When it comes to incorporating a business in Canada, entrepreneurs have the option to choose between federal and provincial jurisdictions. While both federal and provincial corporations enjoy the ability to sell products and services across Canada and globally, there are trade-offs to consider. Let's explore the key differences between these two options by comparing Federal vs Ontario (Provincial) incorporation:
Name Protection
Federal incorporation offers a higher level of name protection, ensuring your business name is safeguarded in every Canadian jurisdiction. On the other hand, Ontario incorporation provides name protection within the province of Ontario only. It's important to note that this protection applies to the legal name, and separate trademark filings are required to protect your trade name.
Extra-Provincial Registration Requirements
Both federal and Ontario corporations must undergo extra-provincial registration in each province or territory where they establish a physical presence. However, there is an exception for Ontario corporations. They are not required to register for extra-provincial registration within their home province, Ontarios.
Resident Director Requirement
Federal corporations must have a minimum of 25% resident Canadian directors, whereas Ontario does not impose this requirement. This lack of a resident Canadian director requirement makes Ontario incorporation an attractive choice for foreign business owners looking to start a Canadian business. Typically we find that businesses with resident Canadian directors (individuals living in Canada that are Canadian citizens or permanent residents) choose to incorporate federally while businesses without resident Canadian directors, or who might want to live abroad, typically choose to incorporate in Ontario.
Movement of Headquarters
Another benefit for federal corporations in Canada that enables them to move their headquarters between provinces is the flexibility it offers in terms of jurisdiction. Federal corporations have the advantage of being able to easily transfer their headquarters from one province to another without having to go through a complex process of dissolution and re-incorporation. This flexibility can be particularly advantageous for businesses that anticipate changes in their operational needs or want to take advantage of economic opportunities in different provinces. This means that federal corporations can adapt to changing circumstances with relative ease, making it a versatile choice for businesses seeking to expand or relocate within Canada while maintaining the benefits of federal incorporation.
The Ontario and Federal governments have been doing an impressive job making it straightforward to complete the extra-provincial registration in Ontario as a federal company. This is in contrast to some other provinces where the extra-provincial registration costs can be greater than $500, and may have significant annual fees.
Ribbon Makes Business Easy
To keep a corporation compliant is challenging. Ribbon gives entrepreneurs the tools to help them stay compliant. From setting up minute books, maintaining registers to annual filings, Ribbon let's Entrepreneurs focus on their business. Learn more about Ribbon or email support@getribbon.ai.