Starting a corporation in Canada is more than just a legal formality—it’s a strategic move that can position your business for growth and success in a competitive global market. Whether you’re an ambitious entrepreneur or an established business owner looking to expand, incorporating your business in Canada offers a wealth of benefits, from access to a stable economy to favourable tax structures. However, understanding the process is crucial to unlocking these opportunities.
In this guide, we’ll break down each step of incorporating a business in Canada, giving you the insights and tools you need to launch your venture effectively and tap into the potential of the Canadian market. Let’s dive into how you can streamline the incorporation process and set your business up for long-term success.
How to Start a Corporation in Canada?
If you are wondering how to start your corporation in Canada, you can follow the steps given below. You can also speak with our business formation experts if you want to register your corporation in the growing Canadian economy.
1. Decide on a Corporate Structure
The first step in starting a corporation in Canada is deciding on the corporate structure. Canada offers several options for business incorporation including federal and provincial business incorporation, and it’s crucial to pick the one that fits your business goals:
Federal Incorporation
This allows your corporation to operate across all provinces and territories of Canada. It offers nationwide recognition and flexibility.
Provincial Incorporation
If you plan to operate within a specific province, provincial incorporation may be sufficient and may come with fewer filing requirements.
Federal incorporation is ideal if you expect to conduct business nationwide or want protection for your corporate name across Canada. Provincial incorporation is best for businesses planning to focus on a specific region.
2. Choose a Name for Your Corporation
A strong, recognizable name is vital for branding. In Canada, there are specific rules when it comes to naming a corporation:
- The name must be unique and not identical to any existing corporation.
- It must end with one of the following legal elements: “Limited,” “Ltd.,” “Incorporated,” “Inc.,” or “Corporation”.
- Avoid using restricted words such as “bank,” “trust,” or “insurance” unless your business is involved in those sectors.
To ensure your name is available, you can conduct a NUANS (Newly Upgraded Automated Name Search) report. This system checks the availability of business names by comparing them with existing trademarks, businesses, and corporations across Canada. Our experts can assist you in choosing a registering a business name in Canada.
3. Prepare the Required Documents
Incorporating a business in Canada involves preparing specific documents. The essential ones include:
- Articles of Incorporation: This document outlines the basic structure of your corporation, such as the number of shares the corporation can issue, the classes of shares, and the rights of shareholders.
- Corporate Bylaws: Although not filed with the government, bylaws are essential internal documents that dictate how the corporation is governed, how decisions are made, and what rights the directors and officers hold.
- Incorporator’s Organization Resolution: This document appoints the first directors of the corporation and outlines their responsibilities.
- Initial Corporate Filings: In some provinces, you’ll be required to file an initial return or notice of the directors and registered office address within a specified time after incorporation.
4. Register with the Canadian Government
Once your documents are ready, you can proceed with the actual registration process. If you opt for federal incorporation, you’ll need to submit your documents to Corporations Canada. For provincial incorporation, you’ll submit the forms to the appropriate provincial authority.
To incorporate federally:
- Visit the Corporations Canada website.
- Complete the online application by submitting the Articles of Incorporation.
- Pay the incorporation fee
If you are incorporating provincially, the fees and processes may vary. For example, incorporating in Ontario will require submitting the application to the Ontario Ministry of Government and Consumer Services, while incorporating in British Columbia involves registering through the BC Registry Services.
Our team of seasoned business experts is here to guide you through every step of launching a corporation in Canada, ensuring a seamless and efficient incorporation process tailored to your specific needs.
5. Obtain a Business Number and Register for GST/HST
Once you’ve incorporated, the next step is to register your corporation with the Canada Revenue Agency (CRA) to obtain a Business Number (BN). The BN is a unique identifier assigned to your business for tax purposes.
If your business will have sales over CAD 30,000 per year, you’ll also need to register for Goods and Services Tax (GST) and Harmonized Sales Tax (HST). These taxes apply to most goods and services in Canada, though rates can vary by province.
6. Set Up Corporate Records
Maintaining proper records is crucial for any corporation. Canadian law requires you to keep corporate records, which include:
- A shareholders’ register, documenting who owns shares in the company.
- A directors’ register, listing the names and addresses of the directors.
- Minutes of meetings of shareholders and directors.
- Copies of financial statements, tax filings, and corporate returns.
These records must be kept at the corporation’s registered office, and they need to be accessible in case of audits or legal inquiries.
7. Open a Business Bank Account
After you’ve incorporated and registered your business, you’ll need to open a corporate bank account. This step is essential for separating your personal and business finances. Most Canadian banks will require the following documents:
- Articles of Incorporation.
- Corporate bylaws.
- Proof of your business number from the CRA.
- Valid government-issued identification.
A dedicated business account simplifies bookkeeping and ensures that you’re meeting your legal requirements for keeping personal and corporate assets separate.
8. Comply with Ongoing Corporate Obligations
Incorporating a business comes with ongoing obligations. These include filing an annual return with Corporations Canada (or the provincial equivalent), maintaining updated records, and filing corporate tax returns. It’s important to stay compliant to avoid penalties or even dissolution of your corporation.
Benefits of Forming a Corporation in Canada
The potential benefits of forming a corporation in Canada are:
Alternative of an LLC
The corporation is an alternative to an LLC in other countries, which is why it is preferred by foreign entrepreneurs planning to incorporate in Canada.
Personal Asset Protection
Establishing a corporation forms a distinct legal entity that is independent of its shareholders or members, thereby safeguarding your personal assets from claims by creditors or legal proceedings involving your business.
Tax Benefits
Establishing your business as a corporation offers enhanced tax flexibility and a lower corporate tax rate, which may provide personal advantages for you.
Improve Credibility
Establishing your business as a corporation can enhance its credibility and foster trust among prospective investors, clients, or business associates.
Less Paperwork
We eliminate the uncertainty associated with establishing a corporation by efficiently and precisely handling all necessary documentation on your behalf, thereby conserving both your time and financial resources.
Taxation for a Corporation in Canada
All businesses in Canada are required to register for the Goods and Services Tax (GST) and taxation with the Revenue Agency. In terms of corporate taxation, the following points should be noted:
The federal tax rate is established at 38% of taxable income, but due to tax abatement, this rate is effectively reduced to 28%.
Additionally, a general tax reduction is available, resulting in a net tax rate of 15%.
Canadian corporations classified as small businesses enjoy a reduced federal corporate tax rate of 9%.
Provincial corporate tax rates vary, ranging from 0% to 16%.
Regarding the GST in Canada, the standard rate is 5%. However, each province and territory applies a Harmonized Sales Tax (HST) or a Provincial Sales Tax (PST), each with its own specific rates. The threshold for GST registration is contingent upon the legal structure under which the company operates.
Conclusion
Starting a corporation in Canada unlocks opportunities for growth, financial stability, and long-term success. While the incorporation process involves several legal steps, from choosing the right structure to complying with ongoing corporate obligations, the benefits far outweigh the complexities.
By following this step-by-step guide, entrepreneurs can confidently navigate the process, ensuring their business is built on a solid foundation in one of the world’s most business-friendly environments. Embrace the opportunity to grow your enterprise, and take advantage of Canada’s robust support for corporations, ensuring your business is poised for sustained success. Get in touch with our business professionals to start your business in Canada today
FAQ’s
Incorporation timelines vary depending on whether you file federally or provincially. Online federal incorporation can be completed within one day, while provincial processing times can range from a few days to a few weeks.
Federal incorporation allows you to operate across Canada, while provincial incorporation limits your operations to a specific province. However, a provincially incorporated business can still operate in other provinces but may need to register as an extra-provincial corporation.
Costs vary depending on the type of incorporation (federal or provincial). Federal incorporation costs CAD 200 online, but provincial fees differ, with some provinces charging more.
Yes, you can amend the Articles of Incorporation to change your corporation’s name, share structure, or other elements. This involves filing amendments with the government and paying a fee.
