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Tom B.
Tom B., Barrister & Solicitor
Category: Canada Law
Satisfied Customers: 2414
Experience:  25 years in practice
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I want to open a company with different divisions, do I need

Customer Question

I want to open a company with different divisions, do I need to incorporate the main company as well as the divisions?
Submitted: 1 year ago.
Category: Canada Law
Expert:  Tom B. replied 1 year ago.
Hi
Please expand a bit on your strategy.
Often multiple incorporations are not necessary.
Tom
Customer: replied 1 year ago.
I'm currently in the process of starting an online pet store and once policies procedures, etc are up and everything seems to be running well, I would then like to open another store with a different product line and repeat this process for several entities if I am able. I would like a main company or "holding company" and then the other stores operate under one umbrella.
Expert:  Tom B. replied 1 year ago.
Hello
As you probably know, the main reason for incorporating is to limit liability. If a business is sued, the personal assets of the shareholders are not at risk.
However, incorporation offers some other business benefits including..
- some name protection
- flexibility in structuring partnerships
- tax advantages depending on structure
You can register "Bob's Pet Store Limited" and get some name protection and the liability protection and then open "Sally's Pet Store". But the signs and receipts would read "a division of Bob's Pet Store Limited" so the public knows who they are dealing with. This can go on and on with different business names as long as the primary company is identified.
Name protection of the others can be achieved by registering trade marks.
But, what if there is a Sally and she is a partner? Maybe, you want her to be a shareholder of that entity for 25% and nothing to do with Bob's. Then a separate company might make sense with you or Bob's Limited owning the other shares.
In my opinion, incorporate as you must with the advice of your own lawyer and more importantly, your accountant. Your decisions should be accountant driven first in my opinion. But there is no problem with having a holding company with various divisions if that works best from a tax and financial standpoint.
So, incorporate one first and assess your business needs as you grow.
I trust you will find this helpful. Please advise if you require any further information.
Sincerely,
Tom