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The Ontario Superior Court of Justice recently held that pursuant to the Business Names Act, a corporation operating in Ontario must clearly and explicitly identify itself as a corporation when dealing with customers, failing which, the customer can commence an action as against the owner of the business personally, as if the corporation was actually a sole proprietorship.

In World Stone & Tile Inc. v. Ezekiel [2012] O.J. No. 4710, the plaintiff, World Stone & Tile Inc. commenced an action against the defendants for a construction lien claim for work performed in relation to tile installation. The defendants counter-claimed against the owner of World Stone & Tile Inc. personally for damages resulting from defective workmanship with the installation.

The owner of World Stone & Tile Inc. sought leave to continue the counterclaim under the name of the corporation.  The application was dismissed with the court concluding that the owner did not satisfy the three factors set out in section 7(2) of the Business Names Act.

The Court held that evidence as related to the deception or misleading of the public, was adduced, whereby the defendant testified that he was misled as to the owner’s true status as a corporation and he assumed that he was in fact, dealing with a sole proprietorship.

The Court held that the corporation’s owner’s submissions that he forwarded the defendants documentation containing the corporation’s full corporate name were weak and unconvincing given that the defendant denied receiving them and no documentation was provided into support of their transmittal. Finally, the Court examined the evidence in relation to the claim and counterclaim and made an order in favour of the defendants. 

This case is a valuable example that when operating as a corporation in Ontario or elsewhere, it is fundamentally important to properly identify yourself as a corporation, in order to benefit and take advantage of the corporate veil.  Failing to properly identify your business as a corporation can result in the owners of the corporation being held personally liable for the damages caused by the corporation to customers.  A corporation is considered a separate legal entity under the law.  One benefit of incorporating is the ability of the owners of the corporation to shield their personal assets from any liability incurred by the corporate entity.