Federal vs. Provincial Incorporation in Canada

Sep 22, 2023

Businesses that want to become incorporated have the option of following either the federal or provincial procedures. The main distinctions between Federal and Provincial Incorporation in Canada lie in:

  • Safeguarding the rights to the company name
  • Conducting business in multiple provinces
  • The total expenses involved in starting and renewing the incorporation

Regardless of whether a business chooses the federal or provincial route, the process of incorporation enables the segregation of company and personal finances. This involves fulfilling and submitting various paperwork, establishing internal business frameworks and company stock shares, and paying the requisite fees.

 

Provincial Incorporation in Canada

In Canada, you have the option to register your business in any specific province or territory. The process of incorporation is separate for each province, much like it is for states in the United States. The provinces and territories include Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, Quebec, Saskatchewan, Northwest Territories, Nunavut, and Yukon.

Once you’ve successfully incorporated your business in a particular province or territory, you can secure your company’s name and operate within that specific region. However, if you wish to conduct business in another province, it’s necessary to register your company with the relevant authority in that specific province.

 

 

The Advantage of Federal Incorporation in Canada

Federal incorporation and provincial incorporation differ primarily in terms of the level of business name protection and the ability to conduct business nationwide.

By choosing federal incorporation, you grant your business an enhanced level of name protection and the opportunity to operate throughout Canada. Even if another company in a specific province or territory is already using a similar name, your federally incorporated business can still operate under the same name in any province or territory. For example, if your federally incorporated business is named XYZ Inc., you can conduct business as XYZ Inc. in any province or territory, despite other companies with identical names operating in those locations.

However, provincial incorporation doesn’t offer the same benefits. When you incorporate your business in a particular province or territory, you can only operate within the jurisdiction of that region, which means you have no name protection outside of it.

While it is possible to register your Ontario corporation in Manitoba to expand your business operations, there is no guarantee that there won’t be other businesses with the same or similar name operating in that province. Therefore, it may not be possible for your company to operate in Manitoba under your chosen name.

Additionally, federal incorporation provides an advantage in terms of reputation. Corporations Canada, in their Frequently Asked Questions on Federal Incorporation, highlights that federal incorporation carries a certain prestige and offers global recognition to a company, a benefit that provincial incorporation lacks.

 

The Downside of Federal Incorporation

Some people may question why not everyone in Canada chooses to incorporate at the federal level when they read about the distinctions between provincial and federal incorporation. The reason for this could be that federal incorporation comes with extra effort and expenses.

Even though you have the option to choose between provincial and federal incorporation, if you opt for federal incorporation, you will still have to register your business in the province or territory where you operate. It’s important to note that after completing the federal incorporation process through Corporate Canada’s Online Filing Centre, you will have the opportunity to fill out registration forms for Saskatchewan, Ontario, Nova Scotia, and Newfoundland and Labrador.

Federal incorporation entails more annual paperwork because you have to comply with both the federal Director of Corporations Branch and the filing requirements of the provinces where your corporation is registered.

Federal incorporation may involve higher costs. While the current fee for federally incorporating your business (by filing Articles of Incorporation) is $200 if done online via Corporations Canada’s Online Filing Centre, there could be additional fees associated with extra-provincial registration for your corporation and extra expenses resulting from the increased annual paperwork.

 

In conclusion

Opting for federal incorporation can be a great decision if your business requires nationwide protection for its name or if it operates or intends to operate internationally. However, if your business primarily operates within a single province, provincial incorporation might suffice. It’s important to note that you have the flexibility to initially incorporate provincially and transition to federal incorporation at a later time.

You can find Contracts and Documents for Business Owners in Canada here https://www.businessdocs.ca/

Need more information? CBES is here to assist you; feel free to contact us for expert guidance.

 

 

 

 

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