After processing hundreds of incorporation files, we've seen the same mistakes come up again and again. Most are completely avoidable. Here's the full list — with what to do instead.
1. Incorporating in the Wrong Province
Founders often default to incorporating in their home province without considering whether federal incorporation makes more sense for their situation. If your brand name matters, you plan to do business nationally, or your founding team includes non-residents, federal incorporation may be the stronger choice. The decision deserves 10 minutes of thought — not a default.
2. Choosing a Name That's Too Generic or Too Similar to an Existing One
The NUANS search exists for a reason. Names that are too generic ("Canada Tech Inc.") are often rejected. Names that are too similar to existing names create legal risk even if they technically pass the NUANS search. Aim for a distinctive name with a clear descriptor — "[distinctive] [descriptive] [legal element]" is the NUANS formula.
3. Issuing the Wrong Share Structure From Day One
Many founders issue shares without thinking about future investment, income splitting, or the lifetime capital gains exemption. A single class of common shares is simple but inflexible. Having a CPA review your share structure at incorporation — rather than amending it later — saves thousands in legal and tax costs down the road.
CPA Tip: Including multiple classes of shares (e.g., Class A voting, Class B non-voting) from the start costs nothing extra at incorporation and gives you enormous flexibility to split income with a spouse or bring on investors later — without amending your articles.
4. Skipping the Organizational Meeting
Many founders file their articles and consider themselves "done." The first directors' meeting (or written resolution in lieu of a meeting) is not optional — it's where you formally appoint officers, issue shares, adopt bylaws, and authorize banking. Banks frequently ask for these resolutions before opening a business account.
5. Using Personal Bank Accounts for Business
The corporation is a separate legal entity. Commingling personal and business funds in one bank account undermines the corporate structure, makes bookkeeping a nightmare, and raises red flags in a CRA audit. Open a dedicated business bank account the week you incorporate.
6. Missing the HST Registration Threshold
Founders often don't realize they've crossed $30,000 in revenue until well after the fact. CRA can assess HST on revenues from the date of crossing the threshold, plus interest and penalties. Set a tracking reminder at $20,000 in revenue so you have time to register proactively.
7. Forgetting to Register for CRA Accounts They Need
Incorporation gives you a Business Number — but it doesn't automatically create your HST/GST account (RT), payroll account (RP), or import/export account (RM). Each requires a separate registration step through My Business Account. Missing these means you're operating without the accounts you legally need.
8. Not Maintaining the Minute Book
We covered this in detail in our minute book article, but it bears repeating: the minute book is a legal requirement, not optional paperwork. Founders who skip it for years often face significant cleanup costs when they go to sell the business, raise investment, or mortgage a property through the corporation.
9. Treating Contractors as Employees (or Vice Versa)
Misclassifying workers is one of CRA's most pursued audit areas. If you're paying someone regularly to work primarily for you, on your schedule, with your tools — they're probably an employee, regardless of what your contract says. Get this classification right from the first hire.
10. Incorporating Before Profitability When It's Not Necessary
Incorporation has real costs — government fees, CPA fees, annual T2 returns, and administrative overhead. For a side hustle generating $15,000 a year, the compliance costs may outweigh the benefits. Run the numbers before you incorporate. If you're not yet generating meaningful income, a sole proprietorship may be the right choice for now, with a plan to incorporate once you cross a revenue threshold that makes the tax savings meaningful.
The one exception: If liability protection is important to your business regardless of revenue — you're consulting in a field where errors could be expensive, or you're signing contracts with significant risk — incorporate early, even at low revenue levels. The liability shield alone is worth it.
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