How to Incorporate in Canada (Part 2)

Welcome to Part 2 of our Business Basics posts on Canada. Last week we took a quick look at corporate law in Canada, and explored some of the major differences between American and Canadian corporate law. If you are thinking about incorporating up north, you should start there as it will give you a basic idea of what to expect in terms of regulations and rules.

This week we are going to shift gears a bit and answer a few of the most commonly asked question about incorporating in Canada.

Part 2!

Can Americans start a corporation in Canada?
Sometimes. As mentioned last week, you can choose to incorporate either at the provincial or the federal level. However, some provinces require that a percentage of the board of directors be Canadian citizens. Federal corporations also have to have a board made up of at least 25% Canadian citizens. Below is a quick list of the residency requirements of each province:

Alberta: At least 25% of the board must be Canadian
British Columbia: No residency requirements
Manitoba: At least 25% of the board must be Canadian
New Brunswick: No residency requirements
Newfoundland: At least 25% of the board must be Canadian
Nova Scotia: No residency requirements
Ontario: At least 25% of the board must be Canadian
Prince Edward Island: No residency requirements
Quebec: No residency requirements
Saskatchewan: At least 25% of the board must be Canadian, and at least one director must live in Saskatchewan.

Provinces also require that the business’s address be located within the province. If you want to work for your business in Canada, you will also need to apply for a work visa. If you were lucky enough to secure venture capital or an angel investor, you may also qualify for Canada’s new start-up visa.

Alternatively, you could also find a Canadian business partner and work with them to set everything up and get the company running.

Who do I pay taxes to?

The corporation will have to pay the corporate tax rate set by the province and federal government, and anyone who derives an income from a permanent Canadian fixture must pay Canadian income tax. In addition to this, an American who acts as an officer, director, or owns shares in a Canadian (or any foreign) corporation, has to fill out Form 5471 and attach it to their US income tax return. American citizens are responsible for paying taxes on any of their income earned abroad, however there is currently a tax amnesty in affect, meaning income earned by Americans in Canada may not be subject to American income taxes.

It’s also important to know that if your corporation pulls in more than $30,000, you will have to register for a GST/HST Account with the Canada Revenue Agency, though Quebec has its own department that handles these accounts.

How do I incorporate in Canada?

The actual process is fairly straightforward, just like it is in the states. The first step is to choose whether or not to create a provincial or federal corporation, and since we have already explored the good and bad parts of each, the next step is to visit the website of whatever department handles incorporations in your chosen province:

Alberta
British Columbia
Manitoba
New Brunswick
Newfoundland
Nova Scotia
Ontario
Prince Edward Island
Quebec
Saskatchewan
If you chose the federal option, you visit Corporations Canada.

Before you file your articles of incorporation, you will probably need to perform a name search and reservation through the provincial/federal website you use. After your name is set, you file your articles of incorporation. In this you’ll likely have to give a registered address for your business and name a registered agent that can accept services of process on the corporation’s behalf. You will likely also need to describe the class of shares you intend to distribute, and identify the names and address of the corporation’s directors. However, every province has its own requirements, so make sure you comprehensively research your province’s laws, or that you talk to a professional – and MyCorp is also happy to lend a hand if you need one.

If you have any questions about incorporating in Canada, you can also leave a comment below or just give us a call at 1-877-692-6772!

Deborah Sweeney

Deborah Sweeney is an advocate for protecting personal and business assets for business owners and entrepreneurs. With extensive experience in the field of corporate and intellectual property law, Deborah provides insightful commentary on the benefits of incorporation and trademark registration.

Education: Deborah received her Juris Doctor and Master of Business Administration degrees from Pepperdine University, and has served as an adjunct professor at the University of West Los Angeles and San Fernando School of Law in corporate and intellectual property law.

Experience: After becoming a partner at LA-based law firm, Michel & Robinson, she became an in-house attorney for MyCorporation, formerly a division in Intuit. She took the company private in 2009 and after 10 years of entrepreneurship sold the company to Deluxe Corporation. Deborah is also well-recognized for her written work online as a contributing writer with some of the top business and entrepreneurial blogging sites including Forbes, Business Insider, SCORE, and Fox Business, among others.

Fun facts/Other pursuits: Originally from Southern California, Deborah enjoys spending time with her husband and two sons, Benjamin and Christopher, and practicing Pilates. Deborah believes in the importance of family and credits the entrepreneurial business model for giving her the flexibility to enjoy both a career and motherhood. Deborah, and MyCorporation, have previously been honored by the San Fernando Valley Business Journal’s List of the Valley’s Largest Women-Owned Businesses in 2012. MyCorporation received the Stevie Award for Best Women-Owned Business in 2011.