Choosing where to incorporate your company is a critical decision.
In Canada, you can choose to incorporate under the laws of any province or territory, or alternatively, you can choose to incorporate under the federal laws of Canada. Each of those is referred to as separate “jurisdictions,” and each has its own “Business Corporations Act”, “Companies Act”, or similarly named legislation.
If you choose to incorporate under Canada’s federal laws, you must also separately register your corporation to carry on business in at least one province or territory (most federal corporations only register in the province or territory where their head office is, at least to start).
The factors that most people consider when deciding where to incorporate their company are:
1. Where will the registered office of the corporation be?
It’s best to incorporate the company under the laws of that province/territory or incorporate federally (and then separately register the corporation to carry on business in that province/territory).
2. Are the Directors residents of Canada?
Federally incorporated companies need at least 25% of their directors to be resident Canadians. Some provinces/territories have a similar rule, while others require no resident Canadian director (in recent years, more and more provinces have started to do away with the resident director requirement).
3. Will the corporation carry on business throughout Canada or internationally?
Incorporating federally provides somewhat broader protection of a corporation’s name, making it more difficult for others to incorporate a company with the same name anywhere in Canada (whereas if you incorporate provincially, the name protection is mostly limited to that province only). Also, some people find that there is more international appeal to doing business with a “Canadian corporation” rather than, for example, a “Manitoba corporation”.
4. What am I familiar with?
If you have owned/operated corporations before, or if you control a group of companies, then chances are that you will want to stick with the jurisdiction that you are most familiar with.
5. What jurisdiction is easiest to deal with?
As of the time of writing this, the federal corporate registry system is modern and efficient. Managing your corporate records and undertaking transactions involving a federal corporation is relatively straightforward. The provinces and territories also generally have good modern systems, but the ease of use and consistency varies more from jurisdiction to jurisdiction.
6. Is there a requirement to keep a “transparency register” or “register of individuals with significant control”?
This is primarily relevant to corporations that are owned by other corporations or trusts. The requirement to keep a transparency register means that the corporation must keep a record of who ultimately owns and controls the corporation, so if it is owned/controlled by other corporations and trusts, there needs to be documentation showing what humans own the shareholding corporation and trusts. This is an administrative burden (because records need to be revisited on a regular basis) and, for some, might be unappealing for other reasons. As of the time of writing this, federal Canadian corporations are required to keep a register of individuals of significant control, British Columbia corporations are required to keep a transparency register, and Ontario corporations will soon be required to keep a similar register (more and more jurisdictions now require that transparency registers be kept, and the federal government of Canada plans to introduce an even more in-depth system in the years to come).
In addition to the above factors, other factors may be specific to your situation that will be important for making the decision.
Keep in mind that if, down the road, you realize that you would prefer to be incorporated under the laws of a different corporation, then you do that! It’s called a “continuance”.
And if you incorporate a provincial corporation, then that will not stop you from doing business outside of the province; you just need to register in each additional province where you do business.
