PEI Business Registration (6 Step Detailed Guide)

Registering your business in Prince Edward Island (PEI) is a big step towards kickstarting your entrepreneurial aspirations. Whether you're going solo or forming a corporation, this process involves a series of steps and things to keep in mind to make sure your business follows the local rules and runs smoothly. In this guide, we'll take you through the six key steps for registering a business in PEI, from understanding why it's necessary to meeting your ongoing compliance needs.

Step 1 - Do You Need to Register Your Business?

Before going through the effort of registering your business, double check that you actually need to register. A corporation does not exist until you register it, while a Sole Proprietorship may operate without registering under the specific conditions highlighted below.

In Prince Edward Island, you can operate a sole proprietorship without registering a business name only if it is operated under your own name. If a prefix or suffix of any kind is added to your own name to create the business name, you are required to register under the Partnership Act.

Reference: Corporate and Business Names Registry

Step 2 - Choose the PEI Business Structure

The two most common business structures in PEI are sole proprietorship and corporation. Partnerships will not be the focus of this guide.

Different Business Structures in PEI

Corporation (PEI)

Description. A legally separate business owned by shareholders. Governed by the Business Corporations Act (PEI). Can be completely owned and operated by non-residents.
One-time government fee: $250.00
One-time name reservation fee: $40.00
Annual government fee: $30.00

Corporation (Federal)

Description. Similar to a PEI Corporation but governed by the Federal district. 25% resident Canadian requirement.
Extra-Provincial Registration.Federal corporations with a headquarters in PEI must complete the extra-provincial registration process.
One-time government fee: $200.00
One-time name reservation fee: $13.80
Annual government fee: $12.00

Sole Proprietorship

Description. A sole proprietorship is a business structure in which a single individual owns and operates the business, making them personally responsible for its profits, losses, and liabilities.
One-time name reservation fee: $40.00
One-time government registration fee: $90
Renewal fee (every three years): $75.00

Pros and Cons of Different Business Structures

Business Type	Setup Fees	Pros	Cons
Corporation	$$$	Legal shield, easier to invest in, potential tax benefits	More complex, more expensive to set up and maintain
Sole Proprietorship	$	Simple structure & reporting	No legal separation between the individual and the business
Partnership	$	Can share costs between individuals	No legal shield, decisions require consensus between partners

Illustrative Costs Associated With Each Business Structure

	Corporation	Sole Proprietorship
One-time Government Name Search or Reservation Fee	Federal - $13.80 PEI - $40	$40
One-time Government Fee	Federal - $200 PEI - $250	$90
Annual Government Fee	Federal - $12 PEI - $30	$75 (every 3 years)
One-time Extra-Provincial Name Registration Fee	Federal - $40 PEI - N/A	N/A
One-time Extra-Provincial Registration Fee	Federal - $275 PEI - N/A	N/A
Annual Extra-Provincial Registration Fee	Federal - $275 PEI - N/A	N/A
Legal	Lawyer ($1000+ and $500+/year), Ribbon ($300+/year)	$0+
Accounting	$1000+ for tax return preparation	$300+ for tax return preparation
Accounting Software	$0 to $700/year	$0 to $700/year
Payroll Software	$20/month + $3/employee	$20/month + $3/employee

Disclaimer. These are ballpark numbers to give a sense, situation and requirements will dictate

Step 3a - Register a Sole Proprietorship in PEI

Registering a Sole Proprietorship in PEI can be completed online and is typically processed in 1-2 weeks.

Steps to Register a Sole Proprietorship:

1. Search for Name Conflicts. Check for name conflicts for your proposed name using the Online Corporate and Business Names Registry and the Canadian Trademarks Database. Read the guide to Guide to Corporate and Business Name Rules.

2. Create Online Corporate and Business Names Registry Account. Register an account to get access to services required for the next two steps.

3. Submit a "Name Reservation Request". Through the Online Corporate and Business Names Registry submit a Business Name Registration, part of this process will be a $40 fee and typically is processed within 5 days.

4. Register a Sole Proprietorship Through the Online Corporate and Business Names Registry submit a Sole Proprietorship Registration, part of this process will be a $90 fee.

Step 3b - Incorporate in PEI

Businesses can be incorporated in PEI as either a Federal Corporation or a PEI Corporation. There are some relatively minor differences but importantly both can sell across Canada and across the globe. This guide will cover federal corporations with PEI extra-provincial registration.

Registering a Federal Corporation with PEI Extra-Provincial Registration

Extra-Provincial Registration

Extra-provincial registration in Canada refers to the process of a business entity obtaining permission to operate in a province or territory other than the one in which it was initially incorporated.

Steps to Incorporate a Federal Corporation with PEI Extra-Provincial Registration:

1. NUANS Name Search. Conduct a NUANS name search through the Corporations Canada portal. Cost is $13.80 and is completed almost immediately.
2. Incorporate with Corporations Canada. Through the online portal, the same one you used for the NUANS Name Search, incorporate your business and pay a $200 fee. Corporations Canada provides recommended text you can use for items such as share classes, restrictions on share transfers, etc. Through the process you are required to sign the Articles of Incorporation and Initial Registered Office Address and First Board of Directors both of which are generated for you. You must keep a signed copy of both these documents.
3. PEI Extra-Provincial Registration. Reserve a PEI Business Name using the Online Corporate and Business Names Registry . Complete the online Extra Provincial Registration and pay the required $275 fee.
4. Set Up Minute Book and Resolutions. Each corporation must maintain a minute book, which holds registers, ledgers, bylaws, resolutions, articles of incorporation, etc. Every corporation must also have the board of directors and shareholders issue certain resolutions relating to topics such as bylaws, appointing officers and directors, waiving of an auditor, etc. This step can get pretty confusing and it's recommended you hire legal/accounting advisors or use a service like Ribbon to do this for you.

PEI vs Federal Incorporation

Federal Corporations, compared to PEI Corporations, have higher legal name protection and can move their HQ between provinces. PEI Corporations have the benefit that they don't need to complete the extra-provincial registration process in PEI.

Step 4 - Set Up Tax Accounts

Canada Revenue Agency Business Number. A business requires a Canada Revenue Agency Business Number if it is a corporation or if it needs a Canada Revenue Agency Account (GST/HST, Payroll Deductions, Import/Export). The Business Number is automatically assigned for corporations but sole-proprietorships need to apply for them.

Federal Corporation Integration with Canada Revenue Agency

Every Federal Corporation is automatically signed up for the Canada Revenue Agency Business Number. When filing a T2 Tax Return with the Canada Revenue Agency, the PEI provincial corporate tax is taken by the Canada Revenue Agency so a separate provincial income tax return is not required.

Goods and Service Tax/Harmonized Sales Tax (GST/HST) Account. Sales tax in PEI are integrated with the Canada Revenue agency and are charged as 15% HST on sales. If a business has sales of greater than $30,000 within the past 12 months it must register for a GST/HST account with the Canada Revenue Agency. Businesses that don't meet this mandatory threshold may still optionally register for the GST/HST account.

Payroll Account. If you have employees, and you hire them as employees not as contractors, you must register for a Payroll Account with the Canada Revenue Agency. Certain mandatory deductions such as Canada Pension Plan, Employment Insurance and Income Tax Deductions are remitted through the Payroll Account.

Step 5 - Obtain Licences and Permits

PEI is known for its friendly and accessible government. If you ever have any doubts or questions about the requirements, you can simply reach out to a local government representative, whether it's from the city or township. They'll be more than happy to assist you in understanding what's needed to secure the right permit or license.

tip

BizPal is a great resource that makes it easy to search for the permits and licences you may need to start or grow your business

Step 6 - Stay Compliant - Annual and Ongoing Obligations of PEI Businesses

Sole Proprietorship Obligations

A sole proprietor must file a T1 Tax Return (Individual Tax Return) if the business:

• has to pay tax for the year;
• disposed of a capital property or had a taxable capital gain in the year;
• has to make Canada Pension Plan/Quebec Pension Plan (CPP/QPP) payments on self-employed earnings or pensionable earnings for the year;
• wants to access employment insurance (EI) special benefits for self-employed persons; or
• received a demand from the Canada Revenue Agency to file a return.

Reference - Canada Revenue Agency

Business Registry. Sole proprietorships must renew their registration every three years.

The remainder of the sole proprietorship obligations depends on what tax accounts, permits and licences they have signed up for.

Corporation Obligations

Corporate obligations are more demanding than the sole proprietors

Key annual and ongoing obligations

• File an annual return with the relevant business registry
• File T2 return with the Canada Revenue Agency
• File relevant returns for Canada Revenue Agency Program Accounts (GST/HST, Payroll, Import/Export, etc.)
• File relevant provincial taxes (may be required if you sell/operate in other provinces)
• Maintain a minute book
• Complete mandatory director and shareholder duties
• File relevant returns or file renewals for permits and licenses as applicable

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.

Conclusion

Commencing the business registration procedure in PEI is a pivotal move that lays the foundation for your entrepreneurial journey within this province. By following the six outlined steps in this manual, you can effectively maneuver through the intricacies of business registration, pick the suitable organizational structure, and meet your tax and licensing obligations. Whether you opt for a sole proprietorship or a corporation, it is essential to uphold compliance with local regulations to secure the ongoing success of your business. Remember that numerous resources and tools are accessible to support you throughout this process.