FAQ

Business & Corporate Law FAQs

Explore our Business & Corporate Law FAQs for clear, reliable answers on incorporation, compliance, contracts, and governance in Ontario. Get professional legal insights to help you make informed business decisions and stay compliant with provincial regulations.

Ontario Corporations – Key Legal FAQs

  1. What Is a Corporation Under Ontario Law?
    A corporation is a legal entity separate from its owners. It can own assets, enter contracts, sue or be sued, and continues to exist independently of shareholders.
  2. Why Should I Incorporate My Business in Canada?
    Incorporation offers liability protection, tax planning opportunities, credibility with clients, and potential access to business grants and investors.
  3. What Does Limited Liability Actually Mean?
    Limited liability means shareholders are not personally responsible for the company’s debts. Their financial risk is limited to their share investment.
  4. What Is Meant by Separate Legal Entity?
    A corporation is treated as its own person in law. It can own property, incur debts, and conduct business separately from its shareholders or directors.
  5. What Is Perpetual Existence for a Corporation?
    Perpetual existence means the corporation continues to exist even if shareholders or directors leave, retire, or pass away, ensuring continuity.
  6. What Does Free Transferability of Shares Mean?
    Free transferability means shareholders can sell or transfer their shares, subject to restrictions in a shareholders’ agreement or articles of incorporation.
  7. Do I Really Need a Shareholders’ or Partnership Agreement?
    Yes. A legal agreement between business owners helps manage disputes, clarify roles, and protect everyone’s rights, especially in Ontario businesses.
  8. What Contracts Should I Use with Clients and Suppliers?
    Key contracts include service agreements, NDAs, terms of sale, and vendor contracts to protect your business and manage commercial risks.
  9. Can I Incorporate Online Without a Lawyer in Ontario?
    Yes, but DIY incorporations often miss legal steps like share issuances and bylaws. A lawyer ensures your business is compliant and properly structured.
  10. What If I Skip Organizational Resolutions After Incorporating?
    Failing to issue shares or adopt resolutions may invalidate ownership and lead to tax, governance, or legal problems. This step is legally required.
  11. What Bank Accounts Should I Open for My Business?
    You should open a business chequing account in the corporation’s name and consider savings or USD accounts, depending on your business needs.
  12. What Tax Accounts Are Needed for a New Ontario Business?
    Register for an HST account if required, along with payroll and corporate tax accounts through the CRA depending on your business activities.

Ontario Shareholder Rights & Agreements – FAQ

  1. What Are Drag-Along Rights and Why Do They Matter?
    Drag-along rights allow majority shareholders to force minority owners to join in a full sale of the corporation, ensuring smooth exits and avoiding holdouts.
  2. Can Shareholders Influence Corporate Disputes in Ontario?
    Yes. A shareholders’ agreement can give shareholders the power to resolve internal disputes through mediation, arbitration, or other binding processes.
  3. Do Minority Shareholders Have a Say in Capital Spending?
    Minority shareholders may be granted pre-approval rights over major capital expenditures if such provisions are included in the shareholders’ agreement.
  4. How Do Pre-Emptive Rights Work in a Corporation?
    Pre-emptive rights let shareholders buy new shares before outsiders, helping maintain ownership percentages and prevent dilution of their interest.
  5. What is the Role of a Shareholder Shotgun Clause?
    A shotgun clause enables one shareholder to offer to buy out another, forcing them to sell or buy at the same terms—commonly used to break deadlocks.
  6. Do Private Equity Investors Have Control in Ontario Corporations?
    Private equity investors often secure veto rights, board seats, or approval powers via agreements, even if they hold a minority equity position.
  7. What Protections Exist for Minority Shareholders in Ontario?
    Minority shareholders may rely on statutory protections and contract rights, including access to information, vetoes, and buy-sell mechanisms.
  8. What Is a Right of First Refusal in a Corporation?
    A right of first refusal requires shareholders to offer their shares to others in the company before selling to external third parties.
  9. What Are Piggyback Rights in a Shareholders’ Agreement?
    Piggyback rights allow minority shareholders to join in a sale initiated by majority shareholders, ensuring equal exit opportunities.
  10. How Are Directors Appointed in an Ontario Corporation?
    Directors are elected by shareholders at annual meetings or by resolution, according to share class rights set out in the articles or agreement.
  11. What is a Valuation Clause and Why Is It Important?
    A valuation clause defines how shares are valued during a buyout, exit, or dispute—often using formulas, appraisals, or agreed metrics.
  12. What Clauses Should Be Included in a Shareholders’ Agreement?
    Typical clauses include share transfer rules, voting rights, dispute resolution, non-compete terms, and exit strategies such as shotgun provisions.
  1. What Is a Non-Compete Clause in a Shareholders’ Agreement?
    A non-compete clause restricts a shareholder from running or joining a competing business for a defined time after leaving the corporation.
  2. How Does a Non-Solicitation Clause Protect a Business?
    This clause prevents departing shareholders from soliciting the corporation’s clients, suppliers, or employees for a defined period.

Business Contract Essentials: Key Information & FAQs

  1. Is Business Name Registration Required for All Ontario Businesses?
    Yes, if you’re operating under a name other than your own legal name, you’re legally required to register your business name in Ontario.
  2. What’s the Process to Register a Business Name in Ontario?
    You can register online via the Ontario Business Registry by completing the name search and submitting the registration form with the required fee.
  3. Where Can I Register My Ontario Business Name?
    You can register your business name directly through the Ontario Business Registry or through ServiceOntario’s online registration platform.
  4. Does Registering a Business Name Give Me Exclusive Rights to It?
    No, registering a business name in Ontario does not provide exclusive rights or trademark protection. Consider trademark registration for exclusivity.
  5. How Long Does a Business Name Registration Last in Ontario?
    Business name registrations are valid for 5 years and must be renewed before expiry to remain active and legally compliant.
  6. Do I Need to Renew My Business Name Periodically?
    Yes, your business name must be renewed every 5 years in Ontario to keep your registration current and avoid legal issues.
  1. Can I Use My Business Name Without Registering It First?
    No, using a name without registration when required may result in penalties or fines under Ontario’s Business Names Act.
  2. What Happens If Someone Else Registers a Similar Business Name?
    Ontario does not prevent similar name registrations, so trademark protection is recommended to avoid legal conflicts and brand confusion.
  3. Do Sole Proprietors Need to Register a Business Name in Ontario?
    If operating under anything other than your personal legal name, a sole proprietor must register the business name with ServiceOntario.
  4. Can I Register My Ontario Business Name Before Starting Operations?
    Yes, you can register your business name before starting operations to secure your branding and comply with legal requirements in Ontario.

Starting a Business, Registering a Business Name

  1. What’s the Difference Between Sole Proprietorship and Corporation in Ontario?
    A sole proprietorship is simpler and owned by one person. A corporation is a separate legal entity that offers limited liability and better tax planning options.
  2. Do I Need to Register My Business Name in Ontario?
    Yes, if you’re not operating under your exact legal name. Business name registration is required through Ontario’s Business Registry for most businesses.
  3. How Do I Know if a Business Name Is Available in Ontario?
    You can search Ontario’s business name registry online to see if a name is already taken. A NUANS name search is needed if incorporating with a unique name.
  4. How Long Does It Take to Register a Business Name in Ontario?
    Registering a business name online usually takes minutes. Incorporation or registrations requiring NUANS may take 1–2 business days if filed properly.
  5. Can I Start a Business Without Registering It in Ontario?
    You can operate under your own legal name without registration, but most businesses must register to comply with Ontario’s Business Names Act.
  6. What Is a Master Business Licence in Ontario?
    A Master Business Licence (MBL) confirms your business name registration in Ontario. It’s valid for 5 years and may be required for banking or contracts.
  7. Do I Need a NUANS Report to Incorporate in Ontario?
    Yes, if you’re incorporating with a custom name. A NUANS report checks name availability and must be submitted within 90 days of the report date.
  8. Can I Operate Multiple Businesses Under One Ontario Corporation?
    Yes, a corporation can operate several businesses under different registered trade names, provided each name is registered under the corporation.
  9. What Is the Cost to Register a Business Name in Ontario?
    As of now, registering a business name costs about $60–$80 online. Incorporation fees are higher and depend on whether you file federally or provincially.
  10. Do I Need a Lawyer to Register My Business in Ontario?
    A lawyer isn’t required, but legal advice ensures proper structure, liability protection, and compliance — especially if you’re incorporating or adding partners.

Commercial Law and Transactions

  1. What Is a Business Purchase and Sale Agreement?
    A business purchase and sale agreement outlines the terms and conditions for transferring business assets or shares between a buyer and seller in Ontario.
  2. What Must Happen Before a Purchase and Sale Deal Closes?
    Before closing, parties must satisfy conditions like financing, due diligence, consents, and clear title to complete the transaction under Ontario law.
  3. What Legal Documents Are Required at Closing?
    Closing typically requires a bill of sale, resolutions, share certificates, officer certificates, and assignment documents, depending on the deal type.
  4. What Happens After the Agreement Is Signed?
    After signing, both parties must fulfill conditions, finalize closing documents, and complete all deliverables for the sale to officially close.
  5. What Is the Difference Between an Asset and Share Purchase?
    In Ontario, an asset deal involves specific business items, while a share deal transfers ownership of the corporation and all its liabilities.
  6. Are Verbal Commercial Agreements Enforceable in Ontario?
    Verbal contracts may be enforceable, but written agreements are strongly recommended for clarity and proof in commercial transactions.
  7. Can a Letter of Intent Be Legally Binding in Ontario?
    A letter of intent can be binding if it includes enforceable terms. It’s important to clarify whether it’s intended as binding or non-binding.
  8. Do I Need a Lawyer to Draft a Purchase and Sale Agreement?
    Yes, having a lawyer draft or review the agreement ensures the terms are enforceable, compliant with Ontario law, and protect your business interests.
  9. What Is the Role of Due Diligence in Business Purchases?
    Due diligence involves reviewing the target business’s legal, financial, and operational status to identify risks and confirm key details before closing.
  10. What Is a Closing Checklist in a Business Transaction?
    A closing checklist includes all tasks, approvals, and documents required before a commercial deal in Ontario is legally finalized.

Buying and Selling a Business

  1. Do I Need a Lawyer to Buy or Sell a Business in Ontario?
    Yes, a business lawyer helps you review legal risks, draft contracts, and ensure compliance with Ontario laws during a business purchase or sale.
  2. What’s the Difference Between an Asset Sale and a Share Sale?
    In an asset sale, specific business assets are sold. In a share sale, you buy the corporation itself. Legal and tax consequences vary significantly.
  3. How Do I Value a Small Business Before Buying It?
    You can value a business using methods like asset-based, income-based, or market-based valuation. Legal and financial due diligence is key.
  4. Can I Sell a Business Without Transferring the Corporation?
    Yes, in an asset sale, you can transfer the business operations, clients, and assets without selling shares of the corporation.
  5. What Is a Letter of Intent (LOI) in a Business Purchase?
    An LOI outlines the main deal terms before signing a full agreement. While usually non-binding, it signals serious intent and helps guide due diligence.
  6. What Should Be Included in a Business Purchase Agreement?
    A solid agreement should cover price, payment terms, assets or shares sold, reps and warranties, closing conditions, and non-compete clauses.
  7. What Are Common Liabilities to Watch for When Buying a Business?
    Watch for hidden debts, unpaid taxes, employee claims, or lease obligations. Share purchases often carry more liability risks than asset deals.
  8. Do I Need Government Approval to Sell My Business?
    Not always. However, some industries require regulatory approval or licensing updates, especially for professional, food, or health-related businesses.
  9. Can I Sell a Business That Has Employees?
    Yes, but employee rights must be considered. In an asset sale, you may need to terminate and rehire staff. Notice and severance rules may apply.
  10. What Is Due Diligence in a Business Purchase?
    Due diligence is the process of reviewing the target’s legal, financial, and operational health before completing a purchase in Ontario.

Business Structures

  1. What Is the Advantage of Registering a Business as a Corporation in Ontario?
    Incorporating offers limited liability, tax planning opportunities, and continuous existence beyond ownership changes under Ontario’s corporate laws.
  2. What Does It Mean That a Corporation Has Perpetual Existence?
    Perpetual existence means a corporation continues operating regardless of changes in ownership, unless legally dissolved under Ontario law.
  3. How Is Liability Limited in a Corporation or LLP?
    Limited liability means owners are generally not personally responsible for business debts or legal claims, protecting personal assets in most cases.
  4. What Are the Key Benefits of Operating as a Partnership in Ontario?
    A partnership allows for shared decision-making, easy setup, and tax benefits through income flow-through, without needing incorporation.
  5. What Is a Limited Liability Partnership (LLP) in Ontario?
    An LLP is a legal structure for professionals like lawyers or accountants that limits personal liability for other partners’ misconduct or debts.
  6. What Is Meant by ‘Separate Legal Entity’ in Business Law?
    A corporation is a separate legal entity, meaning it can enter contracts, sue or be sued, and own property independently of its shareholders.
  7. Are There Risks to Operating as a Sole Proprietor in Ontario?
    Yes, sole proprietors have unlimited personal liability for business debts and lawsuits, which can put personal assets at risk.
  8. What Does Free Transferability of Shares Mean?
    This refers to the ability of shareholders to sell or transfer shares, subject to any restrictions in a shareholder agreement or the corporation’s bylaws.
  9. Why Do Some Professionals Choose a Limited Liability Partnership (LLP)?
    LLPs provide flexibility and limit each partner’s liability for the actions of others, ideal for licensed professionals practicing together.
  10. What Are the Pros of Starting a Sole Proprietorship in Ontario?
    A sole proprietorship is simple to register, affordable to maintain, and gives the owner complete control over business decisions and income.

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We help our clients with:

- Ontario Shareholder Rights & Agreements – FAQ
- Ontario Corporations – Key Legal FAQs
- Business Contract Essentials: Key Information & FAQs
- Starting a Business, Registering a Business Name
- Commercial Law and Transactions
- Buying and Selling a Business
- Business Structures