Provincial Incorporation

Provincial incorporation and federal incorporation are two options available to those wishing to own a corporation in Canada. There are pros and cons to each option, so it is important that you research each type carefully to determine which is best for your business.

Provincial Incorporation: Introduction

When you decide to incorporate in Canada, you need to determine the jurisdiction in which your corporation will operate. You can incorporate in one of 13 jurisdictions, or incorporate federally.

One of the questions asked most frequently by companies is whether they should incorporate provincially or federally. This is asked particularly often by tech startups. There are some small differences both in the function and cost of each option, and the choice can help shape your business and the opportunities that will be available to you.

The price difference between federal and provincial incorporation is one of the first considerations businesses look at. Incorporating federally is typically less expensive than incorporating provincially.

Incorporating federally in Ontario can save several hundred dollars, but you will have to pay yearly fees. This fee is only about $20 and should not be a significant factor in the grand scheme of your business.

You need to ask yourself the following questions when you are determining the preferred jurisdiction for your corporation:

·      Is the corporation going to conduct business in one or more provinces or all across Canada?

·      Is federal name protection important? Is your corporate name going to be used in many provinces?

·      Does the uniqueness of your corporation’s name justify the protection of federal incorporation?

·      How much are the fees for federal incorporation compared to provincial incorporation?

There are three main differences between provincial and federal incorporation:

1.     Jurisdiction of operation

2.     Amount of corporate name protection

3.     Incorporation costs

When you incorporate provincially, you will be in either Ontario or another provincial corporation. You will be limited to doing business in the province where you incorporated. Your business will have to adhere to the corporate regulations of the province.

For restaurants or other local businesses that do not plan to expand outside of the province, provincial incorporation is a good option.

Some businesses have to be incorporated provincially, such as dentists, doctors, or lawyers. It is best to check before you incorporate to make sure there are not any special restrictions on the type of business you want to incorporate.

It can be more complicated to incorporate provincially than federally. Incorporating federally entails automatic filing for any extra forms that are required.

When you incorporate federally, your company will then be governed by the CBCA, or the Canada Business Corporations Act. It will be a Canadian corporation. You will be allowed to use “Canada” within your name and can conduct your business throughout the country.

If you want to sell your products outside of Canada, it is best to incorporate federally. This is also true for online businesses since many of their customers could be anywhere in the world. Your business name will be protected in Canada with federal incorporation. This means you can use your name in all provinces. It will also be protected against registration in Canada.

The Best Advantage of Federal Incorporation

One of the main differences in provincial and federal incorporation is that federal provides increased name protection for your business along with more rights when doing business. It also means that you can do business using the same name all throughout Canada, even if another company uses a name similar to yours in the same province.

This is not true of provincial incorporation. If you incorporate in a certain province, you can only operate your company in that jurisdiction. You have no name protection in other territory or province in the entire country.

When you incorporate federally, you will receive a business number from the Canadian Revenue Agency. This will save you an extra step needed in provincial incorporation.

If you need help with federal or provincial incorporation in Canada, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.