Where Should I Incorporate My Business?
The question as to where you should incorporate your business involves deciding whether your business should be incorporated under the federal laws of Canada (i.e., a federally chartered corporation) or under the laws of one of the provinces of Canada (i.e., a provincially chartered corporation).
There are advantages and disadvantages to both and there is no one best solution. Deciding which jurisdiction to choose may depend on the answers provided to these questions:
- Do you plan on doing business in more than one province?
- What percentage of the corporation's directors will be residents of Canada, if any?
- Do I want to have 2 annual corporate reports (one for federal and one for provincial)?
- Do I want to save money now for incorporation, even though it may cost me more in the long run?
Below are the most common factors that are used to decide where to incorporate.
If you intend on carrying on business only in one province, you may choose to incorporate a provincial corporation under the laws of that province or a federal corporation.
A federal corporation is generally entitled to carry on business anywhere in Canada under its name, subject only to registering in the province where business is carried on. There generally are provincial registration fees (except in Ontario and P.E.I.) that must be added to the incorporation fees of a federal corporation (will be detailed below).
The requirement for a federal corporation to register extra-provincially in the province must usually be satisfied within 30-60 days after starting to do business in the province.
The costs of extra-provincial registration will be discussed below.
PROTECTION OF CORPORATE NAME AND ITS USE
The federal corporation has probably the most stringent criteria in granting the right to use a name as the corporation's legal name. There are many factors that are taken into account by federal corporations examiners. Once the name is approved, it provides a significant amount of legal protection, although less than trademarks.
Most provinces offer very little protection of use, and will grant almost any name provided it is not identical. Moreover, if there is any protection, it is limited to that province, unlike federal corporations which afford Canada wide protection.
For example, a federal corporation with its registered office is Ontario is entitled to carry on business must file certain corporate information with the Ontario government. If the corporation uses a name other than its corporate name, this must be registered as well, under the Business Names Act. The Ontario government charges $60 for a five year registration.
COSTS OF INCORPORATION
One of the most important factors for small businesses when deciding to incorporate is the cost of incorporation. The jurisdiction of incorporation will automatically become criteria for decision because government fees are not the same.
It is important to note that if you are incorporating a federal corporation, you must also register extra-provincially, for which there is an extra cost (except in Ontario).
DIRECTORS RESIDENCY REQUIREMENTS
Another factor that can be important in deciding where to incorporate is the Canadian residency requirements of each jurisdiction. This is especially relevant to foreigners starting a business in Canada. If these requirements are not satisfied, you cannot incorporate in that jurisdiction.
Below are the current residency requirements for each Canadian jurisdiction:
|Federal||at least 25% must be resident Canadians|
|Alberta||at least 50% must be resident Canadians|
|Manitoba||at least 51% must be resident Canadians|
|Newfoundland||at least 51% must be resident Canadians|
|Ontario||at least 51% must be resident Canadians; However, if there are only 2 directors then only 1 must be a resident Canadian|
|Prince Edward Island||None|
|Saskatchewan||at least 51% must be resident Canadians; at least one director must be ordinarily resident of Saskatchewan|
TIME DELAYS FOR INCORPORATIONS
Another important factor when deciding to incorporate is the time it takes. Some jurisdictions are significantly faster than others. Below are the standard processing delays (in business days) that it takes to obtain a certificate of incorporation following the submission of articles of incorporation. Please note additional delays may be due to name approvals.
|Jurisdiction||Standard Processing||Expedited Processing (Additional fees apply)|
|Federal||5 days||3 days|
|Alberta||5 days||3 days|
|British Columbia||10 days||7 days|
|Manitoba||15 days||6 days|
|New Brunswick||15 days||N/A|
|Nova Scotia||21 days||N/A|
|Ontario||5 days||2 days|
|Prince Edward Island||15 days||N/A|
|Quebec *||18 days||5 days|
|Saskatchewan **||30 days||15 days|
* Please be advised that the trade name will be filed at the time of incorporation, however, there is a government processing time of approximately 14 business days before the trade name is officially approved.
** Please be advised that the current government delay to obtain a name decision for Saskatchewan is approximately 15 business days. This delay is in addition to the processing times for incorporations and business name registrations.
There are other issues that you may consider in selecting where you incorporate your business, namely, determining the advantages and disadvantages of each jurisdiction's corporate laws and tax structure. If you require additional information to make an informed decision as to where to incorporate your business we suggest you contact competent legal and tax professionals and discuss these matters with them.