Businesses: Registered, Incorporated and Partnerships

Hello,

In this week’s editorial, I would like to shed some light on two principal legal forms of business organization in Quebec and the judicial and fiscal repercussions of each of them.

The Registered Trade Name

A “registered” or “reg” company is not a distinct corporate body and independent from its constituent. In other words, no distinction needs to be made between the registered company and its creator. The trade name is simply an alias the business owner can use to settle into the market and afterward for commercial purposes. The name, not necessarily the name of the business owner, is then subject to formal registration thereby identifying the person behind the company to third parties. On a fiscal level, the entrepreneur must provide an annex to his/her annual tax return detailing business revenues in the same way he/she would declare any other source of personal revenue.

The Incorporated Company

The incorporated company is a corporate body entitled to an autonomous legal existence and to its own asset base, distinct from its owners. It must undergo the production of several documents such as the statutes of constitution, capital stock, regulations, etc. to give birth to and govern the existence and the healthy operations of the company. It then acts and expresses itself by means of its administrators as chosen by the shareholders. On a legal level in theory, it acts as a distinct society, it does involve the personal liability of its owners unless an owner personally endorses or guarantees the activities of the company. In this case, the creditors can use each others assets. In addition, if one of the owners acts in a fraudulent way via the company, the courts will put an end to the existing bond between the company and its owners (corporate veil).

On a fiscal level, the company must produce verified financial statements and each shareholder must provide an annex to their personal tax return detailing funds transferred to them by the business in the form of dividends (return on shares held) or salaries.

The General Partnership

A general partnership is a practical choice for entrepreneurs who wish to share a commercial enterprise without the expensive start-up costs and formalities that result from the creation of an incorporated company.

For additional information do not hesitate to communicate with me at (450) 227-7077 or at (514) 745-6673 (NORD) or at (514) 688-3131.

About the Author:
Me Michel Labrèche. This column was prepared by Mtre Michel Labrèche, notary, practising in Saint-Sauveur-des-Monts and Laval for the past twenty years. Me Labrèche is also the president of Domaine le Sanctuaire des Lacs. For more information please see www.monlac.com.