Switching business structures can feel confusing. Federal and Ontario incorporations have clear differences, like name protection and compliance rules. This page explains the process of switching from federal to Ontario incorporation, step by step.
Key Takeaways
- Ontario no longer requires 25% of directors to be Canadian residents since July 5, 2021. This change makes it easier for foreign businesses to operate in Ontario.
- Federal corporations have stronger name protection across Canada, while Ontario incorporation protects the business name only within the province.
- Transitioning reduces compliance work as Ontario’s rules are simpler than federal ones. Filing through the Ontario Business Registry is fast and done online.
- Articles of Continuance need detailed information like directors’ names and office addresses.
- Legal help ensures smooth transitions by preparing filings, updating records, checking NUANS reports, and meeting ongoing obligations like filing annual returns on time.
Switching From Federal To Ontario Incorporation: What You Need To Know
Federal corporations must register in each province where they do business. By transitioning to Ontario incorporation, you simplify compliance with local regulations. The Ontario Business Registry allows for quick online transactions to complete the process.
Ontario no longer requires 25% of directors to be Canadian residents as of July 5, 2021. Professional corporations in Ontario usually incorporate under the OBCA, not federally. A detailed plan and legal advice are key to maintaining your corporate identity during this switch.
Key Differences Between Federal and Ontario Corporations
Federal and Ontario corporations differ in rules they must follow and benefits they offer. Understanding these differences helps you choose what fits your business needs best.
Name protection
Federal corporations have stronger name protection. They are protected across all provinces and territories in Canada. Ontario incorporation only protects the name within the province.
The federal process checks for distinctiveness nationwide using NUANS. It prevents similar names in every province and territory. Ontario focuses on exact matches but only inside its borders.
Both systems require a new name if another business has the same one elsewhere.
Governance and compliance requirements
Ontario corporations no longer need 25% of directors to be Canadian residents. This change, effective July 5, 2021, benefits foreign businesses. Federal rules still require at least one resident director if the board has fewer than four members.
Clear policies on conflicts of interest and risk management are vital for governance. Ontario private corporations must keep an ISC Register starting January 1, 2023. Federal companies must file an ISC Register with Corporations Canada each year after January 22, 2024. Non-compliance can result in fines up to $5,000 or penalties for directors and officers.
Filing obligations and fees
Federal incorporation costs $200. Ontario registration adds $300, totaling $500 for federal businesses in Ontario. Provincial incorporation in Ontario is simpler and costs only $300.
Annual return fees differ too. Federal corporations pay $12 yearly, while Ontario charges $25. Missing filings can lead to dissolution or loss of property to the Crown. Corporations must also file notices for changes like directors or addresses.
Reasons to Transition Your Corporation to Ontario
Switching to Ontario incorporation can simplify compliance and offer local business perks.
Streamlined provincial compliance
Ontario’s system makes compliance simpler. The Ontario Business Registry (OBR) allows online filings for changes and updates. This saves time compared to federal requirements. Corporations under the OBCA follow fewer rules than federal ones, reducing workload.
Articles of Continuance help businesses switch without closing down. Ontario corporations must meet local laws to stay in good standing. Professional corporations also need to follow their industry rules during this process.
Local business advantages
Local incorporation helps build strong ties with local partners and stakeholders. This can lead to more networking and mentorship opportunities. Women entrepreneurs, in particular, may benefit from these local connections for business growth.
Accessing local financing becomes simpler with Ontario incorporation. It supports succession planning by ensuring the business can continue beyond the owner’s lifetime. Lower tax rates for corporations also improve financial efficiency compared to sole proprietorships.
Legal Steps in the Continuance Process
Follow clear steps to transition your corporation; each step ensures a smooth legal process.
Obtaining shareholder approval
Shareholder approval needs a special resolution, which means at least two-thirds of shareholders must agree. Both the board of directors and shareholders must approve the change.
Dissent rights allow unhappy shareholders to request fair value for their shares. The corporation must be in good standing in its current jurisdiction before moving forward. Updated records and bylaws are filed after approval to meet Ontario’s rules.
Legal advice ensures compliance and smooth approval.
Conducting a NUANS name search
A NUANS search checks if your business name is available in Ontario. It scans for similar names across Canada using a special algorithm.
This report ensures compliance with Ontario naming rules before filing Articles of Continuance. If the name is not available, you must pick another or create an assumed name and update all materials.
A provincial NUANS report is required for corporate continuance to protect brand identity and meet legal needs.
Drafting and filing Articles of Continuance
Articles of Continuance must include the corporation’s name, share structure, directors, office address, and business activities. It updates corporate governance and confirms the transition of assets and liabilities.
Supporting documents like shareholder approval and regulatory consents are required. Once filed, a Certificate of Continuance is issued. The process can be done by mail or electronically based on your company’s status.
Post-Transition Requirements and Obligations
Ensure your corporate records are accurate and up to date. Meet Ontario filing needs to stay compliant.
Updating corporate records
Corporate records must show changes to directors, officers, or the registered office after continuance. Ontario private corporations need an ISC Register since January 1, 2023. This register must be updated once a year and within 15 days of new information.
Failing to follow these rules can lead to fines. Directors or officers may also face penalties if they allow non-compliance knowingly. Accurate updates are key for legal compliance and smooth operations.
Legal advice helps ensure all laws are met without mistakes.
Ontario annual returns and ongoing filings
Ontario corporations must file annual returns online through the Ontario Business Registry since May 15, 2021. These filings are separate from tax reports and due within six months of the corporation’s year-end.
Failure to file on time can lead to dissolution and forfeiture of property to the Crown. Accountants no longer include these returns with corporate tax filings, so businesses must submit them directly.
Accurate filings are crucial to stay in good standing with provincial authorities.
How Hadri Law Professional Corporation Supports Your Transition
Hadri Law helps simplify the process of switching your corporation to Ontario. The firm provides clear legal guidance for a smooth transition.
Tailored legal strategies for businesses
Legal strategies help businesses with formation, growth, and transitions. The firm provides guidance for preparing Articles of Continuance and other filings. It ensures compliance with laws while reducing risks during the process.
The team also reviews contracts, updates bylaws, and manages governance changes after incorporation. Tax planning and corporate restructuring are supported to aid smooth transitions.
Businesses receive help with communications to stakeholders and government agencies for seamless integration. Annual filing support and record-keeping ensure long-term success.
Bilingual service and international expertise
Hadri Law offers bilingual services in English, French, Spanish, and Catalan. This helps foreign entrepreneurs communicate clearly during the incorporation process.
The firm assists international clients in understanding Ontario’s business laws and tax rules. It also supports cross-border transactions and regulatory compliance for smooth operations.
Conclusion
Switching from federal to Ontario incorporation is a big step. It comes with clear benefits like local advantages and simpler compliance. The process needs careful planning and legal know-how. Professional help can make it smooth and stress-free. Let your business grow stronger with the right support!
Have questions? Reach out to Hadri Law at 437‑397‑2374, email contact@hadrilaw.com, or book a no-cost consultation.