How to Register a Company in Canada

Canada, the second-largest country in the world, is more than just vast landscapes and cultural diversity – it’s also a thriving hub for business and innovation. Canada is divided into 10 Provinces that includes Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, Quebec and Saskatchewan and 3 Territories, namely Northwest Territories, Nunavut and Yukon.

Canada offers a stable economy, a well-regulated business environment, and access to global markets.

Ontario and British Columbia are consistently cited as top choices, particularly for international businesses for company formation.

Home to major companies like Shopify Inc., Telus, Royal Bank of Canada, and Enbridge Inc., the country has built a reputation as a supportive place to launch and grow a business – whether you’re a local entrepreneur or an international founder looking to expand.

But how do you get started? In this blog we will walk you through the most common and important questions – Types of Business corporations, Steps to register a business in Canada, time involved, Common mistakes to avoid etc.

A. Types of Business corporations

1. Federal Corporation – A federal corporation in Canada refers to a business that is incorporated under Canada’s federal laws, specifically under the Canada Business Corporations Act (CBCA). This allows the corporation to operate across all provinces and territories in Canada, unlike a provincial corporation, which is incorporated under the laws of a specific province and typically operates primarily within that province.

Key features –
i) National Name Protection: A federal business name is protected across Canada, unlike provincial names which are only protected in one province.

ii) Directors: Federal corporations need at least one Canadian resident director (or 25% if there are four or more directors).

iii) Shareholders: Can be from anywhere in the world.

Pros –
i) National name protection.

ii) Easier to expand across Canada.

iii) More prestigious and professional image.

Cons –
i) Slightly more paperwork and compliance.

ii) Annual return filing with Corporations Canada and CRA.

2. Provincial Corporation – A provincial corporation in Canada is a business that is incorporated under the laws of a specific province or territory, rather than at the federal level. This type of incorporation allows you to operate primarily within that province, though business can be done in other provinces if you register there as an extra-provincial corporation.

Key features –
i) Jurisdiction – Incorporated under a province’s corporate laws, such as:

• Ontario: Business Corporations Act (Ontario)
• British Columbia: Business Corporations Act (BC)
• Quebec: Business Corporations Act (Quebec)

ii) Name protection – Corporation’s name is protected only within the province. Another business with the same name could register in different province.

iii) Operation – Company can operated freely within the province. To operate in other provinces, one must file for extra-provincial registration in each one.

iv) Directors – Must have at least one director. Residency requirement for directors vary by province. Alberta, Manitoba, Saskatchewan and Prince Edward Island requires at least 25% of resident directors. Ontario, British Columbia, Quebec, Nova Scotia, New Brunswick and Newfoundland & Labrador does not have mandatory local residency requirements for Directors.

v) Shareholders – It can have shareholders from anywhere in the world.

Pros –
i) Simple and cost-effective for local businesses.

ii) Faster to incorporate in some provinces.

iii) Fewer compliance steps than federal corporations.

Cons –
i)  Name protection is limited to one province.

ii) Expansion to other province requires extra steps and fees.

iii) Less national recognition.

B. Steps to register a business in Canada

Starting a business in Canada is an exciting venture, but it comes with a few essential steps to make it official. Whether you’re launching a tech start-up in Toronto or a cafe in Vancouver, here’s a streamlined overview to help you register your company properly and legally.

1. Choose your Business – Before registration, decide on the type of business structure. Whether it will be a Sole proprietorship, partnership or a Corporation.

2. Select and register the company name

3. Prepare Article of Incorporation

4. Register the business with the government

5. Incorporating in Canada: Two Main Registration Routes

i) Federal Incorporation

ii) Provincial Incorporation

6. Resident Director: Director residency requirements depend on whether the company is incorporated federally or provincially. Federal corporations must meet national residency thresholds: at least 25% of directors must be resident Canadians, or at least one if there are fewer than four directors. For provincial corporations, a local resident director is required in most provinces, except in Ontario, British Columbia, Quebec, Nova Scotia, New Brunswick, and Newfoundland & Labrador.

Ordinarily, at least 25 percent of the directors of a corporation must be resident Canadians. If a corporation has fewer than four directors, however, at least one of them must be a resident Canadian. In addition, corporations operating in sectors subject to ownership restrictions (such as airlines and telecommunications) or corporations in certain cultural sectors (such as book retailing, video or film distribution) must have a majority of resident Canadian directors.

7. Obtain necessary documents – Additional permits or licenses to operate legally depends on business activities and locations. These include –

i) Municipal Licenses

ii) Industry – Specific Licenses

iii) Import/Export permits

8. Get a registered office – It is necessary to have a registered office in Canada. It can a physical or virtual office.

9. Open a Bank Account – Opening a separate business bank account is necessary. Banks in Canada require the following documents for bank account opening –

i) Article of Incorporation

ii) Business license or registration certificate

iii) Company bylaws

iv) Identification documents of the company’s directors

C. Tax Calculation in Federal and Provincial Corporation

Foreign companies operating in Canada are generally subject to both federal and provincial/territorial corporate income taxes. The tax treatment depends on how the foreign company is structured in Canada – whether it’s operating as a Canadian subsidiary (incorporated in Canada) or through a branch (not incorporated in Canada, but carrying on business in Canada).

1. Federal Corporate Income Tax Rate
Basic federal corporate tax rate – 15%

2. Provincial/Territorial Corporate Tax Rate
Each province adds its own corporate tax on top of the federal rate. Here are general provincial general corporate income tax rates for foreign corporations (not eligible for small business deduction):

D. Mistakes to avoid while incorporating a company in Canada

1. Choosing the wrong business corporation – Failing to choose wrong business structure can lead to tax inefficiencies, liability issues and difficulty in raising capital.

2. Choosing an invalid or conflicting company name

3. Hiring too early or misclassifying employees.

4. Expanding too quickly.

5. Not seeking professional help.

E. Conclusion

Canada’s strong economy, global ties, and clear legal system make it a great place to start a business. Choosing federal or provincial incorporation depends on your goals – federal offers wider name protection and growth potential, while provincial can be simpler and more affordable. Success takes more than filing forms: picking the right structure, meeting residency rules, and getting proper licenses are all crucial. Avoid mistakes like choosing an invalid name, expanding too quickly, or skipping expert advice. With smart planning, Canada provides a stable, business-friendly environment for both local and international entrepreneurs.