How to Incorporate in Canada

Incorporating a business in Canada is a strategic step for entrepreneurs seeking to formalize their business structure, gain credibility, and potentially access tax benefits and limited liability protections.

We hereby outline the essential considerations for incorporating in Canada, including federal and provincial registration, recommended provinces, types of business entities, and incorporation requirements across various jurisdictions.

Federal vs. Provincial Incorporation

Federal Incorporation

Administered by Corporations Canada under the Canada Business Corporations Act (CBCA).
Grants the right to operate under the same name across all provinces and territories.
Ideal for businesses planning to operate in multiple provinces.
Generally faster and more cost-effective at the registration stage.

Provincial Incorporation

Each province has its own incorporation process and governing legislation.
Suitable for businesses planning to operate within a specific province.
May offer local incentives and simpler administrative processes for local businesses.

Extra-Provincial Registration

Required when a corporation (federally or provincially incorporated) wishes to operate in a province other than where it was incorporated.
Involves registering with the provincial registry and potentially appointing an agent for service in that province.

Recommended Provinces for Incorporation

Ontario:

Canada’s largest market.
– Streamlined online registration through ServiceOntario.
– Robust support ecosystem for startups.

British Columbia:

– Competitive incorporation fees.
– Simple online processes.
– Attractive for technology and startup sectors.

Alberta:

– No provincial sales tax.
– Business-friendly regulations and strong energy sector support.

Nova Scotia:

– Competitive tax incentives for innovation-based industries.
– Good option for businesses targeting Atlantic Canada.

Types of Business Entities in Canada

Sole Proprietorship:

– Simplest form; owned by one individual.
– Not incorporated, so no limited liability.
– Provincial registration required (e.g., Business Name Registration).

Partnership:

– General, Limited Partnership and Limited Liability Patnerships available.
– Formed by two or more individuals or entities.
– Registration requirements vary by province.

Corporation:

– Most common form for incorporation.
– Offers limited liability and potential tax advantages.
– Can be federally or provincially incorporated.
– Requires filing Articles of Incorporation and paying registration fees.

Incorporation Requirements by Province

In Canada, the requirements for incorporating and registering business entities such as corporations, limited partnerships (LPs), and limited liability partnerships (LLPs) vary by province and territory. Below is an overview of the general requirements for each entity type across various jurisdictions.

Corporations

Federal Incorporation

Corporations Canada allows businesses to incorporate federally, providing the ability to operate across all provinces and territories. Upon federal incorporation, businesses automatically receive a Business Number (BN) and a corporation income tax program account. However, if a federally incorporated business operates in a province or territory, it must also register as an extra-provincial corporation in that jurisdiction.

Provincial Incorporation

Alternatively, businesses can choose to incorporate within a specific province or territory. The process typically involves:

– Choosing a unique corporate name or opting for a numbered corporation.
– Filing articles of incorporation with the provincial or territorial corporate registry.
– Paying the applicable incorporation fees.
– Obtaining a BN and, if necessary, registering for other tax accounts (e.g., GST/HST, payroll) with the Canada Revenue Agency (CRA).

In some provinces, such as Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario, Prince Edward Island, and Saskatchewan, incorporating at the provincial level automatically registers the business for a BN and corporation income tax program account.

Limited Partnerships (LPs)

General Requirements

A Canadian Limited Partnership (LP) consists of at least one general partner with unlimited liability and one or more limited partners whose liability is limited to their investment in the partnership. LPs are commonly used in various industries, including professional services.

Provincial Registration

LPs must be registered in the province or territory where they operate. The registration process typically includes:

– Choosing a unique partnership name.
– Filing a declaration of limited partnership with the appropriate provincial or territorial authority.
– Providing details of the general and limited partners.
– Paying the required registration fees.

For instance, in Ontario, a Limited Partnership is formed by filing a Declaration of a Limited Partnership with the Ministry of Government and Consumer Services. The declaration must include the partnership’s name, the names and addresses of the general partners, and the principal place of business in Ontario.

Limited Liability Partnerships (LLPs)

Eligibility

LLPs are typically restricted to professionals, such as lawyers, accountants, architects, and engineers. Each province has specific regulations regarding which professions are eligible to form an LLP.

Provincial Registration

The process for registering an LLP generally involves:

– Confirming eligibility based on professional licensing requirements.
– Choosing a unique LLP name that complies with provincial naming rules.
– Filing an application with the provincial or territorial corporate registry.
– Providing consent from the relevant professional association or society, if required.
– Paying the necessary registration fees.

In Saskatchewan, for example, registering an LLP requires a name reservation, consent from the professional association, and submission of the registration application through the Corporate Registry application.

In Resume

Choosing the right jurisdiction and business structure for incorporation in Canada depends on your business goals, geographic scope, and sector. Whether you choose to incorporate federally for national reach or provincially for regional focus, understanding the regulatory landscape is essential. It’s also advisable to consult with legal or business professionals to ensure compliance and make the most strategic choices for your enterprise.