Learn about Federal vs Provincial Incorporations on Goodlawyer.
Canadian entrepreneurs have the option of incorporating their company federally with the Government of Canada, or provincially with the provincial government where the corporation’s head office will be located.
- Federal vs. Provincial Corporations
- Extra-Provincial Registrations
- What Are “Operations”?
- Extra Filing Fees
1. Federal vs. Provincial Corporations
There are only a few small differences between federal and provincial corporations in Canada. Incorporating federally does not necessarily make it easier to do business across Canada, and incorporating provincially doesn’t restrict you from having customers outside of your home province.
The key legal differences between federal and the provincial incorporations are that federal incorporations give named corporations nationwide “corporate” name protection, whereas provincial corporations are limited to “corporate” name protection in the jurisdiction of incorporation. For example, there can be two identically named corporations in AB and ON, whereas federally there can only be one. This might not matter for some corporations, but for founders who plan on scaling across Canada and want to protect their brand, federal corporations have that advantage.
Another small nuance between federal and provincial incorporations is that federal corporations are required to have at least 25% of its board of directors and the individual incorporating the company be Resident Canadian. This can make incorporating provincially in AB, BC, or ON attractive for entrepreneurs that are new to Canada or intending to operate a Canadian corporation from outside of Canada.
2. Extra-Provincial Registrations
Extra-provincial registrations essentially “extend” the reach of your corporation’s operations geographically by registering it to “carry on business” in additional jurisdictions. Whether federally or provincially incorporated, the corporation must be registered with the provincial government where the head office is located and each additional jurisdiction where it “carries on business”.
For example, if your head office is in Ontario and you want to incorporate federally, you are also required to extra-provincially register in Ontario. If your head office is located in Alberta and you want to provincially incorporate, then your primary incorporation will be in Alberta.
If you “carry on business” or establish “operations” in another province, you must file an extra-provincial registration in that province. This will incur additional filing fees for the registration itself, and usually increases the costs associated with your annual corporate maintenance.
3. What Are “Operations”?
“Operations” is a legally ambiguous term, but at a high level, if your corporation has employees, facilities, offices, or other substantial assets in a province, it is likely “operating” in that jurisdiction. Simply making sales of goods or services, or even entering into contracts in a new province does not necessarily mean that you “operate” or “carry on business” in that province. If you are unsure if your corporation is operating in a province, you should consult with a Good Lawyer.
If you do carry on business or operate in a province outside of your registered corporate jurisdictions, you must file an extra-provincial registration for your corporation in that province, and any additional province that you operate in.
4. Extra Filing Fees
Unfortunately, there is a drastic pricing variance to incorporate a business across the different Canadian provinces and territories due to government filing fees.