Here we would like to provide a brief guide on how to register a business in Canada. Why are the main advantages of setting up a business in this country for foreigners? (Hint: the answer is tax!) What province should you choose? What form of ownership should your business have? What is the process of registering a company or partnership in Canada? We answer these and other related questions in the text below.
To begin with, let us remind you that for years, Canada has been among the top ten countries in the world with the most friendly “doing business” environments. The following main factors make the country so popular with international business people:
- The simplicity of the corporate legislation;
- The efficient protection of property rights;
- The possibility to easily register a company in Canada whether you are a citizen of the country or a foreigner;
- Lack of barriers for doing business;
- Level of corruption – that is close to zero.
- Favourable tax system designed to encourage non-residents to do business in Canada
These and many other factors make starting a business in Canada simpler than in some other countries.
Which Province for your Canadian Company?
If you are thinking of registering a company in Canada, the first decision you have to make is about the province where you would like to set up the company. Canada consists of ten provinces each of them having its own corporate legislation. Canadian provinces are broadly equivalent to “states” in the USA.
To determine where in Canada you would like to have your company registered you should consider answer the following factors:
- Where are your major clients going to be located?
- Where is the company head office going to be located and how the company operations are going to be managed?
- Who is going to be the company stockholders and are these people going to be legal residents of Canada?
- Do you need to raise funds to develop your business?
- Are you going to attract investors from other countries?
The list of questions can be extended almost infinitely but the most important thing is that you should clearly understand your business plans for the nearest 5 to 10 years. If this is the case, you can use the advantages of the Canadian corporate legislation to the full.
Let us suppose that your Canadian-registered company is going to have foreign stockholders, it is going to be controlled from outside of Canada, and the profits are going to be made in countries other than Canada. In this case, it will make good sense to set up a Partnership in the province of Ontario as this will make the business tax exempt in Canada.
Ontario is Canada’s most important business province, incorporating both the commercial capital Toronto and the political capital Ottawa. Ontario is really the only logical choice for setting up a business in Canada controlled by non-residents.
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oinformation from an expert on taxes and possible tax benefits of the jurisdiction appropriate to the company's structure.
You will not have to file tax reports nor pay taxes as the territorial taxation system is applied to Partnerships in Canada. This means that if you do not make any profits in the country, you are not liable to any Canadian taxes. The taxes are payable in the countries where the partners are tax residents. (There’s nothing to stop you listing two offshore companies as partners, for example, or hiring nominees resident in zero-tax countries)
These tax legislation statutes make it attractive to use such Canadian-based Ontario entities for the following types of businesses, among others:
- Electronic commerce in foreign countries (if you engage into electronic commerce in Canada, the taxes are going to be high);
- Software development for non-Canadian customers;
- Any legal online or offline services that are provided outside Canada;
- International trade in physical goods and other similar business activities.
One of the obvious advantages of setting up business entity in Canada is that you can separate your personal assets from your corporate assets. In this way, your personal possessions will remain intact whatever happens to your company possessions. (Of course, we wish you every success in doing business in Canada but things can go wrong through no fault of yours and this fact shouldn’t be forgotten.)
Other advantages of setting up a business in Canada include the following ones:
- The longevity of the business is not limited by the time of the stockholders’ or partners’ lives (the company can be passed down to their heirs);
- The company can be sold, inherited, of become part of a Dynasty Trust;
- Raising money for business development is quite easy in Canada especially if you are going to create new jobs in the country;
- There are serious tax incentives in Canada for those who develop innovative products and services;
- Canada has a spotless reputation in the business world so your Canadian-registered brand will certainly impress your clients and partners;
- It is quite possible to acquire financial support from the Government of Canada.
How can you start a Canadian business company, Partnership or Limited Partnership?
You have to go through several stages if you would like to set up a business in Canada. Below please find a brief description of each stage.
1. Choose the type of business ownership that suits you best.
The answers to the questions that we formulated above should help you understand what company ownership type is most advantageous for you. Nonetheless If you have any doubts, please seek advice from a competent specialist.
Here are the forms of business ownership available in Canada:
Sole proprietorship
Sole proprietorship is a business that belongs to a single person. This is the simplest form of business ownership. The evident advantage of establishing this type of company is that you can make your own decisions whichever area of business is concerned. The largest disadvantage is the unlimited liability of the company owner for all the company operations. If you take on business debts, you might have to sell your house and your car to pay them back. The company can operate under your personal name or under a trade name (DBA or Trading As). You are free to change the business name at any time if you deem it necessary.
Partnership
There are three types of Partnerships that can be set up in Canada:
- General partnership;
- Limited Partnership;
- Limited Liability Partnership.
In a general partnership, each partner has unlimited liability that is defined by his/ her share of the company ownership.
In a limited partnership, there is one general partner with unlimited liability and one or more limited partners whose liability is limited by the amounts of their contributions to the partnership capital.
Limited liability partnerships are not so easy to establish. This option is usually used by a group of professionals such as lawyers, accountants, doctors, and so on.
Corporation
A corporation can be registered at the federal or at the provincial level in Canada. Corporation stockholders are not liable by their personal assets for any losses that the corporation may incur.
2. Choose a name for your company
If you have been thinking of starting a business for a long time, you probably have already invented a few possible names for your company. If not, nows the time to get your creative juices flowing! Please bear in mind the following characteristics of your company name:
- A short company name is easier to remember;
- A descriptive company name can give your customers a clear idea of what exactly your company does;
- A combination of a short name and an clear name would be a perfect option;
- Your company name has to be unique. The name has to be checked for uniqueness with official bodies in Canada. Unless it is confirmed that no company, partnership or other business with this name is currently in existence in the country, you cannot use the name.
3. Register your company name
There are several ways in which you can confirm the uniqueness of your company name and register it:
- By a name search via an online company formation agent such as ourselves;
- By paying a personal visit to the registration service in your chosen province;
- By stating the desired company name in the application for company registration that you will be sending to the Canadian authorities.
The Business License registration state duty in Canada is between 60 and 80 Canadian dollars (CAD). Your registration will remain valid for five years, after which you will have to renew it. Of course, we will do this for you and we always include the government fees in our own offers.
4. Choose the location for your company in Canada
Taxation systems and business environments also differ from one Canadian province to another. The location of your clients and partners is important too. Besides choosing the province, you will need a Canadian “headquarters” in that province.
In Ontario we have a dedicated address service, included in our company or partnership registration cost, that complies with all legal requirements.
That said, some clients need more. Maybe you need a prestigious address in downtown Toronto, desk space, recptionist and a meeting room. A lease contract can also be arranged. In fact, everything you need for a successful business presence in Canada can be arranged. Just remember that operating costs in Canada are relatively high, so if you can keep your Canadian presence to a minimum you will alsdo increase your profit margins. Ultimately, the best location will largely depend upon your intended business activities and we will be happy to advise you on this issue.
5. Acquire Government financing and business grants for your company in Canada
There are good fundraising opportunities in Canada. The main financing channel for Canadian businesses is commercial banks. It’s best to set up an account at the beginning, run funds through it regularly, and then after 1-2 years you can qualify for overdrafts, business loans, corporate credit cards etc.
Financing can also be acquired both from Government funds and from private “business angel” investors. In some cases, you can even receive a grant that does not have to be returned.
6. Acquire a Canadian business number or enterprise number (Le numéro d’entreprise du Québec, NEQ)
A business number (BN) is a nine-digit number that identifies your company at both the federal and the provincial level in Canada. Each province issues its own enterprise number that you will have to acquire in case you register your company in this province. Ontario has certain regulations that may appear attractive to you depending on the type of business you would like to engage in.
Because Quebec is French-speaking, you can also acquire a Canadian business number certificate (NEQ) in French.
7. Choose between federal and provincial registration
Companies in Canada can be registered at the federal or at the provincial level. Federal registration allows doing business all across Canada but it takes more time and effort to register the company at the federal level. Besides, company maintenance costs are going to be quite a bit higher. On the other hand, if you are planning to do business outside of Canada to avoid paying Canadian taxes, acquiring provincial registration for a Partnership (GP or LP) will suffice.
8. Acquire a business license
Not every business activity requires a license in Canada. However, some do and you may have to apply for a license or otherwise a permit to conduct certain types of business activities in the country. Please contact us to find out if your prospective business requires obtaining a license in Canada.
Startup Culture in Canada
You can register a company in Canada completely via the Internet. All you need is a local mailing address such as that we provide, at which you can receive correspondence from the government, banks (plastic cards), etc.
Small businesses comprise up to 60% of the Canadian economy. The Government of the country actively promotes small business development by offering attractive conditions to entrepreneurs. In addition to that, Canada is probably more welcoming to startups than any other country in the world. The favorable business environment in the country attracts many business people to Canada from a number of different countries. There are few obstacles to starting a business venture in the country indeed.
If you are thinking of setting up a business company in Canada, don’t put it off for too long! The sooner you register a business in this country, the sooner you can start making a profit.
We will be happy to consult you on all the business management issues that are relevant to establishing a business or corporation in Canada. The International Wealth team will help you set up and maintain a company in the country. Please contact us by sending us an email message or by using our live chat or WhatsApp number. We guarantee professional assistance and the confidentiality of your personal information.
Can I register a company in Canada remotely?
Yes, you can. Moreover, this this the most convenient method of company registration in Canada. However, if you want to set up a fully functional corporate bank account in the country, you will have to visit a bank office in person. There is a possibility to open an account remotely but in this case, you will only be able to accept payments and you will not be able to withdraw money from the account. But then again, you can always ‘upgrade’ the functionality of your corporate bank account by paying a personal visit to the bank. What makes this procedure even easier is the fact that many Canadian banks have representative offices outside Canada, so you do not have to visit North America to set up both the company and the bank account.
Why register a company in Canada?
First, a Canadian-registered company allows raising funds if yours is an innovative type of business activity. Second, offshore company owners should be interested in setting up a company in Canada too. If you have a company registered in an offshore jurisdiction, you run into reputation problems. However, if you make this company a co-founder of a Canadian company, such problems will disappear.
Can a foreigner register a company in Canada?
Yes, a foreign national can act as the founder of a Canadian company if he/ she has a clean criminal record. Moreover, there is a possibility to make a foreign legal entity a stockholder in a Canadian-based company. This can bring a number of advantages to your international business.
