Federal & Provincial Incorporation

When you consider incorporating your business in Canada, there are two primary options: federal and provincial incorporation.

The primary difference between incorporating a business at the provincial level versus across Canada is name protection, annual filings, name selection, business reach and costs. Incorporating on a provincial level means that the name of the corporation is protected within that area/province.

The rules are not as strict in terms of the business name uniqueness, so long as there are no other matches similar to the choice. However, this process means that your name is not protected outside of the filing province if you chose to ultimately expand it to other territories.

Registering your business at the provincial level only enables you to conduct business there and you must also maintain a local office there. However, this does not stop you from doing business with companies within other provinces. You are also responsible for filing an annual corporate return with the provincial government within sixty days of the anniversary date of the incorporation

Federal incorporation, however, is different because it requires stricter naming selection that also gives you greater protection. A report will identify the database of corporate names to determine if your name is distinct enough from any other registered name in Canada.

Doing Business Across the Country

Once you get approval from the federal government, your name is protected all throughout the Canada so as all the territories and provinces. This allows your company to do business across Canada and there are no restrictions on office locations or where the company records are filed. You are responsible for annual filings with the Director of Corporations Branch as well as any provincial filings as well. Whether or not you choose to incorporate provincially or federally depends on the nature of your company’s business. A small business operating on a local level may only need to file provincially.

FAQ Federal & Provincial Incorporation

Should I incorporate federally or provincially in Canada?

When choosing whether you should incorporate federally or provincially in Canada, it will mostly depend on the nature of your business. If you are operating a small business and have no plans to expand across other Canadian provinces, it would make more sense to incorporate provincially. But if you are looking to grow your business to other regions, then federal incorporation might be a better choice.

Should I hire a lawyer if I plan to incorporate my business?

Yes, you should hire a lawyer if you’re planning to incorporate your business. There are many advantages to getting a lawyer when it comes to incorporation. You can rest assured that the incorporation will be handled by a professional with experience in the process. Secondly, you can avoid being forcibly dissolved by the Canadian government for deficiency because you didn’t perform the incorporation properly sans a lawyer’s help. Additionally, your lawyer can help in the tax planning of the corporation.

Should I incorporate my business or make it a sole proprietorship?

It depends on your personal preferences, your business’s needs, and several factors. If you choose sole proprietorship, you can save on costs when setting up your business. In terms of liability, incorporating your business would mean you will only have limited liability, unlike in sole proprietorships, wherein you will assume all liability. There are also tax concerns — with sole proprietorships, you get less flexibility when it comes to income taxes. On the other hand, corporations typically enjoy lower income tax rates.

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