What’s the Difference Between Corporation and Incorporation?

Understanding the difference between a corporation and incorporation is crucial when you’re looking to start a business in Canada. These terms are often used interchangeably, but they have distinct meanings that are important to understand for anyone considering establishing a corporate entity.

What is a Corporation?

A corporation (sometimes referred to as a “company”) is a legal entity separate from its owners, capable of owning assets, entering contracts, and incurring liabilities. Think of it as a separate “person” under the law.

Benefits of a Corporation

• Limited Liability: Owners are generally not personally responsible for the debts and obligations of the corporation.
• Credibility and Capital Raising: Corporations are often seen as more professional and credible to consumers. They can also make it easier to attract investment and raise capital through the issuance of shares.
• Potential Tax Benefits: Certain tax advantages, such as the Small Business Deduction, are available to corporations in Alberta.
• Transferrable Ownership: Corporations can make it easier to sell your business or bring in co-owners.

Click here to learn more about the benefits of incorporation.

What is Incorporation?

Incorporation is the legal process by which a business becomes a corporation. Think of it as the birth of the corporation. This involves filing specific documents with the government, including the Articles of Incorporation.

Steps to Incorporate

1. Name Reservation: Reserve a unique name for your corporation.
2. Draft Articles: Prepare the Articles of Incorporation, which define the structure of your corporation.
3. File Documents: Submit all required forms and pay the applicable fees to the Corporate Registry.
4. Organize the Corporation: Prepare legal documents required to properly set up the corporation.

These may seem like simple steps, but you must do several things correctly during incorporation to avoid future problems. Incorporation services without legal advice often overlook these steps.

We strongly recommend that you work with an incorporation lawyer to complete the incorporation correctly and prepare all necessary documents.

Key Differences Between Corporation and Incorporation

• Conceptual Nature: A corporation is a business structure; incorporation is the process of creating that structure.
• Legal Requirements: Incorporation involves completing specific steps and filing documents, which are not necessary for an already-existing corporation.
• Timeline: A corporation is ongoing after incorporation, while incorporation is a one-time event.

The Bottom Line

In simple terms, the difference between a corporation and incorporation is that a corporation is a legal entity, while incorporation is the legal process to create that entity. In other words, incorporation is the process of legally creating a new corporation.

After the incorporation process is completed the corporation will continue to exist until its registration expires, or it’s dissolved.

More Questions?

Do you still have questions about incorporating a business in Alberta? If so, consider booking a consultation with one of our incorporation lawyers. We’ll answer any questions you have about incorporating a business, and help you to decide whether incorporation is the right choice for you.

The best part? If you decide to incorporate your business with us, we’ll deduct the cost of the consultation from your incorporation fees.