Business type - income & support payments

[randomjohndoe]

The definition of carrying on business varies from province to province, but most have a catch all phrase of "solicits business in the province" and/or has an office or representative in the province. In Quebec you are carrying on business if you carry on an activity for the purpose of obtaining profit. You would likely be subject to pay some provincial income taxes.

That would be true if the REAL owner were linked to the corp on paper. In this setup you'd be doing 'work' but if you are not officer or director of it, then the corp is in the clear. Naturally you don't want to have an office of that corp here, so there are limits of what it can do.

[randomjohndoe]

From what I understand, you aren't divorced yet? But are you close? Why can't you just hold off incorporating until after you are divorced and then use whatever structure you want. Yeah, she can argue that she deserves more in SS, you can argue that you had the idea post divorce and didn't use matrimonial funds to setup the business so why should she participate in increased revenues when she never contributed to process?

Because the sep.agreement will have a clause that he must provide her with fin. statements of all corps of businesses he controls.

It might not affect the SS, but for sure could be used to get more CS

[HammerDad]

That would be true if the REAL owner were linked to the corp on paper. In this setup you'd be doing 'work' but if you are not officer or director of it, then the corp is in the clear. Naturally you don't want to have an office of that corp here, so there are limits of what it can do.

The owner is the shareholder. The directors and/or officers may, but need not be, shareholders. And officers may, but need not be, directors.

Are you suggesting that the OP not be the shareholder, but just enter into an employment agreement? IMO, that would be crazy as it is the shareholder who is entitled to all of the assets of the corporation. And if one thinks a holding corporation would solve the problem, a court will simply just keep going up the chain of corporations to determine the ultimate shareholder.

As for reporting/registration requirements, here is what the Corporations Information Act (Ontario) provides:

Initial return
2. (1) Every corporation other than an extra-provincial corporation or a corporation of a class exempted by the regulations shall file with the Minister an initial return setting out the prescribed information as of the date of filing. R.S.O. 1990, c. C.39, s. 2 (1); 1994, c. 17, s. 33.
Idem
(2) The initial return shall be filed within sixty days after the date of incorporation, amalgamation or continuation of the corporation. R.S.O. 1990, c. C.39, s. 2 (2); 1994, c. 17, s. 33.
Initial return, extra-provincial corporation
3. (1) Every extra-provincial corporation, other than a corporation of a class exempted by the regulations, that begins to carry on business in Ontario shall file with the Minister an initial return setting out the prescribed information as of the date of filing. R.S.O. 1990, c. C.39, s. 3 (1); 1994, c. 17, s. 34.
Idem
(2) The initial return shall be filed within sixty days after the date the corporation begins to carry on business in Ontario. R.S.O. 1990, c. C.39, s. 3 (2); 1994, c. 17, s. 34.
Offence
13. (1) Every person who makes a statement in any document, material, evidence or information submitted or required by or for the purposes of this Act that, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact or that omits to state any material fact, the omission of which makes the statement false or misleading, is guilty of an offence and on conviction is liable to a fine of not more than $2,000 or to imprisonment for a term of not more than one year, or to both, or, if such person is a corporation, to a fine of not more than $25,000. R.S.O. 1990, c. C.39, s. 13 (1).
Knowledge as element of offence
(2) No person is guilty of an offence under subsection (1) if the person did not know the statement was false or misleading and, in the exercise of reasonable diligence, could not have known that the statement was false or misleading. R.S.O. 1990, c. C.39, s. 13 (2).
Responsibility of directors and officers
(3) Where a corporation is guilty of an offence under subsection (1), every director or officer of such corporation who authorized, permitted or acquiesced in such offence is also guilty of an offence and, on conviction, is liable to a fine of not more than $2,000 or to imprisonment for a term of not more than one year, or to both. R.S.O. 1990, c. C.39, s. 13 (3).
General offence
14. (1) Every person who,
(a) contravenes this Act or the regulations; or
(b) fails to observe or comply with an order, direction, or other requirement made under this Act or the regulations,
is, except where such conduct constitutes an offence under section 13, guilty of an offence and on conviction is liable to a fine of not more than $2,000 or, if such person is a corporation, to a fine of not more than $25,000. R.S.O. 1990, c. C.39, s. 14 (1).
Responsibility of directors and officers
(2) Where a corporation is guilty of an offence under subsection (1), every director or officer of the corporation, and, where the corporation is an extra-provincial corporation, every person acting as his or her representative in Ontario, who authorized, permitted or acquiesced in such offence is also guilty of an offence and on conviction is liable to a fine of not more than $2,000. R.S.O. 1990, c. C.39, s. 14 (2).
Ability to sue
18. (1) A corporation that is in default of a requirement under this Act to file a return or notice or that has unpaid fees or penalties is not capable of maintaining a proceeding in a court in Ontario in respect of the business carried on by the corporation except with leave of the court. R.S.O. 1990, c. C.39, s. 18 (1); 1994, c. 17, s. 41 (1).
Idem
(2) The court shall grant leave if the court is satisfied that,
(a) the failure to file the return or notice or pay the fees or penalties was inadvertent;
(b) there is no evidence that the public has been deceived or misled; and
(c) at the time of the application to the court, the corporation has filed all returns and notices required by this Act and has no unpaid fees or penalties. R.S.O. 1990, c. C.39, s. 18 (2); 1994, c. 17, s. 41 (2, 3).
Contracts valid
(3) No contract is void or voidable by reason only that it was entered into by a corporation that was in contravention of this Act or the regulations at the time the contract was made. R.S.O. 1990, c. C.39, s. 18 (3).

So I can't see where it provides that an off-shore corporation need not register in Ontario if they are carrying on business in Ontario.

About the only grey area would be is if it is an internet based business also based off-shore. Ontario may not cover that. But if said internet based company has an office/agent/representative in Ontario, that would fall under the umbrella of carrying on business. In Quebec the test is even more onerous as, if a corporation is carrying on the business for the gain of profit, there is a requirement to register.

[HammerDad]

but for sure could be used to get more CS

As it should.

[HammerDad]

Nominee shareholder is basically a make believe 'owner' who acts only on your behalf. So in an unlikely event that someone finds out about the off-shore corp, the money in it can't be attributed to you. The scheme is obviously falling into rather grey area of legality, I mean, it is legitimate, but only on paper.

Are you suggesting having someone (because, if you up the ladder for shareholdings, it eventually has to be a person) to hold the shares in trust for the benefit of the OP....there are obvious risks involved for all parties here.

For the trustee, there could be tax risks. A tax agency may try to tax the trustee for the income and then the trustee would have to turn around and say "no this isn't for me it is for them".

The beneficial owner of the shares would have to worry about whether or not the trustee actually acts in their best interests and not go rogue on them or take advantage of them.

Further there are complications of where or not that would fall under embezzlement or other tax evation and possilby be deemed a criminal matter.

I'm not gonna say I am an expert on these sorts of things. Offshore holdings and stuff like that can get REALLY complicated. I'd want to get some high level advice from tax lawyers, accountants, corporate lawyer even before trying something like this.....and than hopefully have pissed away any profits I may have gotten on legal fees to try and avoid paying the ex more coin.

[sahibjee]

Are you suggesting having someone (because, if you up the ladder for shareholdings, it eventually has to be a person) to hold the shares in trust for the benefit of the OP....there are obvious risks involved for all parties here.

For the trustee, there could be tax risks. A tax agency may try to tax the trustee for the income and then the trustee would have to turn around and say "no this isn't for me it is for them".

The beneficial owner of the shares would have to worry about whether or not the trustee actually acts in their best interests and not go rogue on them or take advantage of them.

Further there are complications of where or not that would fall under embezzlement or other tax evation and possilby be deemed a criminal matter.

Let say if we register the HoldingCo under my grandfather's name, who is a retiree, and he would look after every thing (i.e. marketing, accounts, HR and so on) except TechCo's operations, then since he is really putting in the work it wouldnt be embezzlement etc right? and he would be free to donate the money to unitedway on his will? that makes it all legal .. right?

[HammerDad]

Let say if we register the HoldingCo under my grandfather's name, who is a retiree, and he would look after every thing (i.e. marketing, accounts, HR and so on) except TechCo's operations, then since he is really putting in the work it wouldnt be embezzlement etc right? and he would be free to donate the money to unitedway on his will? that makes it all legal .. right?

Would he be the shareholder of Holdco (ie. the person who legally owns holdco, and as such owns TechCo and be entitled to all of the assets/liabilities of both companies in the event of liquidation/dissolution/winding-up)?

If you mean putting simply as a director/figure head for the purposes managing the day to day activities, and you are still the shareholder, you would still be obligated to report the ownership of the corporation if your ex requested financial disclosure. If you don't and they find out you are the owner, a judge will get pissed. If you make him the owner of the corporation, but holding the shares in trust for you, you will likely still have to disclose that you are the beneficial owner of such shares and entitled to all dividends and proceeds attributable to such shares declared by the corporation.

But as a director, he would be allowed to donate funds. But that still doesn't mean that you, being the shareholder, wouldn't have those funds deemed as income for you.

I am not sure whether or not it embezzlement is the right term, or even tax evasion. But the structure would be one that a judge could easily see right through and risky to both of you when it comes to how things are getting handled and who is responsible if something goes wrong.

[randomjohndoe]

So I can't see where it provides that an off-shore corporation need not register in Ontario if they are carrying on business in Ontario.

An ontario corp. can sell to anybody anywhere in the world, it does not mean it has to register everywhere it once sold something. Similarly, foreign corp does not need to register if it ONLY sells into Canada. Clearly we are talking about B2B type of deals.

About the only grey area would be is if it is an internet based business also based off-shore. Ontario may not cover that. But if said internet based company has an office/agent/representative in Ontario

Yes, I said it too, no office in ON, for sure.

[randomjohndoe]

Are you suggesting having someone (because, if you up the ladder for shareholdings, it eventually has to be a person) to hold the shares in trust for the benefit of the OP....there are obvious risks involved for all parties here.

For the trustee, there could be tax risks. A tax agency may try to tax the trustee for the income and then the trustee would have to turn around and say "no this isn't for me it is for them".

The beneficial owner of the shares would have to worry about whether or not the trustee actually acts in their best interests and not go rogue on them or take advantage of them.

Yeah, valid concerns, but that is the service routinely offered by companies that help set up an off-shore.

[randomjohndoe]

Let say if we register the HoldingCo under my grandfather's name, who is a retiree, and he would look after every thing (i.e. marketing, accounts, HR and so on) except TechCo's operations, then since he is really putting in the work it wouldnt be embezzlement etc right? and he would be free to donate the money to unitedway on his will? that makes it all legal .. right?

It could work, but then again, if they find out your grandfather owns the hold.co. then the transactions between hold.co and tech.co. might be deemed non-arms-length and it is only downhill from there.

[randomjohndoe]

Further there are complications of where or not that would fall under embezzlement or other tax evation and possilby be deemed a criminal matter.

You are right. You can PM me if you want to discuss this further.

[HammerDad]

An ontario corp. can sell to anybody anywhere in the world, it does not mean it has to register everywhere it once sold something. Similarly, foreign corp does not need to register if it ONLY sells into Canada. Clearly we are talking about B2B type of deals.

The need for an Ontario/CBCA corporation to register else where in the world would depend on the laws of that jurisdiction. Quebec's laws for example, if taken literally, would mean any corporation that attempts to makes profits within Quebec's borders would need to register.

As for foreign corp's needing to register in Ontario for things like sales....the need to register is questionable. I believe the current case law on this asks the question "where did the sale take place". If an Ontario corporation orders something off of the internet from a corporation in Ohio, it is likely to deem that the sale took place in Ohio.

But if a representative of an Ohio company comes into Ontario to make sales to corporations in Ontario, the point of purchase was in Ontario, thus subject to registration and taxation. I am sure there are companies that don't bother registering and makes sales anyway. It is just a matter they won't have any problems...until they do have a problem and get caught up in court in Ontario and are forced to register in order to maintain the action.

[randomjohndoe]

But if a representative of an Ohio company comes into Ontario to make sales to corporations in Ontario, the point of purchase was in Ontario, thus subject to registration and taxation. I am sure there are companies that don't bother registering and makes sales anyway. It is just a matter they won't have any problems...until they do have a problem and get caught up in court in Ontario and are forced to register in order to maintain the action.

Hm... does this actually ever get to the court? I mean, the cost of tracking this down and enforcement... For what? For 60 bux master business license???

[HammerDad]

Hm... does this actually ever get to the court? I mean, the cost of tracking this down and enforcement... For what? For 60 bux master business license???

Ohio company sends agent into Ontario and makes a sale to OBCA corporation. OBCA corporation defaults on payment. Ohio company tries to sue in Ohio but OBCA corporation successfully argues that Ontario is the proper jurisdiction to hear the case. Ohio corporation is prevented from starting the action until they are registered.

Or, Ohio company sends an agent to Ontario and OBCA corporation buys something. The product is defective and Ontario corporation sues. Ohio company wouldn't be able to defend without registering or leave from the court.

And we are talking about corporate registrations. The $60 master business licenses are registrations under the Business Names Act. Proprietorships, partners and corporate trade names. The registration under the Corporations Informations Act (this filing is fee) and the Extra-Provincial Corporations Act (which I think is maybe $300 max).

Anyway, give the details here, I don't think OP could get away with having an offshore corporation not registered in Ontario as OP would be the corporations agent and he lives in Ontario. And unless OP plans on leaving the country, the need to register would be high.

Offshore corporations are great for holding assets like money, shares or other forms of assets that don't have a tangible presense (art). Something like real estate would cause a corporation to register in the province where the real estate is held.

[FaithandMorals]

HammerDad is very articulate on this imho.

I also think it is REALLY simple. Despite the debate about whether a foreign held co. might have a legal liability to report here or not, the fact remains a bunch of Canadian citizens want to start a couple co.s. They may want to start one abroad in a known tax haven like Netherlands Antilles or Costa Rica or something. They want these companies to associate with one another.
One of the real people related to all of this is going through a messy divorce arguing to reduce the level of support he has to pay.
I am a judge. I learn about this. Doesn't matter if you are George Soros and one of the most sophisticated businessmen on the planet, I call bullshit. I then decide you should pay the most support I can possibly order.
If I am wrong, good luck as you are braver than I.