Ontario vs Federal Corporations
Should you incorporate your business federally or in Ontario? Understanding the differences between a Federal and Ontario corporation will ensure that your business is operating pursuant to the procedural rules that best meet its needs.
Federal corporations are governed by the Canada Business Corporations Act (CBCA) and Ontario corporations are governed by the Ontario Business Corporations Act (OBCA). The primary differences between incorporating under the CBCA or the OBCA can be reduced to the following:
- Geographical scope of your business operations
- Prestige
- Name availability and protection
- Costs and ongoing filing requirements
- Conducting a regulated business
Geographical scope of your business operations
Ontario corporations can operate locally in Ontario, but they must get an extra-provincial licence if they seek to expand operations to another province.[1] The associated fees and processing times will vary depending on the jurisdiction the corporation is being registered in, as different provincial governments will have different requirements.
In contrast, the CBCA allows a corporation to establish businesses, receive profits, and market itself across all of Canada.[2] Therefore, Federal incorporation is a better option if your business will operate in multiple jurisdictions within and outside of Canada.
Prestige
Federal corporations are recognized around the world, whereas foreign organizations may not be as familiar with an Ontario corporation.[3] Business owners who want to establish an international presence and garner greater prestige and familiarity may be better off incorporating federally.
Name availability and protection
The process for name approval and protection is different between the two jurisdictions. When completing a Federal incorporation, the desired corporate name will be submitted through a NUANS name search, which determines whether your proposed corporate name is distinctive and not in conflict with any existing business name across Canada. If the proposed business name is approved, the benefit of Federal incorporation is that it offers cross-country business name protection and gives you the right to use your business name throughout Canada.[4]
On the other hand, if you are incorporating in Ontario, the desired corporate name simply needs to be available within Ontario rather than all of Canada. However, this also means that Ontario corporations do not have the benefit of cross-country name protection. To protect your Ontario corporation’s business name across Canada, you would need to independently register your business name in every province.[5]
If you wish to have your business name protected across Canada, it may be more beneficial to incorporate your business federally.
Costs and ongoing filing requirements
The government fee for incorporating in each jurisdiction is different. Federal incorporations have a government fee of $200.00,[6] whereas Ontario incorporations have a government fee of $360.00.[7]
Although the government fee for Federal incorporation is lower, Federal corporations are required to provide a yearly tax return along with a mandatory filing called an Annual Return. The Annual Return is due on the anniversary month of a corporation and will require payment of additional government fees ranging between $20 and $40.[8]
In contrast, Ontario corporations combine both the tax and annual filing requirement into one form.[9] This means that Ontario corporations are responsible for less filings per year, which may reduce legal and accounting fees.
Conducting a regulated business
If your corporation is going to conduct a regulated business in a particular province or territory, then it may be easier to obtain the necessary provincial licenses if your business is incorporated within that jurisdiction. For example, lawyers, doctors, dentists, accountants and other professionals in Ontario must incorporate their professional corporations provincially under the OBCA.[10]
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Disclaimer: This article is for informational purposes only and does not provide legal advice, nor does it create a solicitor-client relationship with you or any other reader.
[1] See for example the requirements for extra-provincial registration in British Columbia
[2] See s. 15(2)-(3) of the CBCA
[3] https://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs06641.html
[4] https://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs07448.html
[5] https://www.ontario.ca/page/incorporating-business-corporation
[6] https://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs06650.html
[7] https://www.ontario.ca/page/cost-time-required-to-register-change-search-for-business-name-corporation-not-for-profit
[8] https://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs06650.html
[9] https://www.ontario.ca/page/annual-return-filing-corporations-information-act#section-0
