Company Formation and Registration in Canada
Canada’s federal and provincial governments have collectively created a very favourable environment, one in which global businesses can thrive. Canadian common law is managed through a civil court system and there are several mechanisms in place that encourage quick and effective settlement of disputes.
The Canadian legal system also provides predictable outcomes, offering an uplifting environment for various business transactions and start-up in Canada.
Moreover, Canada has always been supporting foreign investment and has displayed strong public management to bind the country together and build its infrastructure. Because the economy has seasoned, it has laws to safeguard its investors, consumers, workers, inventors, and also the environment. Canada’s federal and provincial governments have been using alternative systems such as public-private partnerships for delivering public services. Additionally, both government levels have become more efficient in accomplishing their regulatory objectives. Several restrictions on global investment have been removed, while other business regulations are now liberalized through multiple free-trade agreements. Even the business tax system has undergone huge improvement. Major sectors like transportation, communications, energy, and financial services are deregulated, and various government-owned corporations are privatized. Thus, it is very favourable to register a corporation in Ontario, Canada.
If you have an existing or established foreign business and plan to expand in Canada, it is very straightforward as each province has their own registration procedures laid down for extra-provincial incorporation.
For example, if you are a non-Canadian and currently manage a corporation in India and wish to register a small business in Ontario, then you would need to register your business as an extra-provincial corporation in that specific province. For that, you would require an Agent for Service, who should be an “individual, 18 years of age or older who is resident in Ontario, or a corporation having its registered office in Ontario.”
So to start your business or company registration in Canada, you would have to get in touch with the provincial registry of the particular province where you want to do business and then perform the required procedure. In case you plan to operate in multiple provinces, then you would have to register your business separately in each province.
In case you are not immigrating to Canada and are not a Canadian citizen, you could still need to do a company registration in Canada. It’s imperative to understand that the rules regarding who is allowed and who isn’t allowed to start some types of businesses is decided by Canada’s individual provinces and it is different for each province or territory.
For instance, as of now, the province of British Columbia (B.C.) has the most flexible rules for non-resident businesses. In that province, anyone is allowed to establish a sole proprietorship, corporation or partnership whether they’re a Canadian citizen or not.
For setting up your start-up in Canada or specifically in B.C., you would be required to:
- Have an office or physical address for your company.
- Have an appropriate work permit from Citizenship and Immigration Canada.
- Submit an Investment Canada application. (The Investment Canada Act says that "non-Canadians who acquire control of an existing Canadian business or who wish to establish a new unrelated Canadian business are subject to this Act, and they must submit either a Notification or an Application for Review.")
If you wish to set up your business in any other province, you would need to check on their specific requirements. If they do not permit non-Canadians to set up the type of business you are planning, then you could think of setting up a corporation or a partnership with one or more Canadian citizens or some landed immigrants.
If as a non-Canadian, you want to register a small business in Ontario or you are starting a partnership with some other person, that other individual should be a Canadian citizen or some landed immigrant.
But in case you want to register a corporation in Ontario, Canada, as per the Canada Business Corporations Act:
At least 25 percent of the total number of directors should be resident Canadians (if 25 percent of the directors is not a whole number, then you could round up to the nearest number). If a corporation has less than four directors, then at least one of them should be a resident Canadian (S. 118(3)).
If you set up a company in partnership in Canada, then you would have to register your partnership in the province where you are going to do your business. However, if you are setting up a corporation, then you would first need to choose if you would incorporate your business federally or provincially.
You could opt from various structures available to set up a business and do company registration in Canada. Foreign companies that wish to operate in the country could either open a branch office or by set up a separate business enterprise. Usually, the tax considerations and liability help in deciding which business entity or structure is the most suitable. Some of the most common business entities to establish business in Canada are:
- Corporations (Federal Incorporation or Provincial Incorporation)
- Sole proprietorships
- Partnerships (General, Limited and Limited Liability)
- Joint ventures
Depending on which type of entity you go for, the rules and regulations may vary. Every entity or structure has its own pros and cons. Thus, you must examine all the pre-requisites, constraints and benefits before incorporating your business entity in Canada.
The broad steps to incorporate your business or company in Canada are:
- Opt for a business format
- Name your business
- Apply and get a Business Number (BN) or a NEQ (Quebec only)
- Decide if you want to set up federally or provincially
- Register for GST/HST
The main benefit of opting for a corporation in Canada is that your personal and business obligations would remain separate. This means that you won’t be held personally liable for any debts or activities of the corporation. Some other benefits which are worth considering are:
- A corporation has an unlimited life span, as even if you decide to sell your business, your company would continue to exist.
- Ownership of your business entity is transferable and you can sell your company or plan the succession.
- Raising additional money is easier as incorporated businesses are allowed to sell shares and their equity to foster growth.
- There are various tax advantages; corporations especially can take advantage from Canada’s small business deductions. You can also opt to defer some tax payments and take advantage from new tax laws.
- As some businesses don’t enter into contract agreements or sales if you are un-incorporated business, thus, incorporation of your business can enhance your credibility and growth potential.
- Other than that, the Canadian economy is quite stable and also has highly skilled workforce.
Registration for the Goods and Services Tax (GST)/Harmonized Sales Tax (HST):
In case your new business’s gross income crosses $30,000, you would need to register for GST and HST. Even if your company is not making a lot of money to start with, you could still register for GST or HST in the beginning because of Input Tax Credits, which helps you get back the GST or HST that your business has paid while making purchases for business.
Register for Provincial Sales Tax (PST):
Some provinces have still not synchronised their sales taxes with the federal GST or goods and services tax; so in those particular provinces, you would need to register to collect and then remit the right provincial tax.
But if you are setting up your business in Manitoba, British Columbia, or Saskatchewan, then you would need to register as a collector of PST or provincial sales tax. In case you are establishing a business in Quebec, then you would have to register for Quebec Sales Tax (QST).
Similar lower tax jurisdictions as Canada include Dubai and Singapore. So in case you are considering company formation in Dubai, Singapore company incorporation, or setting up your start-up in Canada ,do get in touch with us and we would be glad to assist.