Federal vs. Provincial Incorporation
Choosing where to incorporate is an important early business decision. Federal and provincial incorporation can both be appropriate, depending on how and where the business plans to operate.
Two Common Ways to Incorporate
Canadian business owners often ask whether they should incorporate federally or provincially. Both approaches create a corporation, but the registration framework and ongoing obligations are not identical.
The right choice depends on factors such as where the business will operate, the importance of the corporate name across Canada, expansion plans, administrative requirements, and the provinces in which the corporation expects to conduct business.
Federal Incorporation
A federal business corporation is incorporated under federal legislation through Corporations Canada. Federal incorporation can provide enhanced protection for an approved corporate name across Canada, subject to applicable rules.
However, federal incorporation does not mean a corporation can ignore provincial registrations. A federal corporation generally must register in each province or territory where provincial or territorial law requires registration because the corporation is conducting business there.
Provincial Incorporation
A provincial corporation is formed under the legislation of a particular province. This can be a practical option for a business whose activities are primarily concentrated in one province.
If the corporation later expands into another province, it may need extra-provincial registration there. The requirements and filing procedures vary by jurisdiction.
Ongoing Compliance
Regardless of whether a corporation is incorporated federally or provincially, incorporation creates ongoing responsibilities. These may include annual corporate returns, maintaining corporate records, reporting changes to directors or registered office information, corporate income tax filings, bookkeeping, GST/HST, payroll, and other accounts depending on the business.
Resident corporations generally must file a T2 Corporation Income Tax Return for every tax year, including many inactive corporations and corporations with no tax payable. The T2 filing deadline is generally six months after the corporation’s tax year-end, although any balance of tax owing may be due earlier.
Think About Where the Business Will Actually Operate
When comparing federal and provincial incorporation, it is important to look beyond the incorporation certificate itself. A business planning to operate in several provinces should consider the additional registrations and compliance work that may follow.
For example, employees in another province may create payroll or workers’ compensation requirements, while sales activity may create GST/HST or provincial sales tax considerations.
How M&L Accounting Inc. Can Help
M&L Accounting Inc. assists with federal and selected provincial incorporations, corporate registrations, extra-provincial registrations, annual returns, CRA business accounts, bookkeeping, payroll, and corporate tax compliance.
Through trusted third-party professional partners, we can also coordinate certain specialized corporate services when required. Contact M&L Accounting Inc. to discuss the accounting and registration considerations for your new corporation.
Important Information
This article provides general information only. Requirements can vary based on the facts, jurisdiction, industry and type of business. It is not legal advice. Government rules and administrative procedures can change, so current requirements should be confirmed before taking action.
