General Information about Business and Taxes

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Registering Your company
In Quebec it is recommended to register a company in accordance with one of the acceptable legal forms.

Who must register?

• Persons, who manage an individual private company in Quebec, bearing a name, that doesn't include his/her names and surname. Nevertheless, it is also necessary for physical persons, who manage a tobacco products retail-company, bearing a name, which includes his/her name and surname - must also register;
• Partnerships with limited and unlimited liability, established in Quebec;

• Partnerships that have been not founded in Quebec, but are practicing their activity on its territory (that continue to practice entrepreneurial activity or have an ownership right, other than privileged claim or mortgage);

• Legal persons, founded in personal interests and incorporated in compliance with the legislation of Quebec;
• Legal persons, founded in personal interests and incorporated outside Quebec (on federal territory; in other provinces, territories or countries), which are residents of Quebec (main office), where they practice their activity (continue to practice entrepreneurial activity or have an ownership right, other than privileged claim or mortgage).

Definition of "practicing in Quebec"
A company is being considered practicing its activity in Quebec, if it:

• Has an address in Quebec or has, directly or via a representative with general mandate, an office or a subscriber post-box in Quebec;
• Has a telephone number in Quebec;
• Practices commercial activity in Quebec.

Exemptions
• Persons who manage an individual private company in Quebec, bearing his/her own name and surname. However, the persons who manage a tobacco goods retail-company, bearing a name, which includes his/her name and surname - must also register;
• Non-commercial associations, which do not have a legal person status;
• Universally recognized managing bodies (legal persons).

Where is it necessary to incorporate?
As soon as You've taken a decision to incorporate, you should take one more decision - where to incorporate. You shouldn't incorporate in your own province, it would be better to choose an incorporation at the federal level.

Please, look through the following:
• Cost: incorporation at the federal level is, usually, more expensive than the one at provincial level.
• Protection of name: Federal companies offer a high national protection of name.
• Annual submitting: One package of documents for provincial incorporation, two packages of documents for federal incorporation.
• Location of business: Do You manage the business at local or at national level? If you manage it at national level, than the federal incorporation might be the best option.

• Time line: For a federal company, usually, it takes 48 hours (not including registration of business). In Ontario, it happens, usually, on the same day. In Quebec it takes 5 - 10 working days.

Types of legal frames

Both for local owners and foreign persons, a legally founded business may take one of the following legal-organizational forms:

• sole proprietorship (business, owned by one person only);
• partnership (business, owned by two or more persons, called partners);
• corporation (business, owned by two or more persons called shareholders).

Legal frame of Your business represents a very important aspect because it will influence:
• Your liability regarding the income tax (tax declarations and other forms, fees to be payed, etc.)

• Your liability regarding the business debts.
• Sole proprietorship

Sole proprietorship is one the simplest forms of business, which represents a business, the owner of which is a sole person. The owner receives all incomes from business, takes upon oneself all risks and is responsible for all its debts. If the company goes into bankruptcy, the owner's personal assets may be confiscated together with the assets of the company.

Sole proprietorship may be managed by more than one person. If two or more persons want to manage the business together, they need to establish a partnership (where they will be the partners) or a corporation (where they will be the shareholders).

Registration forms
(http://www.registreentreprises.gouv.qc.ca/en/demarrer/immatriculer/)
Declaration of registration of a physical person who manages a Sole proprietorship

Official fee (at the provincial level)

32 $ CAD

2. Partnership

A partnership is established following an agreement, concluded between two or more persons, named "partners", who want to manage a commercial company. Each partner makes a financial contribution (money or property), a professional contribution (work or experience) or both of them.

In the case, when out of the partners of the partnership, only one remains, and nobody joins it within 120 days, the partnership is being liquidated.

The liabilities of the parties differ, depending on what kind of partnership this company is: a general partnership, a limited liability or unlimited liability partnership.

Notes:
* The members of a partnership must declare, on an individual basis, their share of the partnership income and must pay the appropriate income tax.

* The partnership is considered to be an organization, which exists separately from each of its members. Therefore, it must pay the obligatory consumption tax, it must declare and transfer the necessary sums in the Quebec Department of State Dues, within the established deadlines.

 

Registration forms
(http://www.registreentreprises.gouv.qc.ca/en/demarrer/immatriculer/)
Declaration of registration - Partnership

Official fee (at the provincial level)

43 $ CAD

3. Corporation
Corporation is established by a legislative act (as the legislative act "On Companies" or the law on Canadian Business Corporations) and exists as a legal entity, separately from its shareholders.

The aim of the corporation is to practice commercial business and to distribute the profit between its shareholders.

Below are listed some characteristics of the corporation:

* The corporation exists uninterruptedly, until the time is out.
* A corporation may be established both under a federal and a local legislative act. However, the corporative name of the federal - incorporated company is protected on the territory of Canada.
* The corporation has the exclusive ownership (both money and personal), which was transmitted to it by the shareholders, in exchange for the shares of the corporation.
* The liability of the shareholder regarding the corporation debts is being limited to his/her investment, only if the shareholder didn't give personal guarantees for the loan, invested in the business-corporation.

 

Liabilities of directors

In case if the corporation does not transfer the required sum, which has to be payed to the Ministry, the corporation and directors, who are acting in that period, bear the joined liability for the sum of debt, as well as for the penalties and the percent.

However, the directors are not liable, if they operated with rational prudence, quickness and abilities, in the existing circumstances, or if they had no opportunities to be informed about the omission. If You are interested in a more detailed information, please look through the folder Liability of Directors (IN-107-V).

Registration forms
(http://www.registreentreprises.gouv.qc.ca/en/demarrer/immatriculer/)
* Declaration of registration - Primary Declaration
* Articles of association
* Registration notice of the main office address, list of directors

Official fee (at the provincial level)

300 $ CAD

Taxes

After the registration of the company, You can submit an application for the Federal Goods and Services Tax and Turnover Tax in Quebec. Only business transactions, which where concluded in Canada (not abroad) are liable to tax.

If You deliver goods and services that are liable to tax, you need to pay the Federal Goods and Services Tax and the Turnover Tax in Quebec. You also have to register the consumption tax, by filling in the Registration Application (form LM-1-V) or via the electronic service for Registration of new business for the Department of State Dues of Quebec province.

If you manage a non-commercial organization or deliver goods and services that are not taxable, you don't register for the Federal Goods and Services Tax and the Turnover Tax in Quebec.

Small suppliers can register for the Federal Goods and Services Tax and for the Turnover Tax in Quebec, but it is not necessary.

When is it necessary to register for the Federal Goods and Services Tax and for the Turnover Tax in Quebec?

* Federal Goods and Services Tax (7,5 %)
You should apply for registration for the Federal Goods and Services Tax until the day, when You, not acting in the quality of small supplier, will make in Quebec the first taxable sale operation. You must pay the Federal Goods and Services Tax since the registration date.

* Turnover Tax in Quebec (5%)
You should apply for registration for the Turnover Tax in Quebec, 30 day before the day when You, not acting in the quality of small supplier, will make in Quebec the first taxable sale operation. You must pay the Turnover Tax in Quebec, since the registration date.

 

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