Original Post Date: March 3, 2020
Whether you are starting a new business in Canada or have decided to transition from a small business to a corporation, you may be wondering what the differences are between a Federal and Ontario corporation.
When you incorporate in Canada, you have the option to register a provincial or Federal business corporation. Both Federal and Ontario Provincial corporations have a number of the same benefits, however, there are some differences between the two jurisdictions. Before deciding on which jurisdiction of incorporation is best for yourself, it’s a good idea to learn more about these differences.
After learning more about the differences between federal vs provincial corporations and deciding which type of corporation you wish to register, you can click on one of the options below when you are ready to incorporate:
Differences & Similarities Between Federal and Ontario Corporations
|SIMILARITIES||Federal(Canada Incorporation)||Ontario Incorporation|
|Requires Annual Return filings||Yes||Yes|
|Trade Names or DBA availability||Yes||Yes|
|Citizenship Requirement (Canadian)||Yes 25%||No|
|Requires secondary provincial filing||Yes||No|
|Requires Initial Notice Filing||No||Yes|
|Name Approval by Government Agent||Yes||No|
1. Government Fee
Is it cheaper to incorporate federally or provincially?
The government cost of incorporation between the Federal and Provincial jurisdictions are different.
To incorporate a Federal or Canada Incorporation, the government fee is $200.00.
To incorporate an Ontario Incorporation, the government fee is $300.00
2. Mandatory Corporate Filings
Both Federal and Provincial Incorporations have the Annual Returns as mandatory filings. However, Ontario Corporations have an additional mandatory corporation filing known as the Initial Notice. Federal Corporations do not have this.
Ontario – Initial Notice
When you provincially incorporate In Ontario, you must file the Initial Notice within 60 days after an incorporation. You may select the option in our form for us to file the Initial Notice on your behalf as part of our incorporation package. We will complete the Articles of Incorporation and submit the Initial Notice within the 60 day requirement. It is important to submit the Initial Notice filing within the 60 days to maintain compliance with the Ontario government. The Initial Notice announces the officer titles of the corporation such as President, Vice President, Secretary, CEO. If the details of the company have changed since the date of incorporation, such as the corporate address, directors or directors addresses, they can be updated simultaneously.
Ontario – Notice of Change
If an Ontario corporation has a change to the corporation after the Initial Notice is filed including address change, director change or officer change, a Notice of Change is required to be filed with the Province within 15 days of the change. The history of the corporation will remain and the updated details will be submitted on the corporate record.
Federal – Change of information
If a federal corporation has a change to its incorporation information including the corporate registered address, a directors address or a change in director where a director is either being added or removed, the update should be filed as soon as the change happens. This federal corporate filing will be completed and reflected on the corporate record as soon as it has been filed.
Ontario & Federal Annual Returns
Both the Ontario and Federal governments require Annual Returns to be submitted yearly. However, the government agencies where these are filed are different.
In both jurisdictions, the filing dates are different. Federal Annual Returns are due within 8 weeks of the anniversary date of the Incorporation date. For Ontario Annual Returns, the due date is determined by the fiscal year end. In many cases, this is the same as the date of incorporation, however when the CRA accounts are set up, a corporation has the option to set their own fiscal year end date.
The Ontario Annual Return previously was filed with the Canada Revenue Agency along with the corporate tax filing. As of May 15, 2021 this has changed where now the Ontario Annual Return is to be completed and filed with the Province of Ontario.
The Federal Annual Return has always been filed with Industry Canada and not with the corporate tax submission to the Canada Revenue Agency. The Federal Annual Return is mandatory and if a corporation misses two of these filings, the corporation will be dissolved by the federal government.
3. Name Protection
Corporations are provided business name protection for the exact corporate name within the jurisdiction of incorporation. This means that if a new business is registered or incorporated under a similar business name to your incorporated business, you may have the opportunity to insist on a name change of the new business operating. If this occurs, it’s best to contact a corporate lawyer for an opinion on any legal issues related to your corporate name protection.
An Ontario corporation will have name protection within the Province. Federal corporations have a higher level of name protection, as their name is protected at the Federal level.
Both Federal and Ontario corporations require a NUANS Name Reservation in order to incorporate. The Nuans report reserves the corporate name for 90 days for incorporation. It is recommended that a pre-search is first done before the NUANS name reservation is completed, to ensure there are no existing corporations or trademarks using the proposed name.
4. Name Approval
The process for name approval is different between the two jurisdictions. When completing a Federal incorporation, the chosen corporate name is reviewed and either approved or rejected by a Federal examiner at Corporations Canada. If the name is approved, the incorporation is completed. The examiner will look through the NUANS name search for any existing same or similar business names to your chosen corporate name.
The name is approved when the Federal examiner does not see any existing corporations or registered business conflicts. If the proposed corporate name is rejected by the Federal examiner, there is the opportunity to communicate the differences of your chosen business name to the existing business and the Federal examiner may reconsider the decision and accept the chosen business name under circumstances where the presumed conflict to existing business names is reduced or removed.
Getting a corporation name approved in Ontario is a much easier process. As long as there is no exact match for an Ontario corporation that already exists, any name will be accepted by the Provincial examiners however any similarly named corporations to your proposed business name may take issue with the similarly named business. It is highly recommended you choose a business name that is unique to any existing corporation in Ontario.We have assisted thousands of new and existing entrepreneurs to find an available corporate name for their business. Our objective is to assist you to secure a corporate name that not only you love but will be available in whichever jurisdiction you decide to incorporate within.
5. Citizenship Requirement
With Federal corporations, there is a requirement that a minimum of 25% of the listed directors must be Canadian Citizens or Permanent Residents. Ontario no longer has this requirement, meaning a non-citizen can be the sole director of an Ontario corporation. Ontario and British Columbia are the only jurisdictions that do not have any Canadian director residency requirements for incorporating.as this requirement, meaning a non-citizen can be the sole director of an Ontario corporation. Ontario and British Columbia are the only jurisdictions that do not have any Canadian director residency requirements.
6. Processing Time
Although both a Federal and Ontario incorporation are submitted electronically, the processing time for each is slightly different. As the name approval process is more rigorous for Federal corporations, this increases the processing time to 1-2 business days to incorporate your business.
An Ontario incorporation is completed as soon as it is submitted electronically. This means that, as long as we receive the order for the corporation before 3pm, we can incorporate your company on the same day. If a rush request is ordered, we can incorporate your business and send the completed Articles of Incorporation by email within 3 hours.
7. Extra-Provincial Registration
A Federal corporation, although registered Federally, must also register in the Province or Territory where the corporation is conducting business. This process is known as an Extra-Provincial registration. A Federally incorporated business may operate in more than one Province or Territory and in this event where the business operates in multiple jurisdictions, the Federal corporation is required to register as an extraprovincial corporation within each jurisdiction.
As an example, if the corporation has a physical location in both Ontario and British Columbia, the Federal incorporation is required to register the Extra-Provincial registration in each, to operate the business in that province. If on the other hand, the corporation has its only physical address in Ontario, but has customers across Canada with a large number of them in British Columbia, the only Province required for the additional Extra Provincial registration would be Ontario. If you ever cease conducting business in a province, you can file to cancel or close that specific extraprovincial registration, while keeping the Federal corporation active.
An Ontario corporation is also able to register Extra-Provincially if business operations expand and you are conducting business in other Provinces. However, this is not required if the corporation operates solely in the Province of Ontario.
The fees for Extra-Provincial registrations will vary, depending on the jurisdiction the corporation is being registered in, as the registration filing fees for Provincial governments and processing times are all different. If you are interested in registering in different Provinces, you can contact our friendly staff for more information at the phone number 1-800-280-1913 or by email at email@example.com.
Similarities Between Federal and Ontario Corporations
- Limited Personal Liability Protection
- Tax Advantages
- Name protection for the corporation name
- Ability to add operating names or DBA
- Selling the business
- Raising capital or investment for growth
- Continual existence of corporation
Regardless of whether you decide to register your corporation Federally or in Ontario, there are some similarities between the two registrations.
1. Limited Personal Liability
For small business registrations, such as sole proprietorships, the liability for the business falls on the shoulders of the owner personally. When you incorporate your business, you are creating a separate entity from the directors and owners, so there is limited personal liability for the owners of the business. If the business activity has a higher risk of personal injury, property damage, or any other type of liability, keeping the risk separate from the business owners may be beneficial.
2. Tax Advantages
Corporations file separate taxes, and can benefit from a lower corporate tax rate and other possible tax advantages. Whether you register a federal or provincial incorporation, your incorporated business has numerous tax advantages available, which are not available to registered businesses. An accountant is your best resource for more detailed information about the tax benefits of incorporating.
3. Operating Names
One of the advantages of incorporating is that you are able to register operating names under your existing corporate name. This allows a corporation to carry on business using a different business name by registering a Business Name Registration, previously called a Master Business Licence, as a Trade Name or ‘Business Name for a Corporation’. There is no limit to the number of Trade Names that a corporation can register.
Each Trade Name is valid for 5 years, after which it can be renewed if you wish to keep that business name active. However, unlike a corporation whose name is protected, there is no name protection for a Trade Name registration.
4. Sale of Business
It is easier to sell a business as the business assets are listed under the corporation and not part of the individual owners assets. There are a few options for selling the business as either share or asset agreement. This may be more suitable to whoever is purchasing the business. If you decide to sell the business, you can sell the corporation as part of the agreement and transfer over the rights, responsibilities and ownership to new owners. It is always recommended you seek the assistance of a corporate lawyer anytime the control of the corporation is being considered for new ownership or transferring of ownership to new individuals.
5. Easier to Raise Capital
When you own a corporation, the distinction between you as an individual and you as a director in the corporation are much more defined and easier for a potential investor or lending to analyse. You also have the ability to sell shares of the corporation to an investor who will hold a stake in the corporation based on the assets and revenues generated by the corporation.
6. Continual Existence
When you incorporate the business, it is considered a completely separate entity to those who incorporate and are listed as the directors and officers of the corporation. With an incorporated business, at any time, you can change the corporate name, change the owners or directors/officers of the corporation, change address, add a secondary business, change the structure of the corporation such as the number of shares of the corporation and the corporation remains intact and continual. The corporation will remain active and operational as long as you are in business and want to continue business, as long as any required filings are completed.
When choosing between a federal vs. provincial incorporation, it’s important to take an overall look at the similarities and differences to see which is best for your business. Ontario Business Central is here to help you incorporate your business in the jurisdiction that best suits you and your business needs.
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Whether you decide to incorporate Federally or Provincially, Ontario Business Central can assist in making the process as simple as possible. If you have any questions please feel free to contact our staff for additional information and assistance.
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Ontario Business Central Inc. is not a law firm and cannot provide a legal opinion or advice. This information is to assist you in understanding the requirements of registration within the chosen jurisdiction. It is always recommended, when you have legal or accounting questions that you speak to a qualified professional.