Do you live in Ontario and are debating whether you should form an Ontario corporation or a Federal corporation? We created a list of pros and cons for both, which helps to break down some of the requirements for each. This article is to give you a general sense of the two jurisdictions, but you may need to discuss your specific situation with a professional to find out what jurisdiction would be the best fit for your new business.
Federal Corporations
Pros of Federal Corporations:
- Your corporation name is reserved across Canada: you don’t need to conduct a separate name search for every province that you register in.
- Corporations Canada has an extremely user-friendly platform for filings, and they also offer great resources.
- The Government fee for the incorporation cost is less expensive than Ontario.
Cons of Federal Corporations:
- You’ll still need to register your corporation in whatever province(s) you carry on business in—so the administrative work may be more, and there will possibly be added fees for the extra-provincial registrations and requirements.
- At least 25% of the board of directors is required to be Resident Canadian. This is only a con if your corporation doesn’t meet this requirement. Ontario does not have this requirement, so an Ontario incorporation could be an option.
- You must keep a “Register of Individuals with Significant Control”. Anyone who directly or indirectly owns 25% or more of the Corporation’s shares must be listed on this register. This isn’t necessarily a ‘con’, but it can sometimes be tedious to gather all of the required information, and this increases the administrative burden.
Ontario Corporations
Pros of Ontario Corporations:
- There is no requirement for directors to be Resident Canadian, therefore you can form a company in Canada even if you do not live here yet, or if the majority of the directors are non-residents.
- If you are only doing business within Ontario, you only need to worry about Ontario filings (ie: you don’t have Federal filings and Ontario filings).
Cons of Ontario Corporations:
- The incorporation cost is more expensive than Federal incorporations.
- Your corporation’s name is only protected within Ontario. This may pose an issue if you decide to register in a different province, and realize that your corporation’s name is not available in that province.
- You’ll still need to register your corporation in whatever other province(s) you carry on business in—so the administrative work may be heavier, and there will possibly be added fees for the extra-provincial registrations and requirements.
- As of January 1, 2023, Ontario corporations must also keep a “Register of Individuals with Significant Control”. Anyone who directly or indirectly owns 25% or more of the Corporation’s shares must be listed on this register. This isn’t necessarily a ‘con’, but it can sometimes be tedious to gather all of the required information and increases the administrative burden.
- Ontario corporations are required to keep a “Register of Ownership Interest in Land”. This register keeps track of each property that the corporation owns, as well as the date the corporation acquired and (if applicable) disposed of the property. Even if your corporation does not have any ownership interests, it should still keep a blank register in the Minute Book.
We hope this gave you a better understanding of the pros and cons of Ontario and Federal corporations. One thing to remember is that if you incorporate in one jurisdiction, and realize down the road that you would rather be incorporated under the other, then a ‘Continuance’ could be an option. This is when a corporation moves from one jurisdiction to another.
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