How to incorporate a Federal Corporation in Canada
Incorporation in Canada is an important step: it is the creation of a legal entity able to carry on business in Canada. Entrepreneurs should generally incorporate at a provincial or federal level, depending on the benefits and considerations attached to each. This article will look into those two processes and into the fees associated with federal incorporation and break down each step of incorporating as a federal corporation in Canada.
What is a Federal Incorporation?
A Federal Corporation is a term that refers to a company that has registered or incorporated its business under the Canada Corporations Act. This type of corporation will operate in all of the provinces and territories in Canada, therefore being national in scope. Provincial corporations are limited in operations to the province where they are incorporated, whereas federal corporations do have the option to expand their activities into any or all of the country without needing to register separately in each province.
What are the benefits of Federal Corporation?
1. Name Protection: A federally incorporated company is entitled to have name protection across all provinces and territories in the country, which assists in creating a national brand.
2. Expansion Flexibility: With federal incorporation, there is flexibility in expanding business activities without needing further registrations when moving from one provincial and territorial boundary to another. It is therefore most suitable for companies that have national aspirations.
3. International Status: Federal corporations are internationally recognized, which is something to consider if you intend to expand your business beyond Canadian borders.
4. Flexibility: Your registered office address can be anywhere in Canada, and you can hold annual meetings either by digital means or at any other place in the world.
Who can incorporate a Federal Corporation?
- One or more individuals above the age of 18
- 25% of directors must be a Canadian Citizen or a Permanent Resident (PR)
Requirements:
- Minimum one incorporator, director, shareholder and officer.
- The registered office address must be a physical address in Canada, P.O. Box address is not allowed. If you don’t have a local provincial address, we provide registered address and mail scanning service.
- A Federal corporation, although registered federally, must also register in the province or territory where the corporation is conducting business.
Incorporation Steps:
Step 1. Name your corporation:
- Choose if you want a numbered or a named corporation. A numbered name is the simplest way to name your corporation because the Government assigns the number (for example, 12345678 Canada Inc.)
- A Federal NUANS report and name Pre-approval is required to register a Named Corporation. https://ontario-business.ca/product/business-name-pre-approval/
- Your company can be named and have a unique name that sets you apart from your competition. Please include the legal suffix like Inc./Ltd./Corp. at the end of your name.
- Other recommended service providers that are registered NUANS members – Incorporationpro , Incorpmaster, MD Legals
- For further details on the regulations for naming a corporation, click here
Step 2. Select your articles of incorporation:
This step establishes the structure of your corporation. Choose the right share structure:
- Basic: with unlimited common shares with no specific share class.
- Standard: common shares with class A voting and class B non-voting.
- Custom: this share structure allows to categorize shares into many types such as common, preferred, voting, non-voting etc.
Step 3. Establish the office address:
- The registered office address must be a physical address in Canada, P.O. Box address is not allowed.
- You are allowed to have a legal land description address too but must have a P.O. Box connected to it.
- If you don’t have a local provincial address, we provide registered address and mail scanning service.
Step 4. Decide who will be a director, shareholder, officer and Incorporator:
- Director – the head of the corporation. You can add up to 10 directors.
- Shareholder – owns the corporation and receives profit from the business as dividends and shares.
- Officer – anybody including an employee, no decision making power.
- Incorporator – is the person under whose authority the corporation is created. Is not changeable.
Mandatory items to run a business:
- Minute book: consists of bylaws, share structure, minutes & other legal sections. Without it, a corporation is not complete.
- Business Number: It is a unique identification of your business with the Canada Revenue Agency. It is required to register accounts like GST/HST, Payroll, Import/Export accounts. https://ontario-business.ca/product/cra-accounts-registration-online/
- Corporate Tax ID: It is like a SIN number for a corporation.
- HST Registration: Harmonized Sales Tax. If you are selling goods and collecting HST you must have an HST account. every time a business incurs an expense – be it rent or paying for goods – it pays HST, if you set up the account, you can claim it back.
- Payroll Account: If you have employees, including yourself, you must set up a payroll account.
- Import/Export: If your goods or raw materials cross the Canadian border, you are required to clear customs using the Import/Export account.
- WCB Account: It’s the Workplace Compensation Board registration. If your corporation has employees (except directors and shareholders) you must register for WCB.
- Annual Return: A corporation must file its Annual Return with the Government every year to keep it active. You may add Annual Return to your package to avoid the risk of forgetting it. We will take care of it!
You can find out more information about annual returns Learn More
What is the Difference Between Provincial and Federal Incorporation?
When setting up a business in Canada, one of the key decisions you’ll need to make is whether to incorporate your company provincially or federally. Understanding the differences between these options and the steps involved in the incorporation process can help you make an informed decision that best suits your business needs.
The primary difference between provincial and federal incorporation lies in the geographic scope of your business’s operations and the legal protections your business name receives. Provincial incorporation limits your business operations and protections to the province where you incorporate, whereas federal incorporation allows you to operate and protect your business name across all provinces and territories in Canada.
Understanding Provincial Incorporation
Provincial incorporation allows a business to do business within that one province. This may be most appropriate for businesses that intend to do business in only one province. There are differences among the provinces with respect to the acts, costs, and procedure of incorporation.
Advantages of Provincial Incorporation:
- Business Done in Provinces: Best option when business exists only in one province.
- It’s Less Expensive: Generally, it costs less to incorporate at the provincial level than at the federal level.
- Easier Compliance: You need only comply with the provincial regulations and laws for the province in which you’re actually incorporated.
Understanding Federal Incorporation
Federal incorporation, on the other hand, allows you to do business throughout Canada with the same corporate name. It’s very useful when your business will be expanded across provinces and territories.
Benefits of Federal Incorporation:
- Name Protection: Your corporate name is protected across Canada.
- Flexibility: You can operate your business in any province or territory without needing to register separately in each.
- Credibility: Federal incorporation usually gives the impression of stability and national presence.
Should You Register Provincially or Federally?
The decision to incorporate as either a provincial or federal corporation will depend upon the aims of the business, the scale of operations, and the budget available. If you’re looking to expand the business into more than one province or want name protection throughout the country, you may find it better to incorporate federally. On the other hand, if you will be conducting business in only one province, then incorporating provincially may be both simpler and more cost-effective.
Incorporation Procedures in Each Province
As outlined, every province has its incorporation procedures. For instance, in the province of Ontario, one can fully incorporate online through the Online Business Registry. The other provinces also have similar services, but the fees and requirements are all different.
How to Incorporate Federally in Canada
Federal incorporation is a process that is taken through a series of steps to ensure a company or business complies with Canadian law. Described below is a step-by-step process for the incorporation of a federal corporation.
- Step 1: Name and Describe Your Corporation
Naming your corporation is the first and foremost key step. A name, which is distinct and of your desire, will be provided to your corporation as long as it abides by the rules of Corporations Canada. You must obtain a NUANS (Newly Upgraded Automated Name Search) report to ensure that your suggested name is available. - Step 2: Registered Office Address
You must have a registered office address of the corporation in Canada. That address will be treated as an official place for correspondence from the government. - Step 3: Appointment of Contact Person and Directors
You need to appoint at least one director who will be responsible for managing the corporation; he or she needs to be a resident of Canada. You will also be required to provide a contact for an individual who will be the contact with Corporations Canada. - Step 4: Issuing Shares and Acquiring a Corporate Minute Book
Corporations have to issue shares to the corporation’s shareholders. You will have to decide how you want the corporation to be organized in terms of shares. A corporate minute book is also a requirement of corporations to record any key decisions of the corporation. - Step 5: Register Corporate Accounts, If Required
Based on your business activities, you have to register under several accounts, like GST/HST, payroll account, or import/export account, with the Canada Revenue Agency (CRA).
How Do I Federal Incorporate?
In order to incorporate a company federally, you have to:
- Prepare articles of incorporation
- File the prescribed forms
- Pay the applicable fees.
Once you are incorporated, you need to also meet the continuing reporting and corporate governance obligations.
Services Offered By Ontario Business Registry for Federal Incorporation
Ontario Business Registry offers a variety of services that are meant to help in federal incorporation through name search and document filing as well as compliance services that make it easier and more efficient for your business to meet the requirements stipulated by law.
Can I Change My Incorporation After It’s Ordered?
Yes, after the incorporation, such things as changing the corporate name, registered office address, or share structure can be changed. To do this, you will need to file the appropriate forms with Corporations Canada.
What Are the Costs of Federal Incorporation?
The cost of federal incorporation would normally depend on a few factors, such as the complexity of your corporate structure or whether you choose to incorporate online or by mail. Generally speaking, the fees for federal incorporation are usually higher than provincial incorporation because the federal one means a broader scope of operation.
Provincial and Federal Incorporation Comparison: Key Differences
If you are contemplating incorporating federally or provincially, the key differences are as follows:
- Name Protection: A federal corporation has its name protected Canada-wide, while a provincial corporation has its name protected only within the boundaries of the province it’s registered in.
- Operational Scope: A federal corporation has the right to do business across all provinces and territories without any additional requirement of registration, while a provincial corporation may conduct its operation in just one province.
- Fees and Costs: Federal incorporation commands higher fees and more reporting compared to provincial.
Eligibility for Federal Incorporation of a Business in Canada
To be eligible for this process, one needs to have certain qualifications. One is that the business must have at least one director who is a Canadian resident. Secondly, the organization will require having a registered office address within Canada.
Do I Need Legal Assistance to Incorporate a Federal Business?
Hiring a lawyer is not required to do federal incorporation, the services of such legal entities could be indispensable in seeing to it that the process of incorporation is within the precincts of the law. Moreover, a lawyer will assist in the preparation of necessary documents and in dealing with legal matters that may be complex.
FAQs
If I incorporate federally, can I do business in every province?
Yes, with federal incorporation you can do business in a province or territory without having to register specifically there.
How long will it take to get my business incorporated by federal law?
It will take from a number of days to a number of weeks for a federal incorporation process to be completed, depending on the completeness of your application and the method of submission.
What ongoing compliance does a corporation have once it is registered federally?
Federal corporations are supposed to file an annual return, keep corporate records, and fulfill any other needs under law outlined by Corporations Canada.
Can I convert my business from provincial incorporation to federal incorporation?
Yes, it is possible to convert from provincial incorporation to federal incorporation. This can be achieved by submitting a few required forms and meeting the federal requirements.
There are numerous advantages to incorporating a company federally within Canada, particularly if the company will operate in more than one province. Understand the process and the requirements so that you can make the best choice for your business in regard to the future growth and success of your business.
