In Canada, a business can incorporate federally (at the national level) or within a single province or territory. Choosing between incorporating a federal corporation or a provincial corporation depends on a number of factors, including how wide a net the corporation seeks to cast in getting business.
When it comes to incorporating in the first place, businesses usually incorporate so their owners can avoid personal liability, to continue existing after a shareholder dies, and to raise capital more readily than having to rely primarily on debt.
Nationwide and Flexible Business
Under the Canada Business Corporations Act, a federal corporation can conduct business anywhere in Canada. Its business is not limited where it maintains its head office, stores its records or conducts its annual general meetings – as is the case with provincial corporations.
For example, a provincial corporation in British Columbia seeking to relocate in Manitoba must either (1) dissolve as a British Columbia corporation and reincorporate in Manitoba or (2) discontinued itself in British Columbia and continued itself in Manitoba. If the corporation were federal, it need only notify Innovation, Science and Economic Development Canada and British Columbia of its move.
A federal corporation need incorporate only once, but it must register shortly thereafter with each province in which it will conduct business. The Joint Online Registration System, run by Corporation Canada, allows businesses to incorporate online and register the corporation online with selected provinces at one time.
An entrepreneur more likely will choose provincial corporation if the business intends to operate in one province and will be owned only by a single shareholder or a small group.
Business Name Protection
The name can play a significant role in the corporation’s advertising, branding and marketing. For a federal corporation, the Canadian Business Corporations Act extends protection of that name and the marketing efforts with that name nationwide. That said, any corporation – whether federal or provincial – must verify the name is available before using it.
Incorporating a Federal or Provincial Corporation in Canada
We’ve written specific how-to guides for incorporating in each Canadian province or federally:
- Incorporate a Federal Canadian Business Corporation
- Incorporate a Provincial Ontario Corporation
- Incorporate a Provincial Quebec Corporation
- Incorporate a Provincial Alberta Corporation
- Incorporate a Provincial Manitoba Corporation
- Incorporate a Provincial British Columbia Corporation
- Incorporate a Provincial Saskatchewan Corporation
- Incorporate a Provincial Nova Scotia Corporation
- Incorporate a Provincial New Brunswick Corporation
- Incorporate a Provincial Prince Edward Island Corporation
- Incorporate a Provincial Newfoundland and Labrador Corporation
Generally, the steps to incorporation involve preparing and filing Articles of Incorporation. Generally, the Articles must have the following:
- Name. The organizers or incorporators must choose a name that:
- is distinctive, which means it must identify more than merely what goods or services the business providers. For example, “Used Cars” would fail the distinctiveness test, but Michael’s Used Cars would pass muster.
- avoids confusion with other corporate names – whether federal or provincial – and trademarks. A business must file with its application a “Nuans Name Search Report”, which is a database listing trade-marks, and the names of provincial and federal corporations. A Nuans search doesn’t extend to and won’t report on Quebec corporate names. That province maintains its own data bases.
- contains terms at the end of the name, such as Corporation, Company, Limited or the abbreviations of Corp., Co. or Ltd., which identify the legal nature of the entity.
- excludes unacceptable terms. An offending element (i) imply a connection or relationship that does not exist, such as affiliation with a government agency; (ii) falsely describe the nature of the business; or (iii) employ obscene, scandalous or immoral language.
- Share Structure. The rights of shareholders — the owners — depend on the class or classes defined by the Articles of Incorporation. For corporations with only one class, each shareholder has the right to vote, receive any dividends declared by the board of directors and share in the distribution of proceeds or property remaining after dissolution. If the Articles create more than one class, shareholders may have some, but not all, of these rights.
- First Directors. The directors of a corporation must be a natural person (entities cannot be directors), at least 18 years old, not bankrupt, nor legally incapable of being a director by any court anywhere.
- Registered Office. A corporation designates the registered office as the place where it keeps its documents and receives service, notices, and other documents. Items delivered to the register office’s address are deemed received by the corporation.
Provinces have their own requirements for provincial corporations.