Canada is a great place to do business—both for its residents and for people from across the globe. When it comes to starting a company in Canada, incorporators can choose to form their company either federally or in one of Canada’s 13 provinces and territories.
Companies incorporated under the federal laws of Canada are formed and governed by the provisions of the Canada Business Corporations Act. Incorporated federally, these corporations can carry on their business anywhere in Canada; however, they will be required to register as extra-provincial corporations in each province and territory where they want to conduct the business.
This article aims to shed some light on Canadian federal corporations and the advantages and disadvantages of incorporating one.
Advantages of incorporating federally
Federal corporations enjoy various advantages over provincial/ territorial corporations:
Name protection across Canada
When you incorporate federally, the name of your corporation is protected across Canada as a business name. This gives your business increased business name protection and wider rights to carry on business throughout the entire country. No other corporation, whether federal or provincial, can use the same or confusingly similar corporation name. (Note: Even greater country-wide protection can be secured via trademark registration).
Ability to conduct business in other provinces/territories
Your federal corporation can conduct and expand its business in other provinces by registering as an extra-provincial corporation in such other provinces, that too with the same corporation name. This can be a limitation for provincial corporations if an existing business is using its name (exactly the same or somewhat similar) in other province(s), as it may not use its existing name to conduct business or expand in such other province(s).
Quick and easy registrations and compliances
Federal corporations are registered with Corporations Canada, which has a great website where any notices, documents requests and forms can be easily filed online.
The interface and the response time of Corporations Canada are usually convenient and hassle-free, especially when compared to the websites and systems of some other provincial Corporate Registries.
Cost of incorporation
The fee for incorporation of a federal corporation is $200.00, generally less than incorporating as a provincial corporation. For example, the fee for incorporating as a New Brunswick corporation is $262.00, for a Saskatchewan corporation, it is $265.00, and for Ontario Corporation is $360.00 (these fees are exclusive of name search and reservation fee).
Global recognition
Federal corporations are better recognized around the world as opposed to provincial corporations. This is a very important consideration if you have plans to expand internationally.
Other considerations
Now, it would be fair to talk about the downsides and other important aspects of incorporating federal corporations:
Registration in other provinces
Although a federal corporation can conduct its business in any province or territory of Canada, it needs to register the corporation in at least one province or territory (where its registered office is located). As a result, both federal and provincial filings are required.
Mandatory corporate filings and notices
Federal Corporations enjoy various benefits but are also required to comply with various filing requirements. Firstly, federal corporations are required to file an annual return every year with Corporations Canada within 60 days of its anniversary date. In contrast, the annual filings for some provincial corporations are submitted with tax returns. Also, for certain changes in corporate information, like a change of registered office, it is not just required to send notices to Corporations Canada but also to file notices with the provincial corporate registries where the corporation is registered as an extra-provincial corporation.
Maintenance of transparency register
Every federal corporation is required to maintain a transparency register wherein it needs to disclose the details of individuals who (1) own or control a significant number of shares with one or more individuals; or (2) have significant influence over the corporation without owning any shares, or (3) both. This register needs to be updated regularly within 15 days of becoming aware of the new information.
Disclosure of diversity for publicly traded companies
Federal corporations with publicly traded shares need to disclose information to their shareholders on the diversity of their boards of directors and senior management teams.
Such corporations are required to report on the representation of four designated groups, i.e. (1) women; (2) Indigenous peoples (First Nations, Inuit and Métis); (3) persons with disabilities, and; (4) members of visible minorities, as defined in the Employment Equity Act on their board of directors and senior management teams.
Should you incorporate federally?
In deciding whether to incorporate federally, the prospective incorporators should ask themselves the following questions:
- Will the corporation do business with companies outside of Canada?
- Is federal name protection important for the business? Will the corporate name be used in other provinces or territories?
- In which province(s) will the company carry on its business? In one or more provinces or across Canada?
- Is the corporate name unique enough to justify protecting it with federal incorporation (keep in mind the option of seeking a trademark registration, which is available to all corporations no matter where they are incorporated)?
- Do you want to avoid the burden of a transparency register and diversity disclosures (if applicable)?
There are similar and other important matters to consider when incorporating a corporation in Canada. If you are considering incorporating your business but need help with the process, contact us for immediate assistance regarding your incorporation needs.
At Tobuso, we are focused on keeping you organized so that you can focus on what you do best. We ensure that our clients have a hassle-free experience and can concentrate on what matters most—doing what energizes them most with their business.
