Although it may not be the most enjoyable part of starting a new business, finding just the right legal operational structure for your business is an important step toward eventually achieving success.
One of your options for setting up the operational structure is by incorporating your business in Prince Edward Island. Incorporation delivers some important advantages, but it has some complexities associated with it, too.
To learn more about how to incorporate a business in PEI, we’ve assembled some important tips.
What Is an Incorporated Business in Prince Edward Island?
When you incorporate your PEI business, it provides a couple of advantages that are not found with other operational structures.
First, all the owners who are part of the corporation receive a number of shares equivalent to the portion of the corporation that they own. This simplifies bequeathing shares to others or even selling shares on a public stock exchange, if desired.
Second – and probably more importantly for the majority of people who choose to incorporate in PEI – the structure of the business is completely separate from the owners. The financial obligations and any liability the corporation has generally cannot bleed over to the personal finances and liability of the owners.
Types of Corporations in Prince Edward Island
You have a few different options for incorporating a business in Prince Edward Island.
You also can incorporate a non-profit organization, if desired, using Part II of the Companies Act.
Do I Have to Incorporate to Start a Prince Edward Island Business?
The act of incorporating a business in PEI creates a complex legal structure that many businesses do not need. You can instead choose a couple of legal business structure options that don’t require incorporation.
With the sole proprietorship and partnership, the owner or owners have no separation of personal and business finances, which is different from what occurs with the incorporation of a business.
In some Canadian provinces, you can operate a co-operative without incorporating, but this is not an option in Prince Edward Island.
You should seek advice from an attorney if you have any uncertainty about what type of business legal structure you want to use.
Should I Incorporate My Business in Prince Edward Island?
Deciding whether to incorporate your PEI business requires some careful consideration. Incorporation is not necessary for every type of business.
Canadian businesses wishing to incorporate have the option of registering in a province (like Prince Edward Island) only or registering federally and provincially.
Incorporating federally gives your business name protection throughout the country. Incorporating federally occurs through the Canada Business Corporations Act.
Incorporating provincially provides protection within the province. If you never plan to do business outside Prince Edward Island, incorporating provincially works well. You’ll incorporate provincially through the Business Corporations Act in PEI.
To do business in Prince Edward Island, you must register with the provincial government, regardless of whether you incorporate federally or provincially. A few provinces in Canada allow you to incorporate federally and register provincially at the same time, but PEI does not.
When Incorporating Your Prince Edward Island Business, How Long Do You Have?
Prince Edward Island does not set a deadline for businesses to incorporate. However, if you want the benefits of incorporation, you should do it as early as possible.
What Does It Cost to Register Your Incorporated Business in Prince Edward Island?
To register your incorporated business in PEI, your cost starts at $305 for your one-time registration costs. The $305 cost includes:
You then have to pay $30 annually to submit your corporation’s annual report, as required by law.
You will have some extra costs associated with incorporating, such as hiring a lawyer to help you complete all the necessary documents. You can submit your registration for incorporation through the PEI Business and Corporate Registry.
Third-party companies can help you with the incorporation process, too. They will charge for their services, however. Company Formations charges $199 to help with the incorporation, for example. ECompanies charges $99.99, but it charges more to perform the NUANS search than others.
One item that complicates this process in Prince Edward Island is that provincial laws require a locally based lawyer to draw up the incorporation documents. Consequently, some third-party companies that offer incorporation services in other provinces cannot help you incorporate in PEI. (They may suggest incorporating federally instead of only provincially.)
How Long Does It Take to Register a Corporation in Prince Edward Island?
The provincial government in Prince Edward Island does not specify how long the registration and incorporation process takes. Third-party companies estimate requiring up to 10 business days to complete the process.
The amount of time required could change significantly once the province fully shifts to its new Registry website and registration process.
You can reach out to the Consumer, Corporate, and Insurance Division to try to set up an appointment if you would like to submit your information in person or by mail. Versus submitting your information online, it may take longer to receive a response when you submit it by mail or in person.
Ready to Incorporate Your Prince Edward Island Business? Here Are the Requirements
To incorporate your business in Prince Edward Island, you must follow the PEI Companies Act. The various aspects of incorporating in PEI include the following.
Where most provinces require corporations to file Articles of Incorporation, Prince Edward Island requires a Letters Patent form. The Letters Patent includes:
You must disclose the names and addresses of the owners of the shares of the corporation. You also must disclose the number of shares each owner.
The PEI Registry will publish these names on its website, as this becomes public record.
If your corporation has more than one class of shareholders, you must disclose this as part of the registration process in PEI.
PEI does not require that your corporation’s directors or shareholders be residents of Canada.
5 Steps to Incorporate a Business in Prince Edward Island
Here are the steps to follow when incorporating a PEI business.
Your business name for a PEI corporation should include descriptive and distinctive elements that accurately describe your business, as well as the legal element. The legal element means the incorporated business name should include a word like:
The NUANS report shows that your desired name is legal and available for use in Prince Edward Island. (In other words, no other business is using the name.)
You must have a corporate address that you will use with your registration forms. You also should have a list of your directors. Remember, these items will be part of the public record in PEI.
In PEI, you must complete forms like the Letters Patent and the Disclosure of Shareholders.
After you file your information with the Prince Edward Island provincial government, you then can wait for a response from PEI about whether it accepted your registration.
Where Can You Incorporate Your Prince Edward Island Business?
Prince Edward Island is in the midst of making changes to its business registration process. You can register online with the new version of the PEI Business and Corporate Registry website, or you can use the original version of the PEI Corporate Registry.
You need to create an account with the Registry to be able to submit your items.
If you would prefer to submit your information in person or by mail, you need to reach out to the Consumer, Corporate, and Insurance Division of Prince Edward Island.