Registering your business is probably one of the biggest considerations that you will have to make. A series of factors go into play when making your decision including the scale of which you’d like to operate your business.

If you opt to incorporate your business, the next choice you have to make is whether you’d like to incorporate it federally or provincially. At Sodagar & Co., we can assist you throughout the entire registration process to ensure that your business needs are met.

Why Should You Incorporate?

There are 5 key benefits that arise from incorporating your business. For more information and details, please see the following link.

  1. Separate legal entity. Your business will have the same rights as a real person.
  2. Limited liability. Shareholders will never lose more than their investments.
  3. Lower tax rates. Owners will be taxed separately from their corporations.
  4. Better access to capital and grants. Corporations can issue stocks and bonds as well as borrow money at lower rates.
  5. Continuous existence.

What Does it Mean to Incorporate Provincially?

In short, when you incorporate your business provincially for example, in British Columbia, you will be a B.C. corporation. Thus, you will be limited to conducting business in the province of incorporation. As a result, you will have to comply with any applicable provincial rules and regulations. Continuing with the B.C. example, the governing legislation that you will be entitled to follow is the Business Corporations Act (BCBCA).

Note that some businesses have to be incorporated provincially. Examples of these businesses include doctors, lawyers, dentists, and realtors.

What Does it Mean to Incorporate Federally?

Federally incorporated businesses are governed by the Canada Business Corporations Act (CBCA). Therefore, your company will be a Canadian corporation which allows you to do business nationwide. However, keep in mind that certain provinces may require you to register or obtain a license prior to operating in it.

Key Differences

The following points highlight the 3 key distinctions between federal and provincial corporations.

  1. Corporate names protection and registration. Under the CBCA, a federal corporation has the right to carry on business under its corporate name in any province of Canada. However, as mentioned above, some provinces may require you to register it before operating. Under the BCBCA, however, there is no such entitlement. A B.C. corporation registering in another province cannot be registered under its name if that name is already being used there by another corporation. Both federally and provincially incorporated companies must fulfill the registration requirements of every province in which they carry on business.
  2. Residency requirements. The CBCA requires at least 25% of directors to be Canadian residents. If a corporation has fewer than four directors, at least one director must be a resident Canadian (except for certain business sectors and corporations subject to federal ownership restrictions). The BCBCA has no residency requirements for directors or for directors’ committees.
  3. Flexibility on changes to a company’s articles. Under the BCBCA, levels for various shareholder approvals, other than those prescribed by the legislation, can be set in a corporation’s articles. The CBCA however, does not provide such flexibility on shareholder approvals.

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