Where to incorporate in Canada Selecting a Province of Incorporation in Canada
When incorporating a business in Canada, it is important to determine the province where your corporation will operate. You may choose to incorporate federally or in one of 13 provincial/territorial jurisdictions.
In order to determine your corporation’s preferred province, you should ask yourself the following questions:
Where will your corporation conduct its business – in one or more provinces/territories or across Canada?
How important is federal name protection? Will your corporate name be used in multiple Provinces or Territories?
Doers the uniqueness of your corporate name justify its protection with federal incorporation?
What are the various fees associated with federal incorporation versus provincial incorporation?
There are three principal differences between federal and provincial incorporation; namely, jurisdiction of operation, degree of corporate name protection and cost of incorporation.
Federal and Provincial Jurisdiction
Federal corporations are incorporated pursuant to the Canada Business Corporations Act (CBCA). They have the constitutional right to carry on business anywhere in Canada under their registered corporate name, subject to extra-provincial/territorial registration requirements in each Province or Territory.
Provincial corporations are incorporated pursuant to the applicable provincial corporate statute. They only have the right to carry on business within the Province or Territory of incorporation. For example, an Ontario corporation is allowed to operate only in the Province of Ontario.
It is possible, however, for provincially-registered corporations to make an extra-provincial registration to carry on business in one or more other Provinces. For example, if an Ontario corporation wished to establish a permanent office in Alberta and another in Quebec, it could apply to those Provinces for registration as an extra-provincial corporation in Alberta and Quebec. The definition of “carrying on business” varies from Province to Province, so a qualified lawyer should always be consulted to determine whether or not extra-provincial registration is required.
Extra-provincial registration
The extra-provincial registration process for provincially registered corporations is very similar to the extra-provincial registration process for federal corporations; however, it differs in one important respect: Name Approval.
Federal corporation names are automatically protected across Canada (except in the Province of Quebec) at the time of incorporation. When a federal corporation needs to register to operate in a Province or Territory, with some limited exceptions, it can normally file the requisite paperwork with the filing fee and commence doing business once its registration has been approved. This is not the case for provincially incorporated companies, whose names are only reserved and approved for use in their home Province.
Provincially incorporated companies have the added burden of having their name re-approved in the Province of extra-provincial registration. If another company were to be using the same or similar name in that other Province, it is possible that the name could be denied for extra-provincial registration. For example, an Ontario corporation registering to do business in Alberta must complete and submit an Alberta NUANS® Search in conjunction with its application for extra-provincial registration. If an Alberta business using the same name as the Ontario corporation were to appear on that NUANS® Search, the Ontario corporation would be prohibited from using its name in Alberta. The Ontario corporation would have no choice but use a different name (assumed name) for its operations in Alberta. This scenario usually leads to the recommendation that federal incorporation is preferred if your corporation plans to operate in multiple Provinces.
Cost of Incorporation
Of all the factors that influence your choice of jurisdiction, the cost of incorporation should be the least important of the determinants; nevertheless, it is a consideration. Federally incorporated companies must be incorporated at the federal level and then registered extra-provincially in one or more Provinces. As a result, the overall cost of incorporation is usually higher for federal incorporation, as both federal and provincial filing fees will apply. The only exceptions are for federal corporations which are located in the Provinces of Ontario and Prince Edward Island. Neither Province charges any extra-provincial filing fees for federally incorporated companies, and therefore, the cost to incorporate federally is the same or lower than the equivalent Provincial incorporation.
Corporate Directors Residency Requirements
Each jurisdiction has its own requirements concerning the residency of a corporation’s directors. Residency requirements by jurisdiction are as follows:
Federal (Canada) 25% resident Canadian Directors Required
Alberta 25% resident Canadian Directors Required
Manitoba 25% resident Canadian Directors Required
Newfoundland 25% resident Canadian Directors Required
Ontario 25% resident Canadian Directors Required
Saskatchewan 25% resident Canadian Directors Required
Provinces Not Requiring Canadian Directors
British Columbia No Canadian Directors Required
New Brunswick No Canadian Directors Required
Nova Scotia No Canadian Directors Required
Prince Edward Island No Canadian Directors Required
Quebec No Canadian Directors Required
Please note that it is only directors which are specified, not officers or shareholders.
Officers and shareholders do not need to be Canadian residents. Note also that Canadian residents are specified, not Canadian citizens.
Corporate Name Protection
The second factor in determining your corporation’s jurisdiction is the degree of protection you wish to acquire for your corporate name.
As previously mentioned, incorporating federally under the Canada Business Corporations Act (CBCA) provides protection for corporate names across Canada (except Quebec). Once a particular corporate name is registered as a federal corporation name, no one else may use that name or one that is confusingly similar for his/her corporation anywhere in Canada (except Quebec). This federal corporate name protection is second only to trademark protection, in terms of its scope and effectiveness for protecting business names. Because of the scope of corporate name protection provided under the CBCA, proposed corporate names are thoroughly scrutinized by Corporations Canada according to strict name granting guidelines. As a result, many names that would be acceptable for corporate registration provincially are rejected by Corporations Canada as being too vague or non-distinctive.
It should be noted that although regulations in both federal and provincial jurisdictions require that a corporate name not be identical to, or confusingly similar with, an existing corporate name or trademark, these regulations are applied quite differently in each jurisdiction. For instance, in some Provinces, a proposed corporate name is likely to be acceptable unless it is identical to an existing one. The onus is on the incorporator to determine confusion. When this is compared to the name-granting system used by the federal government, which uses government examiners to determine confusion using more rigorous standards, it becomes evident that many corporate names which are acceptable for Provincial registration may be rejected for federal incorporation.
It is strongly recommended that a NUANS® and/or CIDREQMD name search be performed prior to submitting your application for incorporation, in order to ensure that there can be no confusion about your choice of corporate name. Be aware that a NUANS name search for incorporating an Ontario company includes corporate names across Canada, but other Provinces may not necessarily search Ontario corporate names. This means that, if you incorporate ABC Company in Ontario, someone else could potentially incorporate ABC Company in Manitoba at a later date.
Laws Restricting Selection of Province
If you are a Canadian who is seeking to incorporate a business, and you favour Provincial jurisdiction over federal, chances are that you will incorporate your business in your home province. All Provinces require that your corporation register an address within the Province where you propose to carry on business and/or that an appointed representative or agent of your corporation register and reside within the Province. This address is used for service of legal documents and for contacting the corporation generally.
Canadian Provinces Not Requiring Resident Directors
The Special Cases of
British Columbia
Quebec
Prince Edward Island
Nova Scotia
New Brunswick
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.
We do not provide nominee director services, however we can provide incorporation services in any province which does not have residency restrictions.
Companies incorporated in any of those five provinces can then be registered to do business in other provinces as well.
Branch office registration is also available to you in any Canadian province, and you would not need to have a resident Canadian as a director.
Contact Us
Should you require additional information, request a quotation or clarify any related matter, please contact one of our Consultants who will be happy to assist with your enquiries.
Disclaimer
COI ´s services are subject to its Terms and Conditions.The information provided by COI is intended as informative material and should not be relied solely upon in decision-making, especially if it concerns international tax planning and financial structuring as these areas are subject to frequent changes, although its efforts to keep all information on its website regularly updated.
COIstrongly recommends that each potential user of its services seek tax and legal advice before deciding on implementing a solution employing international financial structures. COI will not be liable for any damages, costs and expenses resulting from or incurred as a result of any action taken or omitted based upon any such information provided by COI.