Thirty terms you'll meet when you incorporate, raise money, or sign a shareholder agreement — explained without the legalese.
Who this is for: Founders, small-business owners, and anyone in Ontario about to incorporate, take on a co-owner, or read a corporate document and not want to nod along blankly. What you'll get: about 30 common corporate terms, grouped by topic, each explained in a sentence or two.
⚖️ This is a general guide, not legal advice. It can't account for your specific situation. Use it to get oriented, then confirm the details with a licensed Ontario lawyer.
Corporate documents are written in a language all their own. This glossary translates the terms you're most likely to run into when you start or grow an Ontario business. Most Ontario private companies incorporate under the Business Corporations Act (Ontario) (often shortened to "OBCA") or, federally, under the Canada Business Corporations Act ("CBCA"). Terms are grouped so related ideas sit together.
Business structures
Sole proprietorship — A business owned and run by one person with no separate legal existence. Simple and cheap, but the owner is personally responsible for all debts and liabilities.
Partnership — Two or more people carrying on business together for profit. In a general partnership, every partner is personally liable for the business's obligations.
Limited partnership — A partnership with at least one general partner (full liability, runs the business) and one or more limited partners (passive investors whose liability is capped at what they invested, as long as they stay out of management).
Corporation — A separate legal "person," distinct from its owners, that can own property, sign contracts, sue, and be sued in its own name. This separateness is what makes limited liability possible.
Federal vs. provincial incorporation — You can incorporate under federal law (CBCA) or under a province's law such as Ontario's OBCA. Federal incorporation gives stronger name protection across Canada and a national identity; provincial incorporation can be simpler if you operate mainly in one province. Each has different filing, residency, and registration rules — verify the current requirements before choosing.
Shares and capital
Common shares — The basic ownership units of a corporation. Common shareholders typically vote, share in growth, and rank last if the company is wound up — after creditors and preferred shareholders are paid.
Preferred shares — A class of shares with special rights — often a fixed dividend and priority over common shares on dividends or on dissolution. Frequently used for investors and tax planning. The exact rights depend entirely on what the articles say.
Authorized shares — The shares a corporation is permitted to issue under its articles. Many Ontario corporations are set up with an unlimited number of authorized shares.
Issued shares — The shares the corporation has actually issued to shareholders. Authorized but unissued shares aren't owned by anyone yet.
Treasury shares — Loosely, shares a company is authorized to issue but hasn't yet (held "in treasury"). The company can issue them later — for example, to raise money or bring in a new shareholder.
Dilution — When new shares are issued, each existing shareholder's percentage of the company shrinks, even though their share count stays the same. Raising money usually means accepting some dilution.
People and roles
Director — A member of the board elected by shareholders to oversee and direct the corporation. Directors owe legal duties to act honestly, in good faith, and in the corporation's best interests, and can face personal liability in certain situations (for example, unpaid wages or some taxes).
Officer — A person appointed by the board to run day-to-day operations (e.g., President, Secretary, Treasurer, CEO). Officers carry out the board's decisions. One person can be a director, officer, and shareholder all at once.
Shareholder — An owner of shares in the corporation. Shareholders generally don't run the business day-to-day; they vote on big-ticket matters and elect the directors.
Documents
Articles of incorporation — The founding document that creates the corporation and sets out its name, share structure, and any special provisions. Think of it as the company's birth certificate and constitution.
By-laws — The internal rulebook governing how the corporation operates: how meetings are called, how directors and officers act, banking authority, and so on. By-laws sit beneath the articles.
Minute book — The official record of the corporation's existence and key decisions: articles, by-laws, director and shareholder resolutions, share registers, and registers of directors and officers. Keeping it current is a legal obligation — and the first thing a buyer, bank, or investor asks to see.
Shareholder agreement — A contract among some or all shareholders setting out how they'll run the company and handle ownership changes — voting, share transfers, buyouts, dispute resolution. Not legally required, but invaluable the moment there's more than one owner.
Unanimous shareholder agreement (USA) — A special shareholder agreement signed by all shareholders that can restrict or remove the directors' powers and transfer them to the shareholders. Because it can shift legal responsibility, it's treated as more than an ordinary contract.
Key concepts
Limited liability — The principle that shareholders generally risk only the money they put into the corporation; their personal assets aren't on the hook for the company's debts. The main reason people incorporate. (It can be lost if owners give personal guarantees or misuse the corporation.)
Piercing the corporate veil — The rare situation where a court ignores the corporation's separate existence and holds owners personally responsible — usually because the corporation was used to commit fraud or as a sham. Limited liability is strong but not absolute.
Right of first refusal (ROFR) — A right that forces a shareholder who wants to sell their shares to first offer them to the other shareholders (or the company) on the same terms, before selling to an outsider. Keeps ownership from drifting to strangers.
Shotgun clause — A buy-sell mechanism for breaking a deadlock: one shareholder names a price; the other must either sell their shares at that price or buy the offering shareholder's shares at that price. It forces a clean split — and pressures the offeror to name a fair number.
Drag-along right — Lets a majority (or specified) shareholder selling the company force the minority to sell on the same terms, so a buyer who wants 100% isn't blocked by a small holdout.
Tag-along right — The mirror image, protecting the minority: if a major shareholder sells, the minority can join the sale on the same terms rather than be left behind with a new, unknown majority owner.
Vesting — A schedule under which a person earns their shares or options over time (often with a "cliff" before any vest). If a founder or employee leaves early, unvested shares can be bought back or forfeited. It keeps people committed.
Register of individuals with significant control (ISC register) — A record many private corporations must keep listing the individuals who ultimately own or control a significant stake or otherwise exert significant influence. It's a transparency requirement; the exact thresholds and rules are set by statute and change — verify the current requirements.
NUANS — A name-search report that checks a proposed corporate name against existing corporate names and trademarks. Usually required before incorporating with a named (rather than numbered) corporation.
Business Number (BN) — A unique account number the Canada Revenue Agency (CRA) assigns to a business, used as the base for tax accounts like payroll, HST/GST, and corporate income tax.
Annual return — A yearly filing that keeps a corporation's basic information current on the government registry. Don't confuse it with the corporate income tax return — the annual return is a corporate-law filing, not a tax filing, though both are due each year.
Terms you'll hear together
A few clusters that tend to show up in the same conversation:
- Authorized vs. issued vs. treasury shares come up the moment you decide how to split ownership or bring in an investor.
- ROFR, shotgun, drag-along, and tag-along all live in the share transfer and exit sections of a shareholder agreement.
- Director, officer, and shareholder are three distinct roles you may hold at once in a small company — but they carry different rights and responsibilities.
- Articles, by-laws, and the minute book are the three core records every corporation must keep straight.
- Vesting and dilution dominate any conversation about founders' equity and raising money.
💡 Tip: If a document uses a term that isn't here, ask whoever drafted it to define it in writing. In corporate law, the same word (e.g., "preferred shares") can mean very different things depending on the specific document — the rights are whatever the articles and agreements say they are.
How Treadstone Law can help
Knowing the vocabulary is step one; getting the documents right is what protects you. We help Ontario business owners incorporate, build a proper minute book, and draft shareholder agreements that actually fit the people involved — in plain language, at a flat fee.
- Flat fees for incorporations and shareholder agreements.
- Online intake from anywhere in Ontario.
- Talk to a real person at 1-844-900-1070.
Explore our Corporate services, see pricing, or start a file online.
This is not legal advice
This guide is general information, not legal advice. Reading it does not create a lawyer-client relationship. Ontario laws, tax rates, and government programs change, and how the law applies depends on your specific facts. For advice about your situation, speak with a licensed Ontario lawyer. Treadstone Law is licensed by the Law Society of Ontario — reach us at 1-844-900-1070 or start a file online.