Change in the legal form of a company

Expertises connexes

A business can take many legal forms depending on its structure, size, goals, and growth stage. In fact, when a business is initially incorporated, entrepreneurs are presented with several options regarding its legal structure, including sole proprietorship, corporation, partnership, and cooperative. Each of these legal forms comes with its own advantages, limitations, legal obligations, and tax implications. Additionally, one must also decide whether the business will be governed by federal or provincial legislation, which may further influence how it operates and evolves over time.

Since each of these options has its own legal framework and consequences, it is often challenging to choose the most appropriate form at the early stages of business development. Entrepreneurs may select a structure that suits their initial needs, but as the company grows or diversifies, it may become apparent that the current legal form is no longer optimal. A business that initially operated as a sole proprietorship might, for instance, benefit from the legal protection or tax planning opportunities offered by incorporation.

Evolving Business Needs: When to Change Your Legal Form

As your business evolves, whether due to expansion, acquisition, tax considerations, succession planning, or new investors, it may develop new operational and strategic needs, which could justify or even necessitate a change in its legal form. This transformation, although often beneficial in the long term, may involve numerous legal and administrative steps, and therefore should not be undertaken lightly or without proper legal advice.

Legal and Administrative Steps Involved in Changing Legal Form

Indeed, both the current and the intended legal forms of your business may be governed by multiple pieces of legislation, such as the Business Corporations Act, the Act respecting the legal publicity of enterprises or even the Civil Code of Québec. These laws outline the requirements and formalities that must be followed depending on the nature of the legal transformation. As a result, changing the legal form of a business may involve steps such as:

• Filing a registration statement;
• Filing a statement of current status;
• Dissolving and winding up the corporation;
• Filing a declaration of striking off;
• Preparing a plan of continuance;
• Drafting articles of continuance;
• Filing a statement of selected name;
• Requesting that a registration be made in the files of the various governmental authorities;
• Filing an application for a Quebec business number (NEQ) or a business number with Corporation Canada;
• Obtaining the necessary authorizations from another legislative authority to allow the continuation of a corporation;
• Completing the required forms;
• Paying the application fees.

Seeking Professional Legal Guidance: Bernier Fournier Can Help

Given the complexity of these formalities and the potential legal implications of each step, it is strongly recommended to seek professional guidance. With a vast experience in the business law field, our team is fully equipped to advise you on the legal form best suited to your current and future business objectives. Whether you are looking for general legal advice, a preliminary assessment of your situation, or assistance in preparing and filing the necessary documents, our team is at your full disposal to ensure that the change in the legal form of your company is efficient, compliant, and beneficial for your organization.