Almost anyone can incorporate a company in Canada. You don’t need to be a Canadian citizen. You don’t even need to be a resident (in some cases)!
In this article, we provide details about how non-Canadians can set up a corporation in Canada and some of the common questions and challenges that arise.
This article intends to assist entrepreneurs running small and medium-sized enterprises outside of Canada who are interested in expanding their business to Canada.
Why would a non-Canadian want to open a company in Canada?
Canada is a great place to live and do business. It’s not perfect, but for the most part, it’s an incredibly nice and easy place to be.
Canada is especially attractive to entrepreneurs who have been successful in their home countries. Opening a business in Canada creates several new opportunities for such entrepreneurs.
For example, you could open a business in Canada to:
- access new markets to sell products and/or services that you already sell elsewhere in the World;
- build a pathway to migrate you and your family to Canada;
- diversify your assets geographically, which is especially important if your assets are concentrated in areas with high political/economic instability or with excessive exposure to natural disasters;
- access trade and R&D opportunities unique to Canada; or
- to change it up a little!
What are the minimum requirements for opening a company in Canada?
The minimum requirements for opening a private company in Canada are minimal!
Generally:
- You need to be 18 years of age or older.
- You need to be of sound mind.
- You need to not be bankrupt.
- You need to have a physical address in the province (or territory) where your head office is located (which Tobuso offers as an add-on to any of our incorporation packages).
That’s it.
Note that being a citizen or resident of Canada is not a requirement for forming a privately held corporation in Canada. (However, there is a requirement for at least 25% of the directors to be resident Canadians in some jurisdictions in Canada.)
Also, note that you are not required to make a minimum investment into the corporation (though, if you plan on pursuing a Canadian immigration program, there might be investment requirements as part of the immigration program).
Finally, there is no need to specify exactly what type of business the corporation will be engaging in—the corporation will be free to engage in a wide range of businesses (aside from a few protected industries, such as professional services). And the corporation will be free to change the nature of its business without submitting any notice of changes with the government (at the time of incorporation, you will be asked certain questions about the general industry in which your business will operate, such as supplying a NAICS code; however, this information is collected only for statistical data collection purposes and/or as part of the name approval process).
What’s involved in opening a company in Canada?
Forming a company in Canada requires you to make several decisions and take a number of steps (if you like analogies, then you can think of incorporating as building a robot person… your very own Canadian robot person).
Before we go on to explain all of the decisions and steps required, we want to help you breathe easier. Tobuso has built a platform and a process to streamline the entire company formation process, so even if it sounds complex, please rest assured that with Tobuso, you’ll easily incorporate your company.
Where to incorporate
The first decision that needs to be made is where to incorporate. You can incorporate under the laws of any province/territory or the federal laws of Canada. The factors that usually determine where non-residents incorporate their corporations in Canada are:
- location of market for their industry;
- location of existing business, family, and community relationships;
- where the business owner wants to live (with the Greater Toronto Area (GTA) in Ontario and Lower Mainland in British Columbia being the top 2 choices); and
- director residency requirements.
The director residency requirement needs more explanation: Every private corporation needs at least one “director”. Some jurisdictions require that at least 25% of the directors be resident Canadians. For example, all corporations formed under the federal laws of Canada require at least 25% of the directors to be resident Canadians.
Popular jurisdictions that do not have any citizenship or residency requirements for directors are: Ontario, British Columbia, and New Brunswick.
Most non-residents, therefore, choose to incorporate in Ontario, British Columbia, or New Brunswick. Of course, non-residents with trusted business partners or family residing in Canada can ask those individuals to be a director of their corporation to take advantage of forming a federal corporation. Having a resident Canadian on the company’s board of directors can also help when it comes to opening a bank account for the corporation (more on this below). However, there are a number of risks associated with involving others in your new corporation, which should be carefully weighed against any benefits.
Name
The second decision that needs to be made is what to name your corporation. You can learn all about naming your corporation in our earlier article about that exact topic.
Once you have chosen a name, it needs to be checked against a national database, which is done by obtaining a NUANS report (rest assured, this is all taken care of through the Tobuso platform). The NUANS name report will show you whether any companies or trademarks in Canada are the same or similar to your proposed name. When you carry out a NUANS search, the name that you searched for is reserved for your use for 90 days (provided that it is not already taken or is too similar to an existing name or trademark).
Structure
The third decision that you have to make is how to structure your new corporation.
There are three main roles in every corporation: shareholders, directors, and officers (you can read all about them in detail in our earlier post, What Are Directors, Officers, and Shareholders?).
You need to decide who will fill all 3 of those roles. In the case of most small businesses, there will be just one person who fills all three roles. Suppose your company outside of Canada is predominantly owned and operated by one person. In that case, the simplest way to start in Canada is for that sole person to be the sole shareholder, director, and officer.
Of course, you can also make more complex structures (much more complicated). For example, you can have family members fill some of those roles and have multiple classes of shares for various purposes.
And that is the other aspect of structuring your corporation—choosing what share classes to create and who will subscribe for what shares. Again, most small businesses do well by sticking with the KIS principle (“Keep It Simple”) and just having one class of shares.
Structure is the last big decision that you need to make in order to incorporate. After that, the decision to form is relatively minor. Please keep in mind, however, that Tobuso has made the whole incorporation process as easy as possible, and if you follow our process, you’ll easily breeze through these decisions!
What steps need to be taken to incorporate a company in Canada?
In brief, the steps are as follows:
- name search and reservation;
- incorporation application;
- initial return filing and/or extra-provincial registration filing (depending on the jurisdiction of incorporation);
- organizing resolutions of directors and shareholders (which includes the creation of by-laws and initial subscriptions for shares); and
- creation of a minute book, which contains all of the documents generated from the above steps along with lists (i.e. registers and ledgers) of shareholders, directors, officers, issued shares, etc.
Each of these steps has a number of nuances and substeps, so they are more complex than they may seem.
Many other steps also need to be taken, such as opening bank accounts, setting up tax accounts, and so on.
You can read some of our other posts to learn more about these steps, but please remember that the company formation steps are taken care of for you when you incorporate them with Tobuso.
What are some common challenges non-residents who open a corporation in Canada face?
Opening a bank account in Canada can take a lot of work for non-residents. The banks in Canada have legal obligations to know certain information about their customers. (These obligations are referred to as KYC—Know Your Client—and AML—Anti-money Laundering and Terror Financing—obligations.) Most banks are only willing to put in the time and effort to obtain this information if an individual is physically located in Canada and sitting in front of a bank employee at a physical bank branch.
For non-Canadians, banks also usually ask for evidence that the individual has a right to live and work in Canada, such as a permanent residency card or a valid work visa. That means that even if you come to Canada in person, you might still need help opening a bank account if you only have a tourist visa.
Most non-Canadians who incorporate companies in Canada have historically found a way to open a bank account in Canada. They sometimes do it by involving friends and family in the account opening (which has risks), speaking with multiple banks, or simply waiting until they have the necessary visas.
But… opening a business bank account in Canada became much easier for non-residents! Tobuso now offers bank account opening assistance as part of its full-service incorporation packages. We have partnered with leaders in Canada’s money services businesses to address the unmet needs of non-resident owners of Canadian businesses.
Getting credit is another big challenge faced by non-Canadian business owners in Canada. Canada’s banks (and credit unions) depend heavily on credit scores in deciding whether to lend to businesses and business owners. However, they seem very reluctant to look at any credit history from outside of Canada. So, that leaves most new non-Canadian business owners with the option of self-financing using funds from outside of Canada or turning to private lenders (you should be very careful when working with private lenders since the industry is not as well regulated, and you can easily be scammed or put into a bad position).
There are countless articles online about how to build your credit score as a newcomer to Canada. For example, try searching online for “new Canadian how to get credit”.
Bookkeeping and tax filings take a lot of work to stay on top of. They also involve intricate rules, deadlines, and record-keeping requirements that take time to learn thoroughly. As you can see from our other article about this topic, bookkeepers and accountants are invaluable when you’re starting up in Canada. That’s why Tobuso now offers to help you set up your bookkeeping relationship in Canada after incorporation as part of the “Incorporate with Help PLUS” incorporation package.
Legal administration is in the same boat as bookkeeping and tax filings. Intricate rules, deadlines, and record-keeping requirements take time to learn (or remember) fully. The Tobuso platform is also designed to assist with this and will help you easily take care of the most common legal administration items (like annual corporate maintenance).
Immigration for business owners & their families
Immigration to Canada is a crucial topic that is often discussed in connection with opening a business here.
You can find countless resources online to learn more about what different immigration programs are available for business owners, digital creators, and other entrepreneurs (you can even check out our article on the Intra-Company Transfer program, which details forming a company for that specific program; however, you should look elsewhere for information on the immigration program itself).
Immigration & Citizenship Canada is the most authoritative source for information; however, it’s always best to work with an immigration lawyer based in Canada or with an immigration consultant. Either way, make sure that whatever advisor you are working with is properly authorized by the Government of Canada, which you can verify by checking out this site; otherwise, you risk getting scammed. Please contact us if you are looking for recommendations; we would be happy to share.
We hope that this article has been of assistance to you. If you would like to learn more, please visit our library.
Or, if you’re ready to begin, you can start forming your company in Canada right now!
