5 steps to incorporating a business in Canada
Establishing a business in Canada is fairly straightforward, but as with any process, corporations must understand and abide by the rules and regulations to stay compliant.
Canada is an attractive market for corporations looking to invest overseas due to its abundant, nationwide resources and consistently stable political environment.
5 steps to setting up a business in Canada
These are the 5 steps to incorporating a business in Canada.
1. Decide on an entity name
To incorporate a business in Canada, you will need to pick an entity name that is distinctive, clear and not reminiscent of another corporation or business. A NUANS name search will provide a report showing existing corporations with names similar to the one being requested. These reports will help you get approval for the name of your business. Some provinces require a name reservation before submission of the incorporation application. In some cases, a French translation of the name may be required. You can also bypass the NUANS search or name reservation process by incorporating a numbered company.
2. Choose federal or provincial/territorial incorporation
In preparation for incorporating a business in Canada, corporations must choose to incorporate either at federal or provincial/territorial level. If the corporation aims to do business in more than one jurisdiction, it can file extra-provincially in each province or territory. Some provinces allow for the creation of unlimited liability companies (ULC) under their respective statutes.
The benefits of incorporating your corporation in Canada are as follows:
- The corporation is considered a separate legal entity, giving it the same rights and obligations under Canadian law as a natural person
- It limits the liability of the shareholders - they will not be responsible for the corporation’s debts (except for ULCs)
- Corporations are taxed separately from their owners, and the corporate tax rate is generally lower than the individual tax rate
- Corporations have greater access to capital as financial institutions view loans as low risk compared to other types of businesses, allowing them to borrow money at lower rates
- An incorporated corporation is more stable than one that is incorporated as a partnership or sole proprietorship due to ownership rights upon death
The benefit of incorporating federally includes increased name protection and rights to carry out business activities throughout Canada.
When you incorporate your business in a specific province or territory, you can operate within that jurisdiction, but name protection is limited to the province or territory of incorporation.
Incorporating at provincial/territorial level comes with various requirements depending on the jurisdiction.
Once you decide how you want to incorporate your business, you must complete the applicable incorporation forms and provide supporting documents.
3. Establish an office address
A requirement of any Canadian corporation is a physical registered office and records office. The address must be the physical location in the province where the business is incorporated. All official documentation and correspondence are sent to this office.
4. Appoint the board of directors
Each jurisdiction has its own requirements concerning the residency of a corporation’s directors. Except for a few jurisdictions, most of the provinces in Canada have waived the corporate directors' residency requirements. This is especially important for foreign individuals and businesses wishing to register businesses in Canada, as they will not have to appoint resident Canadian directors.
5. Obtain a business number
After your corporation is incorporated, a business number (BN) will be issued by the Canada Revenue Agency for your corporation. They will send a letter confirming your information along with your BN. A BN is used for various purposes, including but not limited to the following:
- Goods and Services Tax (GST) or Harmonised Sales Tax (HST), depending on your province
- Payroll deductions
- Corporate income tax
- Import and export duties and taxes
Talk to us
Our experts on the ground offer services across the three core business lines of accounting and tax, global entity management, and human resources and payroll. In addition to assisting with incorporation procedures, we help you streamline your operations and stay compliant.
To learn more about how we can help you set up a company in Canada, make an enquiry today.
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