Set up a Corporation in Canada
The main types of corporations in Canada
The Company Law provides for the corporation to be registered at a federal and provincial level, which represents the main types of entities in Canada, however, there also other types of legal structures that can take the form of a corporation. Among these, we mention the non-resident company and the extra-provincial corporation.
If you are interested in starting a business in Canada and are considering the corporation as your go-to business form, our local specialists can help you.
Steps in opening a corporation in Canada
A corporation in Canada can be set up in one of the 13 jurisdictions (provincial and territorial) in the country or in the federal jurisdiction. The Canada Business Incorporations is in charge of registering the companies and the authority which issues the registration certificate of a firm. Here are the main requirements one should consider when registering a corporation in Canada:
• reserve a distinctive name for your corporation – the name can also be a number issued by the Trade Register;
• draft, notarize and submit the Articles of Association with the federal or provincial Trade Register;
• provide information, such as identification papers, about the owners of the Canadian company;
• submit documents of the business location, such as the address of the company;
• appoint the managers of the corporation – their personal information must also be filed with the Trade Register;
• open the company’s bank account and deposit the share capital of the business;
• prepare the corporate seal – it must also be submitted with the Companies Registrar upon incorporation;
• register for tax purposes, obtain a VAT number and register for social security and employment purposes.
In addition to the documents and requirements mentioned above, a corporation cannot be set up without a minute book which needs to comprise the directors' register, a copy of the Articles of Association, securities register, the resolution of managers and the share transfer register. Our Canadian company formation agents are able to offer complete support in drafting the documents for your corporation in Canada.
The Articles of Association of a Canadian corporation
The Articles of Association are the most important documents when setting up a corporation in Canada. These must contain the following information:
- who the shareholders and the company directors are, as well as their duties and rights;
- the number of shares issued by the company and their allotment to the shareholders;
- the types of shares to be issued by the company and if any restrictions apply;
- the activity or activities which will be undertaken by the Canadian corporation;
- other clauses and specific information that the shareholders want to mention.
Choosing the place of registration of the Canadian corporation
Unlike other jurisdictions which provide for the same company incorporation procedures on the entire territory of the country, Canada is slightly different because there are 3 main categories of business formation procedures: the federal one, the provincial/territorial one and the mixt one, which allows a company to operate in one or more provinces but also at a federal level. So, the first step to consider after deciding to set up a corporation in Canada is to choose where it will be registered.
In the case of local investors, the jurisdiction of incorporation is the home of the shareholder(s), however, foreign investors must select the jurisdiction on different criteria. Among these, we recommend they consider the taxation level and the licensing requirements. It should also be noted that the registration of a corporation at a federal level is a little more expensive, however, it offers the possibility of offering services or selling goods on the entire Canadian territory.
A federally incorporated corporation must be registered in accordance with the Business Corporations Law and will be required to obtain extra-provincial licenses when seeking to operate in another province or territory.
Our company formation agents in Canada can offer more information on how to choose the local jurisdiction to set up a corporation.
You can read about the creation of a corporation in Canada in the scheme below:
Business number or corporate name for the Canadian corporation
The Canadian legislation allows companies, no matter their structure, to use business numbers or corporate names to represent them. The difference between these is that the business number is issued by the Trade Register while the trading name must be reserved by the shareholders. An important aspect to consider when registering a Canadian corporation with a trading name is that the selected name must be unique at both the federal level and in the province the company will operate.
The following rules apply when choosing a business name for a corporation in Canada:
- the business owner is required to ensure the selected name is unique;
- the name must not be offensive to the general public;
- the name can be in English or French, however, it is possible to use both versions;
- the name must end with Corp. short from Corporation.
Our local consultants can advise on the registration of a corporate name or obtaining a business number for a Canadian corporation.
The registered address of a Canadian corporation
While in most countries, the registered address is the legal seat of the company, in Canada, the registered address of the corporation will also imply the place where its corporate records are stored. Also, all official documents will be directed to this address. For such purposes, a registered agent can be appointed.
When using the services of such an agent, the investor must make sure he or she complies with the local regulations.
When registering the corporation, the business owner must state the proposed trading name, the exact address of the registered office and complete information about the directors of the company. It is very important to state if the directors are Canadian residents or not.
We offer registered agent services for federal and extra-provincial corporations.
The corporate minute book of a Canadian corporation
Once the certificate of registration of the corporation has been received, the next step is to determine and organize the structure of the company. We mention that the organization of the corporation involves written documents which are kept in a corporate minute book. Such documents are prepared and presented in a meeting held by the stockholders and the managers of the corporation.
Register for a federal business number
Each corporation must register for the federal business number which is used for tax purposes by the financial authorities. For example, the federal business number will be verified for federal corporate income taxes and payroll source contributions. Furthermore, a corporation in Canada must register any non-corporate business name different from the name of the company which will be used in the province in which the activities take place. Please consider that this requirement is mandatory.
Please watch our video on how to set up a corporation in Canada:
Taxation of corporations in Canada
All Canadian companies must register for the Goods and Services Tax (GST) and taxation with the Revenue Agency. When it comes to the corporate tax, the following must be considered:
- the federal tax rate is set at 38% of the taxable income, however, thanks to the tax abatement, the rate is lowered to 28%;
- a general tax reduction is also available which generates a net tax of 15%;
- Canadian corporations registered as small businesses benefit from a federal corporate tax of 9%;
- provincial corporate taxes are levied at rates ranging between 0% and 16%.
With respect to the GST in Canada, the standard rate is 5%, however, each province and territory imposes a Harmonizes Sales Tax (HST) or a Provincial Sales Tax (PST), each at its own rates. The GST registration threshold depends on the legal entity the company operates under.
How long does it take to register a corporation in Canada?
The timeframe for registering a corporation in Canada is detailed below:
- preparation of the incorporation documents - 1 day;
- business name reservation - 1 day;
- filing the incorporation documents - 1 day;
- tax and VAT registration - a few hours.
For extra information about how to register a corporation in Canada, we suggest you get in touch with our local company formation representatives.