Initially, the concept of an incorporated company was developed in response to the need in financing large economic projects without the limitations associated with sole proprietorships and partnerships. Sole proprietorships created problems because they did not allow for the acquisition of substantial capitals through the participation of many entrepreneurs. The difficulty with partnerships was that major decisions needed to be agreed upon with all the partners, thus making large partnerships impractical. What was needed was to make a large number of people participate in a business venture without playing an active role in it, and the idea of a corporation was initially designed to accomplish this end. Therefore, the most significant feature of an incorporated company is that it represents a separate legal entity from the people who own shares in it.

In early times, ordinary citizens were still precluded from incorporating companies for general business activities. Instead, they created their own unofficial companies through contracts called “deeds of settlement”. When Parliament decided to permit incorporation on a general scale, a considerable number of these contractual associations had to be accommodated. The resulting legislation gave these companies legal status and the advantages of incorporation by allowing them to simply register at an appropriate governmental office and pay a fee.

Canada adopted many British approaches to incorporation. Both federal and provincial governments have created many corporations through their power to pass special statutes. For example, the Canadian Broadcasting Corporation and the Canadian Pacific Railroad were made by special acts of the Parliament. Some Canadian jurisdictions adopted the British practise of incorporation through registration, while others used royal charter approach and created incorporated bodies through granting of letters patent. A third approach, based on filing of articles of incorporation, was borrowed from the U.S.