Starting a business in Canada involves critical decisions, including choosing between federal and Ontario incorporation. Federal incorporation offers broad name protection across Canada.
In contrast, provincial (Ontario) incorporation is limited to protecting the business name within Ontario. This article will help you understand these key differences so you can make an informed choice for your business.
Key Takeaways
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- Name Protection: Federal incorporation protects your business name across Canada. Ontario only gives protection within the province.
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- Government Fees and Directors: The fee for federal incorporation is $200, and 25% of directors must be Canadian residents. In Ontario, the fee is $300, with no Canadian resident director needed.
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- Business Scope: Federal corporations can operate anywhere in Canada but need to register in each province. Ontario corporations only work in the province unless they register outside.
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- Filing Requirements: Federal businesses file annual returns within two months of their founding date. In Ontario, annual returns are due six months after the fiscal year ends.
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- Flexibility: Federal companies can move offices between provinces easily. Provincial companies have more steps to do this.
Overview of Incorporation Options
Incorporating a business in Canada can be done at the federal level or the provincial level. Each option has its own rules and benefits for business owners to consider.
Federal Incorporation
Federal corporations give great name protection all over Canada. At least 25% of their directors must be Canadian residents. The government fee for federal incorporation is $200.
These corporations must register in each province or territory where they have a location. Federal incorporation offers national reach and trademark protection. Annual returns are due within two months of the date of incorporation each year.
Provincial Incorporation in Ontario
Incorporating in Ontario protects your business name only within the province. There is no need for a Canadian resident director. The government fee for incorporation is $300.
Getting an extra-provincial license in Ontario is free, but you will pay if you want to operate in other provinces. You must file an annual return within six months after the fiscal year ends.
At Hadri Law we complete incorporations within 24 hours of receiving all the required information and documentation from our clients.
Key Differences Between Federal and Ontario Incorporation
Federal and Ontario incorporation differ in several ways. These differences impact your business name, operation scope, and filing needs.
Name Protection and Approval
Federal incorporation gives your business name more protection across Canada. This means your name is safe in every province. For both, federal and provincial incorporation, a NUANS search report is needed to check for similar names.
The business name chosen must be an original business name, not taken by another business. Using a conflicting name risks legal action for infringement.
Business Operation Scope
Federal corporations can work across Canada under the CBCA. This is great for businesses aiming for national or global recognition. They must also register in each province if they do business there.
Businesses formed in Ontario can only operate in that province unless they register outside it too. Federal corporations can move their main office between provinces without needing to dissolve and re-incorporate, giving more flexibility than provincial incorporation.
Mandatory Corporate Filings
Federal corporations must have at least 25% Canadian residents among their directors. In Ontario, you need to file an Initial Notice within 60 days of incorporation. Both federal and provincial corporations must complete annual corporate filings.
For federal corporations, Annual Returns are due within 60 days of the incorporation anniversary. In Ontario, a Notice of Change must be filed within 15 days if there are any changes after the Initial Notice.
If you do not file annual returns, the government can dissolve your corporation.
Extra-Provincial Registration Requirements
Federal corporations must register in each province where they do business. This can have a significant cost at first and has strict rules.
Businesses incorporated in one province do not need to register again in that same province. But, they need to register if they work in other provinces. Provincial incorporation is cheaper with lower fees and compliance costs.
Conclusion
Choosing between federal and Ontario incorporation depends on your business needs. Federal incorporation offers strong name protection across Canada. Ontario incorporation may be easier for foreign owners due to no Canadian resident director requirement.
Consult with Hadri Law to make the best decision for your company. Contact us today at 437-974-2374.