When considering incorporation, understanding the difference between provincial and federal option is important. This decision has consequences and possible challenges for your business. Consulting a business lawyer can help you ensure you are fully informed.
So what are the differences? Let’s break it down.
Provincial Level:
Each province has its own laws and a regulatory body that governs the incorporation (in Ontario, it’s the Ontario Business Corporations Act). By going the provincial route, your business will only be incorporated in that specific province and depending on your type of business, you might be restricted to provincial incorporation only.
You are able to conduct business with other businesses outside of the province, but your office must be located in the province you are registered in. Usually if you wanted to do business in another province you would need to go through an extra-provincial registration and also get your name re-approved in that province.
Federal Level:
By incorporating federally, your company is regulated by the Canada Business Corporation Act and it can expand throughout all of Canada. This includes more documentation and you do have to have corporate filings both federally and provincially. This also mean that you would need to go through extra-provincial registration to do business in different provinces, but it’s important to note that in Ontario there are no extra fees for federally incorporated companies. This makes fees for both options almost the same because although federal incorporation is slightly cheaper, there is also a small annual fee.
If your business is international – a federal option might be better for you. This would also apply to an e-commerce business as you would be dealing with a variety of locations. Another advantage of federal incorporation is name protection – this means your business can keep your name even if it is used by another company. Provincially your name is not protected outside of that one province. Finding out if your name is already in use can be done through a NUANS report which is a database that has a list of all the business names already in use.
These are the differences between provincial and federal corporations but there are also similarities. Both have Limited Personal Liability Protection, tax advantages, ability to raise capital and growth.
At Eshel Law Firm, we have the expertise and experience to help you make informed choices when it comes to Business Law. We are happy to provide you with a consultation and answer any questions you might have.
Contact us at: [email protected] or visit our website to make an appointment: www.eshellaw.ca.
