Incorporating your business in Canada
Thinking of incorporating your business?
There are two ways to do it in Canada: federally or provincially.
Regardless of which way you go, the basic steps are the same. Let’s take a closer look at what those steps are.
1. Choose a name for your company
Your company will have to have a name. Generally speaking, that name has to consist of two different parts.
1. The name you choose (e.g. “ABC Accounting”, “George’s Web services”).
2. A business term called a “legal element” that describes the type of business (e.g. Ltd., Limited, Incorporated, Inc. etc.)
Here is an example of how the two parts work together to create a complete corporation name.
Name: ABC Accounting
Legal element: Ltd.
Result: ABC Accounting Ltd.
Your company will also be assigned a corporation number (e.g. 123456789). This number is different than your CRA business number (the account number assigned to you when you register your business with the CRA for tax purposes).
You can choose to have no name, in which case the corporation number assigned by the government is used instead as the first part of the business name. A word referring to the region your business operates in is usually then also required
Example: 987654321 Canada Inc.
2. Choose directors
The incorporation application includes a section where you must name directors. You must give their full name, phone number, and home addresses (P.O. box numbers are not allowed). The reason P.O. boxes are not allowed is that directors have a legal oversight role for the company and may be accountable for any difficulties a company may find itself in. This accountability means the government must know where to locate them, if needed. If there is a change in directors, or if any directors change their phone or address, the new information must be filed with the incorporation office.
3. Run a name search
Before you can register a new corporation, you have to prove that no other company is already using the same name. Proof is obtained by doing what is called a name search.
You must run a full name search report (called a NUANS report), not a summary, and there is a fee of approximately $50. The report will list company names that are the same or similar to yours. For example, if you want to name your company ABC Accounting Inc., and you run that name through a name search, the resulting report may list existing company names such as the following.
· ABC Accountants Inc.
· ABC Finance Accountancy Ltd.
· A Accounting Services Limited
…etc.
If the name you want to use is on the list, you will have to come up with a new name. Even if your proposed company name is only similar to one on the list, you may not be able to register it. You can try, but it may come back rejected. Then you will have to pick a new name, pay for a new name search, and re-apply.
This name search process is meant to prevent confusion among customers, trademark infringement, or legal confusion. The bottom line is that you can’t register a company name that is the same as, or highly similar to, one that already exists.
When you apply to incorporate a business, you must include a copy of the name search report that proves there is no name conflict.
4. Complete and file an application to incorporate
The application typically ask for the following information.
· Name, phone number, and home address of all business owners
· Names, phone numbers, and home addresses of all directors
· Date company will start to be in business
· Type of goods/services to be provided
You must include a registration fee with your application. The amount varies by region. Federal incorporation currently runs about $250 if you send in your application by mail, $220 if you submit it online. Provincially, fees range from about $300 to $500.
There are typically other fees that you also have to pay at the time of application. Provinces often have one-time extra service fees, usually less than $200. If you register federally, you also have to register in the province in which your business is located (so that’s another $200-$500).
5. Register your business with the CRA
In addition to the process for incorporating, you must also undertake a separate process to register your business with the Canada Revenue Agency (CRA). This is the case regardless of which method of incorporation you choose (federal or provincial/territorial).
The purpose of registering with the CRA is to have an account for the remittance of payroll deductions, PST/GST collected, and business income tax. The CRA will provide you with an account number (which they call a business number) which is different from your corporation number.
6. File an annual report
Every year you must file a report, with a fee. For many smaller businesses, the report consists of a fairly simple form that is just a few pages long and has just a few questions. Typically you must identify basic information such as company name, address, phone number, as well as names and contact information for all directors.
Should I incorporate federally or provincially/territorially?
Whether it might be better for you to incorporate federally or provincially depends on where you live, your situation, and your preferences.
Pros and cons of federal incorporation
Pros
· Lower application fee;
· Can operate in all provinces/territories;
· Fast online registration;
· Company name protection across Canada (new companies anywhere in Canada cannot use the same or a highly similar name).
Cons
· Lack of director privacy (name, phone and address are publicly available);
· Must register in each province you do business in (not incorporate, but register—that means letting the provincial government know you are a new business operating in their province. This is a separate process from incorporating.)
· Name conflict rules can be more strict than with provincial incorporation.
· There can be more ongoing paperwork than with provincial incorporation, and some of this paperwork has fees, which could mean your overall long term cost is higher than if you incorporate provincially.
Pros and cons of provincial incorporation
Pros
· Director privacy (usually);
· Lower long term cost (due to fewer ongoing requirements).
Cons
· Higher application fee;
· If your company grows and expands to do business in other provinces, you may need to incorporate in those provinces as well.
· Application process can be more complicated than registering federally, and is not always available online.
· Additional service fees at time of incorporation.
More information
For more information on incorporating, here are the websites for each incorporating region.
Canada
Alberta
British Columbia
Manitoba
New Brunswick
Newfoundland
Northwest Territories
Nova Scotia
Nunavut
Ontario
Prince Edward Island
Quebec
Saskatchewan
Yukon
After you incorporate:
Register your company provincially
Register with the CRA
So that’s my overview of the incorporating process. Whether it makes sense for you to incorporate at all is a different topic, and one I will visit in the future.
Cheers,
Tim
Helping you engineer the business of you