What is Ontario Holding Company?
Ontario Holding Company is a special type of business structure that holds and manages the assets of other businesses. It is a central hub that owns and oversees multiple companies, often called subsidiaries. These subsidiaries are called operating companies. Operating companies involved in day-to-day business activities.
In this blog post, we will dive into Ontario Holding Company and explain its role, advantages, and the incorporation process in Ontario. We’ll also try to show you the valuable services offered by Business Ontario Corporate Services Inc. ( Service Ontario’s official intermediary) to guide you smoothly through registration.
Incorporate Ontario Holding Company
Benefits of Incorporating an Ontario Holding Company
Now, why would you choose this structure? There are several compelling reasons:
Multiple Business Management: Holding Company Consolidates multiple businesses under one holding company simplifies management. Financial records, reporting, and administration become more efficient.
Enhanced Asset Protection: A holding company structure creates a buffer between owner(s)personal assets and potential liabilities of subsidiaries. If one subsidiary encounter financial difficulty, it doesn’t necessarily impact the holding company or your other businesses.
Tax Advantages: One of the benefits of Holding companies offers potential tax benefits, such as the ability to defer taxes on capital gains from the sale of subsidiary shares. However, it’s crucial to consult with a tax professional to understand the specific implications for your situation.
Estate Planning Flexibility: Holding companies can be a valuable tool for estate planning. It helps to transfer ownership of subsidiary shares through the holding company. Owner(s) can easily streamline the inheritance process for their beneficiaries.
Business Diversification: Holding companies allow to explore new business without jeopardizing existing ones. Each subsidiary operates independently, minimizing risk across your portfolio.
What’s the Difference between Holding Company and Operating Company?
The key difference between a Holding Company and an Operating Company lies in their core functions and roles within a business structure. Here’s a breakdown:
Holding Company:
Function: It owns and manages the assets (including shares) of other businesses, often called subsidiaries.
Activities: It doesn’t directly produce goods or services. Focuses on overseeing subsidiaries, managing investments, and making strategic decisions.
Benefits: streamlined management, asset protection, tax advantages, estate planning flexibility, business diversification.
Operating company:
It is the workhorse directly involved in producing goods or services. It generates revenue, incur expenses, and ultimately contributes profits to the holding company, which then manages those profits.
Function: It is engaged in the day-to-day operations of a business.
Activities: It directly produces goods or services, generates revenue, incurs expenses, and contributes profits to the holding company (if one exists).
Focus: fulfilling customer needs, managing production/service delivery, and generating profits.
A real example of a relationship between a holding company and an operating company:
Think of a holding company as a landlord who owns multiple properties (subsidiaries). The landlord (holding company) doesn’t run the businesses within those properties (operating companies). They collect rent (profits) from the tenants (operating companies) and manage the overall portfolio (group of businesses).
Steps of Incorporating Ontario Holding Company
Are you ready to take the plunge? Here’s what you need to know about incorporating Ontario Holding Company:
Choose a business name for Ontario Holding Company:
You can choose either a numbered or named holding corporation. In a numbered corporation, the Ontario government assigns an automatic unique number. A numbered holding company looks like this (for example: 123456789 Ontario Limited). Or you can Select a unique and available name for your holding company. To incorporate an Ontario Holding Company, you must need an Ontario NUANS Reservation Report, also known “Nuans Search Report” or “Ontario NUANS Report.”. You can get your Ontario Nuans Report here.
You can also get your Ontario NUANS Report through the following service providers that are registered NUANS members:
With the above NUANS service provider, you can get unlimited free business name pre-search as well.
You can find more information about name rules in Ontario here.
Name Rules of an Ontario Corporation
Prepare Articles of Incorporation:
Articles of Incorporation (AOI) of a holding company in Ontario are the foundation document that outlines the company’s basic structure and purpose. This documents outlines:
Types of Shares: This section specifies the different classes of shares your holding company can issue (e.g., common shares, preferred shares).
Number of Shares: Defines the authorized number of shares for each class.
Voting Rights: Outlines how voting rights are assigned to different classes of shares.
Registered Office Address in Ontario.
The registered office address must be a physical address in Ontario. According to Ontario Business Registry, Mailing address cannot be a P.O. BOX. In rural area, you can use legal land description address as well, but must have a P.O. Box connected to it.
If you don’t have a local Ontario Registered address, we provide registered address and mail scanning service. Click for that.
Management Structure
You’ll need to appoint directors and shareholders for your holding company. These can be the same people involved in your other businesses, or you can choose separate individuals. You can Specify the minimum and/or maximum number of directors who will oversee the company.
Incorporator(s): This is the person who applies to incorporate Company. Under Incorporator’s authority, the corporation is created. one or more can be incorporator.
Director(s): the head of the corporation. Initially, you must add 1 director. Later, You can add more directors.
Shareholder(s): The shareholder(s) basically owns the corporation. company’s shareholder receives profit or dividend.
Officer(s): Anyone can be an officer. The most common office designations are CEO, CFO, and so on.
Who Can Incorporate/Lunch A Holding Company in Ontario?
In Ontario, there are no specific restrictions on who can start a holding company, but there are a few general requirements:
- Age: You must be at least 18 years old.
- Residency: While there’s no requirement to be a Canadian citizen, you do need to have a Canadian address for the holding company.
- Capacity: You must be mentally capable of understanding and entering into a legal agreement.
Tips for Holding Company Business Owners:
Beyond these basics, the success of a holding company often depends on your business goals and financial situation. Here are some factors to consider:
Number of Businesses: Holding companies are most relevant if you own or plan to own multiple businesses.
Financial Resources: Incorporation and ongoing maintenance of a holding company involve some costs. Consider if this aligns with your budget.
Tax Implications: While holding companies offer potential tax benefits, consulting a tax professional is crucial to understanding the specific impact on your situation.
Compliance: Holding companies are subject to the same legal and regulatory requirements as other corporations in Ontario.
For a smooth incorporation process, it’s highly recommended to seek guidance from a lawyer or a service provider like Business Ontario Corporate Services Inc. They can help ensure you meet all the legal requirements and navigate the process efficiently.
Post-incorporation (mandatory) services to run a holding company:
By-laws & Minute Book: By-laws are internal rules for your holding company. They provide detailed guidelines on how the company operates and how its directors and shareholders conduct business.
The minutes book serves as the official record of all important decisions and actions taken by your holding company’s directors and shareholders. consists of bylaws, share structure, minutes, & other legal sections. Minute books should be maintained chronologically and accurately. Minutes should be signed by the designated individual (often the secretary) and dated.
Ontario Initial Return: Ontario Initial Return is a mandatory filing with Service Ontario for each new corporation. All Ontario corporations, including business corporations, not-for-profit corporations, cooperatives, and others, must file an Initial Return. It must be filed within 60 days of Incorporation. It provides key information about your company. Remember, it is not a tax filing with CRA.
Business Number: It is a unique identification of your business with the Canada Revenue Agency. It is required to register accounts like GST/HST, Payroll, Import/Export accounts.
Corporate Tax ID: It is like a SIN number for a corporation.
HST Registration : If you are selling goods and collecting HST you must have an HST account with CRA.
Payroll Account Setup: If you have employees, including yourself, you must set up a payroll account.
Import/Export account Set up: If you export or import goods or raw materials from or to Canadaa, you are required to clear customs using the Import/Export account.
WSIB Account: It’s the Workplace Safety and Insurance Board registration. If your corporation has employees (except directors and shareholders) you must register for WSIB.
Annual Return: Every corporation, regardless of Profit or Non-profit, must file its Annual return with the government every year to keep it active. If you select our free Annual return reminder, we will remind you or you can select file Annual return with our package, then we will fill and take care.
Why choose Business Ontario Corporate Services Inc.?
Business Ontario Corporate Services Inc. (Service Ontario’s official intermediary) offers a range of services to streamline your Ontario Holding Company registration:
- Business Ontario Corporate Services Inc. is an official intermediary for Service Ontario.
- We are registered member of Corporations Canada and NUANS
- We can guide you through the incorporation process, ensuring your Articles of Incorporation are accurate and meet all legal requirements.
- We offer ongoing support and resources to help you navigate the complexities of business ownership in Ontario.
- By leveraging our expertise, you can save valuable time and ensure a smooth registration process for your Ontario Holding Company.
How long it will take to incorporate My Ontario Holding Company?
As Service Ontario’s official intermediary, we offer the fastest service compared to others. You can get all your Ontario Holding Company Registration Documents in just 1 business hour. That cannot be beaten by anyone.
After completing the registration process, we will send you a Certificate incorporation and Articles of Incorporation of the incorporate Holding Company and an Electronic Minute Book (if included) by an email. That is enough to open a bank account under Holding Company.