Incorporating Provincially vs Federally

[blue_xii]

Hi all,

I'm looking to incorporate a business. Noticing the fees are lower to incorporate federally than provincially however I am wondering about the maintenance cost associated with both. Practically I don't need to be incorporated federally as I will be working out of the southern ontario area only.

Any info about the maintenance and costs between the two would be realy helpful thanks.

[Whitedart]

Hi all,

I'm looking to incorporate a business. Noticing the fees are lower to incorporate federally than provincially however I am wondering about the maintenance cost associated with both. Practically I don't need to be incorporated federally as I will be working out of the southern ontario area only.

Any info about the maintenance and costs between the two would be realy helpful thanks.

I looked into this several years back, and in the same position as you where I would be operating out of southern Ontario only. The information I received was that unless I was physically operating out of more than one province, I had no choice but to incorporate provincially. In other words, if my primary operation was in Ontario, I had to incorporate in Ontario. If I had the primary operation in Ontario, and a secondary operation in BC, I would be eligible to incorporate federally.

[konfusion666]

Apparently, that's not true.

You can incorporate Federally if you want, you do not need to be simultaneously operating in more than one province.

Chapter 1.3
Benefits of Incorporating Federally
In Canada, you have the choice of 13 provincial and territorial jurisdictions and one federal jurisdiction of incorporation. While company law statutes in Canada are quite similar, incorporation under the CBCA does offer certain distinct advantages.

~ snip ~

Location Flexibility
Incorporation under the CBCA offers flexibility not available under other jurisdictions. For instance, the CBCA does not set restrictions regarding the province or territory where your head office is located, your corporate records are maintained and your annual general meetings are held. You can even hold your meetings electronically or outside of Canada if you wish.

~ snip ~

Regardless of your location in Canada, incorporation under the CBCA is available to you. With federal incorporation comes excellence in customer service, a focus on accessibility and, of course, the status of being a federal corporation. We are your jurisdiction of choice.

http://corporationscanada.ic.gc.ca/e.../cs01357e.html

[DealDemon]

I am in the process of incorporate too.
just wondering if is easy to do it yourself or do we need a lawyer
My lawyer insisted i incorporate and he charged $1000
my business is small.
maybe 1 or 2 employees

[sparkplug]

Incorporating is a piece of cake if you're a one person show. It can be more complicated if you have several directors or shareholders.

I've seen incorporation packages for $250 and that includes one hour of legal and accounting advice.

Lastly, I believe if you incorporate federally you need to do a NUANS search in every province. For instance, the name XYZ Widgets Inc. of a company selling pet rocks might be okay in Ontario, but could run into problems in Manitoba.

[nabeel]

I incorporated my company provincially around two years ago, and incorporated another company for myself and a partner around a year ago.

First off, cyberbahn.ca is the quickest/cheapest service to use. Their service has been great.

I would suggest incorporating provincially:

- Getting your name federally requires their to be no matching name anywhere in Canada, including other provinces. Ontario only cares if the name matches in Ontario.

- The documentation you have to file yearly with the federal government for a federal incorporation adds a recurring cost to your business.

- Ontario provincial corporations can apply for a Vendor Permit, etc. online. Federal corporations must call to get a Ontario Vendor Permit or other permits.

[Fombi]

I have a similar problem in that I'm not sure whether to incorporate at the federal or provincial level. Since I am a web business I will be operating virtualy throughout Canada. Does this mean I have to incorporate at the Federal level. I would prefer to do it at the provincial level, as it seems to be less work on a yearly basis.

Any thoughts would be greatly appreciated!

[nabeel]

Where you operate is defined by where you physically have presence, not where your customers are. For example, we have a physical presence in Ontario but ship to customers even in the Yukon.

In your case, Ontario incorporation is sufficient.

[Fombi]

Thanks so much for clearing that up!! It makes sense, I just wanted to be crystal clear.

I just noticed in the thread that it also states that Federal Inc is cheaper. Am I missing something, I thought it was cheaper going the provincial route...as well as less paper work. The only real benefit I saw with going the federal route was name security across canada.


Thanks again!!

[nabeel]

Federal incorporation is $100 cheaper compared to Ontario incorporation, but has annual filing fees.

[Fombi]

Last question....really!

According to the following listed as a disadvantage to provincial incorporation

"Outdated laws governing shareholder agreements, director’s liability, share structure, etc."

The director's liability part worries me a little. Does this mean that as the owner I am personaly liable if something we sell or say on our site causes harm to someone. Not that anything like this is likely, but the security of no personal liability puts my mind to ease.

Thanks again for all of your responses...its been a great help sorting this all out.

[Canucklehead]

If you get a good lawyer, s/he can steer you in the right direction and make sure you're protected regardless of how you are incorporated.

[Fombi]

A good lawyer would be great, but good lawyers also cost a lot of money (money I need for marketing and inventory). I guess I can incorporate for now and when I start making money get a lawyer to make sure everything is air tight.

Would it be safer in the short term then to go Federally from a liability stand point, or should I be ok provincially.

Thanks!

[SENSEI]

Last question....really!

According to the following listed as a disadvantage to provincial incorporation

"Outdated laws governing shareholder agreements, director’s liability, share structure, etc."

The director's liability part worries me a little. Does this mean that as the owner I am personaly liable if something we sell or say on our site causes harm to someone. Not that anything like this is likely, but the security of no personal liability puts my mind to ease.

Thanks again for all of your responses...its been a great help sorting this all out.

Fombi, from what I know, the whole idea behind incorporation is that the company will be recognized as a seperate entity by the law. So somebody technically sues the incorporation, but the individual directors.

Director liability refers to monetary issues? When we were a start-up company and wanted to take loan out, the directors were still personally liable for the value of the loan, despite being incorperated. Like a personal guaranter...

I'm sure others know much more than me about this, but that's my take.
Don't quote me on, or go through with it unless you have all your questions resolved.

[ebizimage]

If you incorporate federally and operate out of Ontario, you also have to register your federal incorporation in Ontario to file your Ontario tax. Ontario will issue you another corporation number.

If you incorporate by yourself, you will need to find a way to buy cheap minute book and corporate seal because usually the incorporate package will include it.