Dive into the crucial steps that turn entrepreneurial dreams into thriving realities in Quebec. Discover why starting a business here is so much more than just doing business, and explore the essentials for getting started.
Quebec offers a fertile canvas for entrepreneurs, with its rich culture, varied resources and skilled workforce. Your business not only contributes to your success, but also to the province’s evolution.
That’s why Lexstart has compiled a list of the essential steps for setting up your business in Quebec, from incorporation, through terms and conditions, to shareholder agreements and registration.
I. Incorporation : Building solid foundation
A. WHAT IS INCORPORATION AND WHY IS IT IMPORTANT?
Incorporation is the legal process of creating a business entity separate from its owners. This step is of major importance as it provides a legal separation between the company and its owners, limiting their personal liability. In addition, incorporation can offer tax advantages and make it easier to raise capital. It also provides greater credibility in the eyes of customers and partners, as well as continuity in the event of changes in ownership. In short, incorporation is a crucial strategic choice for any entrepreneur wishing to protect his interests and ensure the sustainable growth of his business.
B. TYPES OF ENTERPRISES THAT CAN BE INCORPORATED IN QUEBEC (INC, NPO, COOP)
In Quebec, the incorporation process is straightforward, with a choice between the corporation (INC), the NPO or the COOP. Each enterprise structure has its own advantages and disadvantages, giving entrepreneurs the freedom to choose the structure that best aligns with their specific needs and ambitions.
C. STEPS TO INCORPORATE YOUR COMPANY IN QUEBEC
1. Choosing a company name and checking availability
Before you begin the process of incorporating your business in Quebec, it’s crucial to choose a distinctive corporate name that reflects your activity. However, make sure your chosen name is available and, when applicable, complies with the rules of the Charter of the French Language, by checking with the “Registraire des entreprises du Québec”. This step avoids potential conflicts and establishes the first milestone towards the legal creation of your company. Use the Registraire’s online tool to confirm the availability of your choice of name, and then you can proceed serenely with the incorporation steps.
2. Drafting the company's articles of incorporation
Once you’ve confirmed your company’s name, drafting the articles of incorporation for your Quebec company becomes an essential step in the incorporation process. The articles of incorporation are a legal document that defines the structure and operating rules of the company. They establish the rights of shareholders/members, management procedures, the distribution of profits if applicable, and much more.
Careful drafting of the articles of incorporation is crucial to avoid future disagreements. It is generally advisable to consult a business lawyer for this task. Once finalized, the articles are filed with the Registraire des entreprises du Québec or with Corporation Canada, thereby formalizing the legal creation of your company. They provide a solid framework for the growth and development of your business.
3. Choosing your registered office
The registered office is your company’s legal address, used for official communications and legal documents. It may be your place of work or another specified location. It’s important to note that the registered office can have tax and legal implications, as it determines the jurisdiction in which your company will be registered. Before finalizing this decision, it’s a good idea to consult a professional to understand the implications specific to your situation.
Once you have chosen the location that will serve as your registered office, it will be stated in your company’s incorporation documents. This choice marks a significant step in the incorporation process and helps establish the legal framework for your activity in Quebec.
4. Appointing directors and officers
When incorporating your company in Quebec, the appointment of directors and officers plays a central role. Directors oversee governance, while officers manage day-to-day operations. Their appointment, set out in the articles of incorporation, requires careful consideration based on their skills and adherence to legal requirements.
This key step ensures solid leadership right from the start. Competent directors and officers pave the way for effective governance and the future success of your company in Quebec.
5. Opening a business bank account
When launching your business, opening a professional bank account is essential. Lexstart has teamed up with the National Bank of Canada to offer you an exclusive opportunity. After purchasing one of our legal kits, open an account with the NBC and receive a $350 cashback.
This collaboration allows you to set up an appropriate banking solution right from the start, while benefiting from financial advantages. By opting for this joint offer, you optimize your start-up while benefiting from personalized services. It’s the perfect opportunity to launch your business in Quebec with the combined support of Lexstart and National Bank of Canada.
II. Shareholder’ agreement (INC) or by-laws (NPO, COOP): Solidifying internal agreements
A. WHAT IS A SHAREHOLDERS' AGREEMENT OR BY-LAWS, AND WHAT ROLE DO THEY PLAY?
Once your structure has been incorporated, it’s time to plan the rules of the game between shareholders (INC) or members (NPO, CO-OP). The shareholders’ agreement or by-laws is a contract whichpurpose is to regulate and structure relations between shareholders/members, as well as their obligations towards the structure.
A good shareholders’ agreement/by-laws enables you to anticipate the many events that may arise in the life of the structure and between associates. It protects your interests and those of the structure in the event of conflict. It provides a framework for non-competition and confidentiality, and ensures that all work carried out by shareholders/members belongs to the structure (transfer of intellectual property), such as source code, your name, logo or any content you may have created.
In the case of an incorporation, the agreement governs the transfer of shares, as these are generally points on which shareholders may disagree.
For example, you need to provide for the eventuality of a shareholder deciding to withdraw from the company, or a third party wishing to join, or the procedure to be followed in the event of a shareholder’s death.
If you don’t have a shareholders’ agreement/by-laws, you’ll have to refer to the law and/or the decision of a court or arbitrator to settle disputes between shareholders. Be careful, it can get very expensive!
That’s why such a document often enables you to find a quicker and more appropriate solution to shareholder/member disputes than the law or the courts.
B. TYPICAL CONTENT OF A SHAREHOLDERS' AGREEMENT
A shareholders’ agreement frequently covers topics such as :
- The rules to be respected in the event of changes in shareholding,
- Mechanisms to protect minority shareholders against decisions and actions by the majority shareholder that could be prejudicial to them;
- The procedure to be followed upon the occurrence of certain events such as the death or personal bankruptcy of the shareholder, disagreements between shareholders, conflicts of interest, etc.
- Shareholder involvement (non-competition, confidentiality, intellectual property).
C. ADVANTAGES OF SETTING UP A SHAREHOLDERS' AGREEMENT FOR YOUR COMPANY
Setting up a shareholders’ agreement offers a multitude of advantages for the parties involved in a company. Firstly, it establishes a clear and transparent framework for making important decisions, allocating responsibilities and managing the day-to-day running of the business. In addition, it enables disagreements between shareholders to be anticipated and effectively resolved, by defining mechanisms for conflict resolution. A shareholders’ agreement also makes it easier to protect the rights of minority shareholders, by guaranteeing an equitable balance of powers and voting rights. Finally, it reinforces the company’s stability and long-term viability by anticipating exit scenarios, such as the sale of shares, succession or an initial public offering. In short, a shareholders’ agreement provides a solid legal framework that fosters collaboration, transparency and sustainability within the company.
III. Ensuring fruitful relationships
A. THE IMPORTANCE OF CONTRACTS IN SETTING UP A BUSINESS
Contracts play a fundamental role in the business creation process, providing structure and protection for all parties involved. They define the relationships between founders, partners, employees, trainees, suppliers and customers, clearly establishing the responsibilities and expectations of each. Not only do these contractual agreements provide a solid basis for collaboration, they also provide mechanisms for resolving conflicts and minimizing legal risks. From the drafting of intellectual property agreements to the establishment of confidentiality terms, every crucial aspect of the business can be framed by an appropriate contract. In short, attention to contracts from the outset can make a significant contribution to a company’s long-term success.
B. MAIN CONTRACTS TO CONSIDER FOR YOUR COMPANY
1. Employment contracts for employees
An employment contract is a contract between your company and your employee. It provides a framework for the working relationship between you and your employee, and clearly sets out the rights and obligations of both employee and employer throughout the employment period, and even afterwards.
Among other things, the employment contract determines
- The duration of the contract, the employee’s duties and the terms of remuneration,
- The employee’s specific obligations (e.g. confidentiality, non-solicitation, non-competition),
- Rules governing vacation, sick leave and group insurance.
2. Service contracts
The service contract defines the relationship between the service provider and the client. The service contract establishes, among other things:
- The service to be provided,
- How the service provider is to be remunerated,
- The duration of the contract and how it may be terminated,
- Any guarantees attached to the service.
A service contract is legally distinct from an employment contract in that the service provider is autonomous and decides how to carry out his work. An employee, on the other hand, is subordinate to and under the supervision of his employer.
3. Internship contracts
An internship contract is an agreement between your company and an intern. It sets out the nature of the collaboration during the internship period, and clearly defines the rights and responsibilities of both the intern and the company. As such, the internship contract enables you to specify various elements such as the duration of the internship, the tasks assigned to the intern and the terms and conditions of any remuneration. It may also specify specific commitments on the part of the intern, such as confidentiality, absence of solicitation or competition, and intellectual property created by the intern.
IV. Update and Minute Book : Testify to Your Company's History (compliance)
A. THE IMPORTANCE OF REGULAR MEETINGS AND UPDATES
Every year, you need to update your organization’s information – this is called the annual update. This is necessary even if there have been no changes throughout the year.
When corporate changes occur during the year, you’ll also need to make a current update in the30 days following these changes.
This update obligation has two components:
- An internal component – for example, updating the minute book of an incorporated company or NPO
- An external component – updates to the Registraire des entreprises du Québec (REQ) and Corporations Canada if you are a federal organization.
Updates are used to validate information about your organization or, conversely, to inform you of corporate changes decided by shareholders or directors. For example, a change in the assumed name, the registered office or the identity of those who manage and own the company.
B. UPDATING EFFICIENTLY
There are two steps to an annual or current update: first, you need to draw up the appropriate resolutions, and then you need to update the information or confirm that it is up to date with the REQ and Corporations Canada if you are a federal organization. In principle, you will receive a reminder from REQ and Corporations Canada to file your annual declaration. If you’re unsure of the date of your last annual MAJ or the end date of the MAJ declaration filing period, you can easily check this information on the Internet (REQ website).
In Quebec, it is possible to file an annual update declaration, known as a “déclaration jumelée”, at the same time as your company’s income tax return. The filing period for this type of declaration may be different. You can discuss this with your accountant. This option still requires you to have resolutions.
V. Amending the bylaws: Adapting to new challenges
A. WHEN AND WHY CHANGE YOUR COMPANY'S ARTICLES OF INCORPORATION?
Modifying your company’s articles of incorporation becomes imperative at certain key moments in its development, for a variety of reasons. Changes in the company’s structure, the arrival of new shareholders, a change in corporate purpose or the adjustment of governance rules are all circumstances that may require an amendment to the articles of incorporation. Similarly, when the company wishes to adapt to new regulations or business strategies, an amendment to the articles of incorporation becomes necessary to ensure compliance and relevance. By proactively revising by-laws when the need arises, companies can ensure operational flexibility, strengthen their structure and pave the way for sustainable growth.
B. PROCESS FOR AMENDING ARTICLES OF INCORPORATION IN QUEBEC
In Quebec, the process of amending a company’s articles of incorporation is governed by a set of precise rules and procedures. First, it is essential to convene a general meeting of shareholders or associates to discuss and approve the proposed changes. Once the changes have been decided, resolutions must be drafted and ratified by the shareholders at the meeting. These resolutions must then be filed with the Registraire des entreprises du Québec and, in some cases, specific approvals from regulatory bodies must be obtained. The updated by-laws must then be published in accordance with legal requirements. By strictly adhering to this process, companies in Quebec can guarantee the validity and legality of amendments to their articles of incorporation.
VI. Registration: Formalizing Your Market Presence
A. OBLIGATIONS ASSOCIATED WITH REGISTERING A BUSINESS IN QUEBEC
Registering a company in Quebec entails a series of crucial obligations that must be met to ensure its legal compliance and smooth operation. First of all, it’s necessary to choose an appropriate legal form, such as a business corporation or sole proprietorship, and to determine a unique business name that complies with the established rules.
By fulfilling the multiple obligations in a comprehensive manner, businesses in Quebec can establish themselves firmly in the economic landscape while avoiding potential legal problems.
B. REGISTRATION WITH THE RELEVANT AUTHORITIES
Registration with the relevant authorities is a fundamental step in bringing a business to life in a legal and structured way. This process generally involves selecting an appropriate legal form, such as a business corporation or sole proprietorship. Next, a legally compliant company name must be chosen and its availability checked. The drafting and filing of statutory or incorporation documents is also essential, as they establish the company’s operating rules and structure. At the same time, it is often necessary to obtain the licenses and permits required to operate the business in accordance with current regulations. By carefully following these steps and providing the required information, the company can be duly registered, enabling it to start operations legally and with confidence.
VII. Terms and Conditions: Establishing the Rules of the Game
A. THE ROLE OF TERMS AND CONDITIONS IN YOUR BUSINESS RELATIONSHIP
Terms and conditions include both the General Terms of Use (GTU) and the Privacy Policy (PP).
The GTUsmust be distinguished from the GTSs (General Terms of Sales). The GTSs does not concern the use of the website or application per se, but rather the sale of a service or product offered on the platform.
The General Terms of Use (GTU) are a contract between the users of your website and/or mobile application and your company. They define the rights and obligations of users when browsing your website. GTUs make it possible to circumscribe a company’s responsibility with regard to the content it posts on its site and/or social media.
B. WHY SHOULD I HAVE GENERAL TERMS OF USE?
The GTUs of your website confer certain obligations on the user, notably to prevent and sanction any misbehavior or other abuse. For example, under this policy, you may delete hateful or offensive comments posted by visitors to your site or social media channels.
Having GTUs allows you to define your responsibility with regard to the information posted on your website, or on the sites it links to. Without GTUs, your company could be held liable for any damage resulting from the use of your website.
For example, in the event of a technical problem or interruption for maintenance, your GTUs may indicate that you do not guarantee the continued operation of the site.
The GTUs also enable you to inform your users if you are the owner of the content published on your site. In this way, you can protect your trademark, your site’s source code, your content – written, photos and videos – etc., as you see fit.
C. WHAT IS THE PURPOSE OF THE PRIVACY POLICY?
The Privacy Policy (PP) plays a crucial role in preserving the confidentiality and security of personal data. Its main purpose is to establish the guidelines and practices the organization puts in place to collect, store, process and share personal information responsibly and lawfully. By defining clear standards, the PP ensures that individuals whose data is collected understand how their information will be used and protected. It reinforces the trust of customers, employees and business partners by demonstrating the company’s commitment to confidentiality and regulatory compliance. In short, the PP ensures the ethical management of sensitive data, preventing the risk of privacy breaches and the legal consequences that could ensue.
D. HOW TO DRAFT CLEAR AND EFFECTIVE TERMS AND CONDITIONS
You can draft your company’s Terms and conditions without the help of a lawyer. However, it’s not always easy to produce a document that complies with legal provisions and is tailored to your company’s services. Lexstart does not recommend drafting these documents without a lawyer, as it can be risky.
The drafting of these documents is an important and compulsory step when your company has a website or social media; and we believe that a lawyer can make the drafting of these documents less laborious and technical.
VIII. Trademark: Protecting Your Identity
A. THE IMPORTANCE OF A TRADEMARK FOR YOUR BUSINESS
A trademark helps distinguish a company’s products and services from those of its competitors. It can consist of a word, a slogan, a logo or a combination of these elements. Registering your trademark is the best way to protect it legally. It prevents your competitors from using a name (logo, slogan, etc.) similar to yours, in the same field of activity, within Canada.
When a trademark is registered, the entrepreneur enjoys a monopoly, i.e. the exclusive right to use the trademark in Canada for 10 years. This exclusive right of use, however, applies only to the fields of activity in which the trademark has been registered. By field of activity, we legally refer to classes of protection.
B. HOW TO CONDUCT A TRADEMARK AVAILABILITY SEARCH
When undertaking a trademark availability search in Quebec, there are specific steps to follow. First, consult the online database of the Registraire des entreprises du Québec to check whether the proposed trademark is already registered at the provincial level. In parallel, consult the federal database of the Canadian Intellectual Property Office (CIPO) to determine whether the mark is registered nationally. Also be sure to look for unregistered use of the brand on the Internet, including domain names and social networks. By taking these steps into account, and possibly seeking the expertise of an intellectual property advisor, you’ll increase your chances of choosing and using a distinctive brand that’s available in Quebec.
C. TRADEMARK REGISTRATION PROCESS IN QUEBEC
The application for registration is filed with the Canadian Intellectual Property Office (CIPO). It is then examined by a CIPO agent. If it turns out that a similar mark is already registered and that confusion is possible, the application will be rejected.
If the examination of the application is favorable, it will be published in the Trademark Journal and in certain public databases. This is followed by a waiting period to allow the public to oppose the application. If no opposition is filed, or if oppositions are rejected by CIPO, the application will be accepted and the registration certificate issued.
IX. Dissolution: Closing a Chapter in Compliance
A. POSSIBLE REASONS FOR COMPANY DISSOLUTION
The dissolution of a company may arise for a variety of reasons, reflecting both commercial and legal realities. Common factors include persistent financial difficulties, such as insurmountable debts or lack of profitability. Internal conflicts between partners or shareholders, as well as the departure or death of the principal executive, can also lead to dissolution. In addition, changes in the market, regulatory or technological developments, and an inability to adapt can make continued operation unviable. Lastly, some companies are created for specific projects that have a natural end, which can also lead to dissolution once these projects are completed. Whatever the reason, dissolution requires careful attention to managing outstanding legal, financial and contractual obligations.
B. STEPS TO FOLLOW TO LEGALLY DISSOLVE YOUR COMPANY IN QUEBEC
The legal dissolution of a company in Quebec involves a well-defined process. First, the decision to dissolve must be made at a meeting of shareholders or partners, in accordance with the rules set out in the company’s articles of incorporation. Next, you must obtain a certificate of dissolution issued by the Registraire des entreprises du Québec. This requires liquidating remaining assets, settling outstanding debts and completing all required forms, detailing the reasons for dissolution. It is also important to cancel or transfer operating permits and licenses. If the company is registered with the tax authorities, you must take the necessary steps to close the accounts and settle any remaining tax liabilities. Once all these steps have been completed, you can proceed with the official dissolution of your company in Quebec. It is advisable to consult a business law professional or accountant to ensure that all legal and tax obligations are met throughout this process.
Conclusion
To sum up, setting up a company involves a number of essential steps: drawing up a solid business plan, selecting the right legal structure, and registering the company name. It’s crucial to comply with updating obligations and any amendments to the articles of association, as well as drawing up the necessary contracts. Rigorously following these steps as an entrepreneur ensures not only legal compliance, but also the establishment of a solid foundation for the long-term growth, protection, success and enhancement of your business.
However, it’s important to be accompanied by competent professionals. Lexstart can help you with all the steps and questions involved in setting up your business. Don’t hesitate to book a free 15-minute call with one of our customer service representatives, ask your questions in our online chat or book a legal consultation.
