I am in the process of incorporating my company. I’ve also been talking to a few other clients about how it would be tax effective for them to incorporate their companies. The lawyers have been hired, the paperwork filed, so what’s next?
What needs to happen after you incorporate, and in what order, is top of mind for me and my clients in this same stage of their business adventure.
11 steps you need to take after incorporating your business:
1. Open a business bank account
As soon as I have my Articles of Incorporation, I need to go to the bank and open up a business bank account – even if I had a business bank account previously under the sole proprietorship.
This is my first step because I need to be able to pay for operating expenses and pay for them through the corporation immediately. Hopefully, they’ll give me a credit card as well.
2. Register your new corporation with the CRA
I’m going to register my new corporation with the CRA if it hasn’t already been done (if you incorporate federally it happens as part of the process). Note: I’ve already registered as a sole proprietor, that’s not useful for the corporation. I need to close my HST account and open a new one for the corporation.
I’m also going to register for a payroll account because I can put myself on the payroll along with a bookkeeper I employ. I want to be able to start paying us immediately.
3. Register with your applicable governing body
I need to register an accounting firm. This is a specific step for me as an accountant, but maybe you have to go and acquire a business license. Or perhaps you need to register with your own applicable governing body. This step to me comes after the CRA registration and the business bank account because I have to pay for this registration.
4. Buy insurance or switch insurance from Sole Proprietor to Corporation
Before I start operating this company, I need insurance. I have insurance currently for myself as a sole proprietor, but I need insurance specifically for the Corporation for liability. Because I’m an accountant, I have errors and omissions insurance; however, general business liability insurance is what I recommend immediately before you start operating your company.
5. Update your payment provider
I run all of my payments through Stripe because I have a monthly recurring business model. I charge clients’ credit cards every month. This eliminates having to send them an invoice and having them input their information every time. It just automatically charges through Stripe.
The contract that I signed with Stripe is with me as an individual and I need to make sure that I change the contract to be with the corporation. This is important because if later on I sell the company, the Stripe contract is with the company and not with me personally.
6. Update your supplier contracts with Corporation name
Along the same lines of changing contracts, I’m going to go through all of my current suppliers and make sure that I sign new contracts with them. This could be Microsoft because I have a subscription to Office 365 or Receipt Bank which allows me to upload and track all my expenses. I have a few others, but you get the idea.
7. Update your client contracts with Corporation name and have your clients sign
I have engagement letters that I send to new clients so that we understand the scope of work that’s going to happen. I have one for personal tax clients, one for corporate tax returns and one for a monthly relationship with a client like a retainer agreement. I need to rewrite these agreements and ensure they now state the Corporation’s name. I will also have a lawyer look over them just make sure they’re compliant, to protect both myself and my clients.
Then I will have to send a new agreement to each client and have them sign again. It will probably be the exact same agreement they signed before, but I need them to sign up with the Corporation because contracts need to be party to the entities that are actually in the contract.
8. Update your employee and subcontractor contract with the Corporation and have your employees / subcontractors sign
I need to redesign all of my contracts with my current employees and subcontractors. See my point above about contracts needing to be party to the most current people and entities.
9. Update your bookkeeping software with the new Corporation name and start a new file
I currently have a QuickBooks file for my sole proprietorship, but the corporation will be a completely separate entity. This means I need a new set of “books” for it.
This is the same whether you use QuickBooks, Wave, or another bookkeeping software.
10. Move your assets from Sole Proprietorship to the Corporation
I will need to move my assets into my Corporation. In my case, I only have a computer, so my assets aren’t significant. I’m going to have the Corporation buy it from me at the value it’s currently sitting on my books for.
If I had a large asset that I needed to roll into the Corporation, I would do what’s called a section 85 rollover. I’m not going to address it here in this blog as it’s dull for those that don’t study this kind of thing! However, if you need to do this, have your lawyer help you. It’s tricky.
11. New email address and website address if your company name has changed
Did you know, because I’m an accountant, I have to incorporate the URL of my business? This means I’ve incorporated Kirk CPA Professional Corporation even if I’m not thrilled about it. I had another name picked out I was really excited for, but sometimes you just do what you have to do. I’d much rather keep the URL I have then go with the name I chose.
For your business, if you are changing the name, don’t forget this might mean a new web address, a new email address, and changes to directories and/or social media profiles.
This is my current list of steps to take after incorporation, but it certainly isn’t exhaustive. It sounds like a lot of paperwork (it is, I won’t sugar coat it), but it will be worth it in the long run as my business grows.
Have you recently incorporated your business? What steps did you take after you received your Articles of Incorporation? What challenges did you have? Let’s share our experience to make it easier for entrepreneurs walking the same path. Feel free to share and join me online at www.facebook.com/kaitlinkirkcpa