9.1 – Corporation Basics

When starting or acquiring a childcare centre, many operators choose to operate through a corporation. A corporation is a legal entity that is separate from the individuals who own or manage it. This structure is commonly used because it can provide legal protection, flexibility in ownership, and clearer business organization.

Understanding the basic structure of a corporation helps operators better manage ownership, responsibilities, and long-term planning for the business.

What Are Shares of a Company? #

A corporation is owned through shares.

Shares represent units of ownership in a company. When someone owns shares in a corporation, they own a portion of the business.

For example:

• If a company has 100 shares in total and a person owns 50 shares, they own 50% of the company.
• If a person owns 25 shares, they own 25% of the company.

Shares determine:

• Who owns the business
• How profits may be distributed
• Voting rights in major company decisions

The total number of shares and how they are distributed among owners is known as the share structure of the company.

How Do People Own a Company? #

People own a corporation by holding shares issued by the company.

These individuals or entities are called shareholders.

Shareholders may include:

• Founders of the company
• Business partners
• Investors
• Family members

Ownership percentages depend on how many shares each person holds compared to the total number of shares issued.

For example:

Shareholder	Shares	Ownership
Owner A	60	60%
Owner B	40	40%

In this example, Owner A owns 60% of the company and Owner B owns 40%.

What Is a Board of Directors? #

A corporation is overseen by a board of directors.

The board of directors is responsible for governing the company and making major strategic decisions.

Directors typically oversee matters such as:

• Appointing company officers
• Approving major financial decisions
• Setting high-level policies
• Ensuring the company acts in the best interests of shareholders

The board does not usually manage day-to-day operations. Instead, they provide oversight and direction for the business.

Who Can Be a Director? #

Directors are individuals appointed by the shareholders to serve on the board.

A corporation may have:

• One director (common for small businesses)
• Multiple directors (common for larger companies)

Directors are usually:

• Owners of the company
• Founders of the business
• Experienced advisors
• Investor representatives

The number of directors required depends on the corporation’s structure and legal jurisdiction.

Is the Owner the Same as the Director? #

Not necessarily.

While many small businesses have owners who also serve as directors, these roles are technically different positions.

Shareholder (Owner) #

A shareholder owns the company through shares.

Director #

A director governs the company and oversees major decisions.

In many small businesses, the same person may act as both shareholder and director, but legally they are separate roles.

Can a Company Have Multiple Owners? #

Yes. A corporation can have many shareholders.

Ownership can be divided among multiple people depending on the share distribution.

For example:

• Two partners may each own 50% of the shares
• One investor may own 70% while another owns 30%
• Several partners may each own smaller percentages

Corporations provide flexibility in structuring ownership among multiple parties.

Can There Be Multiple Directors? #

Yes.

A corporation may have one or more directors depending on its size and structure.

Small businesses often have one director, while larger organizations may have several directors who form a formal board.

Officers and Corporate Roles #

In addition to directors and shareholders, corporations often have officers.

Officers are responsible for managing the day-to-day operations of the company.

Common officer roles include:

President or CEO: Responsible for overall leadership and management of the business.

Secretary: Responsible for maintaining corporate records and documentation.

Treasurer or CFO: Responsible for financial oversight and financial reporting.

In small businesses, the same person may hold multiple roles.  For example, one person might simultaneously act as:

• Shareholder
• Director
• President
• Secretary

Do You Need All These Roles? #

For small businesses such as a childcare centre, the corporate structure is often quite simple.

A typical structure might include:

• One shareholder
• One director
• One or two officer roles held by the same person

The structure becomes more complex when there are multiple partners or investors.

How to Incorporate a Company #

To create a corporation, you must incorporate the company.

Incorporation is the legal process of forming the corporation with the government.

This can usually be done through:

• A lawyer
• An accountant
• Online incorporation services

The process involves submitting certain documents and paying government filing fees.

What Is an Article of Incorporation? #

The Articles of Incorporation are the legal documents used to create the corporation.

They typically include information such as:

• Company name
• Share structure
• Initial directors
• Registered business address

Once the articles are filed and approved, the corporation officially comes into existence.

What Is a Minute Book? #

A corporate minute book is the official record of the company’s legal documents and corporate decisions.

It usually contains:

• Articles of Incorporation
• Shareholder records
• Director resolutions
• Share certificates
• Corporate bylaws
• Meeting minutes

The minute book is an important legal record that must be maintained for the corporation.

What Is a Master Business License? #

A Master Business License (MBL) refers to a registered business name used by a corporation that is different from its legal corporate name.

For example:

Legal corporate name:
123456 Ontario Inc.

Operating name:
Bright Future Childcare Centre

In this case, the operating name would be registered as a business name under the corporation.

Do You Need to Register a Business Name? #

If you plan to operate your childcare centre under a name different from the legal corporate name, you usually need to register that name with the government.

Registering the business name allows the company to legally operate and advertise under that brand.

Share Structure Clarity #

The share structure of a corporation defines how ownership is organized.

It determines:

• How many shares exist
• Who owns the shares
• What rights those shares carry

Some companies issue only one class of shares, while others create multiple share classes with different rights.

For example:

• Voting shares
• Non-voting shares
• Preferred shares

For many small childcare businesses, the share structure is simple and may only involve one class of common shares.

However, if the company plans to bring in investors or partners, a more detailed share structure may be used to define ownership rights and profit distribution.

Share Certificates #

A share certificate is a formal document that confirms ownership of shares in a corporation. It serves as proof that a person or entity is a shareholder of the company and specifies how many shares they own.

A typical share certificate includes information such as:

• The name of the corporation
• The name of the shareholder
• The number and class of shares issued
• The certificate number
• The date the shares were issued
• The signature of a director or authorized officer

Each share certificate corresponds to an entry in the shareholder register recorded in the corporate minute book. The certificate itself is the physical or digital proof of ownership, while the register tracks the official record of who owns the shares.

When shares are transferred, sold, or issued to new investors, new share certificates may need to be issued and the minute book must be updated accordingly. Properly managing share certificates is important because they document the ownership structure of the company, which becomes especially relevant when bringing in partners, raising investment, or selling the business in the future.

Shareholder Agreements #

When a company has more than one owner, it is highly recommended to have a shareholder agreement.

A shareholder agreement is a legal contract between the owners that outlines how the company will be managed and how decisions will be made.

Typical topics covered in a shareholder agreement include:

• Ownership percentages
• Voting rights
• Profit distribution
• Roles and responsibilities of shareholders
• What happens if a shareholder wants to leave
• How shares can be sold or transferred
• How disputes between shareholders are handled

Without a shareholder agreement, disagreements between partners can become very difficult to resolve. Even if the partners are friends or family, having a written agreement helps set clear expectations and prevent misunderstandings.

Non-Profit Organizations (NPO) #

A childcare centre can also operate as a non-profit organization (NPO) instead of a for-profit corporation. In a non-profit structure, the organization does not have owners or shareholders. Instead, it is governed by a board of directors who are responsible for overseeing the organization and ensuring it operates according to its mission and bylaws. Any surplus revenue generated by the organization must be reinvested back into the operations, such as improving programs, facilities, or staff compensation, rather than being distributed as profit. Similar to a corporation, a non-profit organization must still maintain proper corporate records, including documents such as articles of incorporation, bylaws, and a corporate minute book that records board decisions and organizational governance. However, because there are no shareholders, the governance structure focuses on board oversight rather than ownership rights.

Key Takeaway #

Understanding basic corporate structure helps childcare operators organize ownership, responsibilities, and legal compliance more effectively.

Even though many small childcare businesses operate with simple corporate structures, having a clear understanding of shares, directors, officers, and corporate records is important for managing the business properly and planning for future growth or ownership changes.