If you’re reading this post, you’ve probably decided two things:

  1. Hiring an attorney to form your LLC (at $1,500 – $3,500) is too expensive; and
  2. You’re not going to do it yourself–filling out government forms gives you hives.

The only option left is to choose an online incorporation company to form your LLC for you.

The only problem is that there are hundreds of online incorporation companies ready to sell you a dizzying array of services and a confusing pricing structure.

Which Services Do You Need?

Probably the biggest factor in determining the cost of forming an LLC are all the add-ons offered. In the marketing world these are called “upsells”. Understand that your plain-vanilla LLC formation is relatively simple. The company pays someone (or more likely has software that auto-populates the form) to fill out an Articles of Organization form from the state where you’re forming your LLC. Then they mail that form with a check to the Secretary of State. Sometime later, usually a few days or weeks at most, you have a legal LLC. There’s only so much that a company can charge for simple paper shuffling of that kind.

So the real profit for online incorporation companies is the add-ons. I’m not begrudging them that–everyone needs to make a profit. The only question is which services you need, and which can you live without.

Essential Services

  1. Registered agent service if you are incorporated in a different state than you live in.

This one is clear-cut. If you don’t have a physical address in the state you’re forming your LLC, then you don’t have a legal LLC. For example: if you form a Nevada LLC, then you need to live or have your business in Nevada with a physical address for the government to send tax returns and serve legal process on you. If you don’t live or work there, then you need to hire a company with a physical presence in (for this example) Nevada.

  1. A Corporate Veil Guarantee.
    This is included as standard with all Company Corporation packages. It’s insurance against your corporate veil being pierced. If your company is sued and you’re held personally liable because your corporate veil is pierced, they’ll reimburse legal defense fees up to $50,000.

Things You Can Live Without:

  1. Corporate kits and binders.
    These are attractive binders to hold your filed Articles of Organization certificate in. It’ll look nice on your shelf. If a fancy binder is worth $25 or $50 or whatever they’re charging to you, then go ahead and get it. Or you can just buy a $1 binder at Office Depot. It’ll hold paper just the same.
  2. Embosser with your corporate seal.
    These look cool. In college, I started a non-profit magazine with some friends and we incorporated it as a 501(c)(3) company. We got the whole package–including the embosser. We had absolutely no legal use for the embosser. Mainly people would play with it when working on an article–embossing everything from waste paper to old magazine covers.

Things To Consider Getting:

  1. EIN service.
    You’re going to need an EIN–also known as an Employer Identification Number. An EIN is an identifier from the federal government that is essentially like a social security number for your company. You’ll need it to open bank accounts and apply for credit. As the name implies, you’ll also need it if you ever hire employees. But even if you are running a single-member LLC with no intention of hiring employees, you’re still going to need an EIN.

The reason why this is under the “consider getting” category is that you can obtain an EIN yourself at no cost. It’s not too difficult. Just fill out one form, called an SS-4, and phone it into the IRS. They’ll give you your number right on the phone or by return fax. I’ve done it and it’s quite painless–I’d say almost pleasant, but we are talking about a call to the IRS.

  1. Expedited filing.
    If you need to be incorporated now, then I suppose it’s worth it. Why are you in such a rush? If you’re trying to move assets from a creditor or ex-spouse (or soon-to-be ex-spouse), then, let me tell you in my non-legal opinion, that it will probably not work. If you’ve simply procrastinated, then that’s the price you pay. If you need to be incorporated ASAP because you’re about to sign a contract on the company’s behalf, then again, it might be worth it.

Much focus has been placed on government incentive programs because of the lagging indicators that show that Canada is falling behind in global innovation. Efforts have been placed on revamping the flagship Canadian programs such as Scientific Research and Experimental Development (SR&ED) and the Industrial Research Assistance Program (IRAP) to improve the commercialization of new technologies.

IRAP and SR&ED tackle commercialization from two different perspectives. Whereas IRAP is a grant program that funds selected projects, SR&ED is a tax credit that is reimbursed to companies that perform eligible R&D activities. Generally speaking, SR&ED is attractive to companies that are generating research and development expenses, whereas IRAP is more attractive for early-stage companies, especially those who have not begun to generate expenses yet.

SR&ED can provide substantial refundable tax credits to Canadian-controlled private corporations willing to take risks. The program incentivizes companies to continue to invest in research and development to stay competitive in the global market. Any corporation can file for SR&ED with their tax return, and have the application reviewed by the CRA.

IRAP, on the other hand, is a grant program that focuses on “picking winners.” Applications are submitted to the National Research Council (NRC) through an Industrial Technology Advisor. Successful applicants are selected for funding grants, based on the following criteria:

  • Level of technical and commercial risk
  • The economic benefit to Canada
  • Management quality
  • Increase of company R&D capability through the project
  • Level of Commitment
  • Consistency with national priorities
  • The social benefit to Canada
  • Contribution to regional development
  • Advancement of scientific knowledge.

Many new companies have been jump-started as a result of the IRAP program. For example, Abydoz Environmental, founded in 1997, received IRAP funding to develop PhytoKlare as a practical water treatment option for homes and communities in Atlantic Canada. IRAP helped to fund a 35-home PhytoKlare Communal Treatment System in the southern Newfoundland center of Marystown, which included 2 treatment beds, made up of plants that eventually grew to 2 meters in height. This pilot project allowed Abydos to prove the technology and set them up for further commercialization through full-scale versions of the system.

It should be noted that IRAP and SR&ED can work together to assist companies to bring technology to market. In the Abydoz example, although IRAP was used for the pilot project, the SR&ED program might become invaluable during their future full-scale developments of the PhytoKlare system.

Significant company failures over the past few years have seen the question of corporate governance hit headlines as never before. Investors and other stakeholders such as employees and creditors have voiced concerns regarding the lack of accountability of the higher echelons of the management, in particular the board of directors.

With added scrutiny, not only companies are under pressure to appoint acceptable people to the board of directors, the directors themselves are now taking company management very seriously. In recent years, the Courts have not shied away from lifting the corporate veil in holding directors responsible for bad management practices but also the Australian Securities & Investments Commission (“ASIC”) has brought about high-profile prosecution of the top flyers.

Good corporate governance requires directors to take responsibility for their decision-making and be accountable to those concerned including the employees, creditors, investors, and regulators.

You have been appointed as a Director of a Corporate Trustee according to a Deed of Trust and you are now concerned about your function and role in the Corporate Trustee concerning the liabilities of the Corporate Trustee and your liabilities to the Trust if there are insufficient assets to meet the Trust’s liabilities.

Directors have to know what the company is doing and act honestly and in the company’s best interest. The directors have to ensure that the company is maintaining proper accounting records. In carrying out their duties, the directors must have first-hand knowledge of the company’s operations and performance. They need to engage professional advisors to assist them in decision-making. They also need to regularly question the lower management and other staff about the business. For listed companies, they also have to meet the requirements of ASIC and the Australian Stock Exchange.

To whom and how are the Directors liable?

Directors’ liability can arise in numerous ways, such as:

  1. If the directors have been acting dishonestly or fraudulently, they can be liable to the shareholders;
  2. If the directors have allowed the company to trade whilst it was insolvent, then they can be liable to the creditors;
  3. If the company has not been filing proper documents with the regulators or meeting statutory requirements, then the directors can be liable for that.

Who can be directors?

Anybody who is over the age of 18 years can be a director. The person cannot be undischarged bankrupt or convicted of a serious offense such as fraud or offenses under company law.