When establishing a business in Canada, the incorporation process can be simple but as with any process, companies need to understand and abide by rules and regulations to stay compliant.
Canada is an attractive market for companies looking to invest overseas because of its abundant resources spread across the country and its consistently stable political environment. Learn the 4 steps needed to incorporate a business in Canada.
1. Decide on a name
To incorporate a business in Canada, you will need to pick a name that is distinctive, not confusing and not reminiscent of another company or business. You must do a Nuans name search to obtain a report that will find other existing companies that are similar to the name being requested. These reports will help you pick and get approval of a name for your business.
2. Choose federal or provincial/territorial incorporation
In preparation for incorporating a business in Canada, companies must choose to incorporate either on the federal or provincial/territorial level. If the company wants to do business in more than one jurisdiction, they can file extra-provincially in each province or territory.
The benefits of incorporating at the federal or Canada Corporations Act (CBCA) level are:
- the corporation is considered a separate legal entity giving it the same rights and obligations under Canadian law as a natural person;
- it limits the liability of the shareholders, they will not be responsible for the corporation's debts;
- corporations are taxed separately from their owners and the corporate tax rate is generally lower than the individual tax rate;
- corporations have greater access to capital since they can borrow money at lower rates than those paid by other types of businesses, usually financial institutions tend to view loans to corporations as less risky;
- a federal incorporated company will be more steady than a company that is incorporated as a partnership or sole proprietorship if the owners are to pass away.
The challenges to incorporate on the federal level can be higher start-up costs and more documents to file such as:
- articles of incorporation
- annual return
- notices of any changes in the board of directors and/or the address of the registered office
- maintain a minute book
- file corporate income tax returns; and
- register in any province or territory where it carries out business.
Incorporating on the provincial/ territorial level comes with varying requirements depending on the jurisdiction.
Once you decide, you must complete the articles of incorporation forms. These can be in either English or French or both official languages.
3. Establish an office address
A requirement of any Canadian corporation is a physical registered office and a records office. The address must be a physical location in the province where the business is incorporated. All official documentation and correspondence is sent to this office.
4. Appoint the Board of Directors
Each jurisdiction has its own requirements concerning the residency of a corporation's directors.
British Columbia, Quebec, Prince Edward Island, Nova Scotia and New Brunswick are the only provinces in Canada that waive the corporate directors' residency requirements. This is especially important for foreign individuals and businesses wishing to register businesses in Canada, as they will not have to appoint resident Canadian directors if they incorporate in any of these provinces.
5. Obtain a business number
After your business is incorporated, a business number (BN) will be issued by the Canada Revenue Agency for your corporation. They will sent a letter confirming all of your information with your BN. A BN is used for:
- Goods and Services Tax (GST) or Harmonized Sales Tax (HST), depending on your province
- payroll deductions
- corporate income tax
- import and export duties and taxes
TMF Canada can provide full administrative support for these opportunities, including entity incorporation, local directorship services, HR and payroll and accounting & tax services for local and global companies looking to work in Canada.
Learn more about what you need to know when doing business in Canada with a free country profile.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.