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Corporation Registration for Foreign Investors in Canada

2024-06-26
Canada is a highly developed capitalist country. Many foreign investors would like to expand their business in Canada. However, starting a business for a foreigner is little complicated and restricted. This article will discuss some frequent questions about business registration for foreign investors in Canada.

Q： Can foreigner register new businesses in Canada?
A： Yes. But they need to meet some requirements.

  • For Canadian residents: If you’re a Canadian resident, you could register a Federal Corporation regarding to “Canada Business Corporations Act”or chose to register a Provincial Corporation regarding to “Provincial Business Corporations Act”.
  • For non-Canadian residents: If you are not a Canadian resident, you can cooperate with a Canadian resident to comply with the 25% rule. According to “Canada Business Corporations Act”, if you would like to establish a federal corporation, 25% of the number of elected directors must be considered as “resident Canadians”. If the board has fewer than four directors, one director should be a resident Canadian. Most provinces have the similar requirement for directors.

Q：
 What is the difference between Federal and Provincial Incorporation?
A：
 Federal corporations that established according to Canada Business Corporations Act”, have the right to carry on business throughout the entire country. You are able to do business all across Canada under the same business name. If your business nature is trading and would like to expand to more than one province, federal corporation is the best choice for you. Provincial corporations are more flexible to choose a name since you just need to make sure no same names in one province. If you are planning to expand your business to other provinces, you must register your corporation and name with that authority. If the name is using in that province, you will not be able to register there.

Please note that federal corporations will likely have to register in any province or territory (such as Ontario and Newfoundland) where they carry on business. It is much expensive and strict to set up a federal corporation than a provincial corporation.

Q：
 What kind of business I can establish without Canadian residents?
A：
 If you are not resident Canadian and temporarily cannot cooperate with Canadians, provincial corporation is the best choice for you. Currently, British Columbia has the most flexible rules regarding non-resident business. According to the “Business Corporations Act of Business Columbia”, no resident Canadian is required to be appointed as a director. Therefore, non-Canadian residents can incorporate Canadian corporations in British Columbia.

Q：
 What are the business structures in British Columbia?
A：
 There are three business structures in B.C. you can choose:

  • Sole Proprietorship

    The sole proprietor is said to be self-employed. As a sole proprietor you would be fully responsible for all debts and obligations related to your business. A creditor with a claim against a sole proprietor would normally have a right against the sole proprietor’s assets, whether business or personal. This is known as unlimited liability.
  • General Partnership

    A partnership is an agreement in which two and more people combine resources in a business with a view to making a profit. In a General Partnership, you and one or more other owners would share the management of a business, and each partner would be personally liable for all debts and obligations incurred. This means that each partner is responsible for, and must assume, the consequences of the actions of the other partner(s).
  • Incorporation

    An incorporation, also known as a limited company, is a legal entity that is separate and distinct from its members (shareholders). Companies are incorporated in B.C. according to the provisions of the Business Corporations Act.

    When a company is incorporated, it acquires all the powers of an individual, an independent existence – separate and distinct from its shareholders, and an unlimited life expectancy. A company can acquire assets, go into debt, enter contracts, sue or be sued. Ownership interests in a corporation are usually easily changed. Shares may be transferred without affecting the corporation’s existence or continued operation.

Advantages of Incorporation Against Sole Proprietorship/General Partnership

Unlike Sole Proprietorship and General Partnership, Incorporation in B.C. has following advantages:

  • Limited Liability

    Normally no member can be held personally liable for the debts, obligations or acts of the corporation beyond the amount of share capital the members has subscribed. Each shareholder has limited liability. A creditor with a claim against the assets of the company would normally have no rights against its shareholders, although in certain circumstances shareholders may be held liable.

  • Perpetual Succession

    Because the corporation is a separate legal entity, its existence does not depend on the continued membership of any of its members.

If you would like to conduct your business through a highly prestigious and widely recognizable Canadian legal entity, buy property in Canada or are planning a business immigration to Canada, British Columbia Incorporation is an excellent choice.
Q：
 What are the registration procedures for provincial corporation?
A：
 Use B.C. provincial corporation as an example:

  • Choose a Corporate Name

    Your corporation’s name must be distinctive, and it must not be misleading or likely to be confused with names used by other organizations and businesses. New corporate names must be approved by B.C. Registries and Online Services.

    If you choose to use the incorporation number as the company’s name (for example 0123456 B.C. Ltd), you do not need a name approval and reservation. The incorporation number is assigned by system at the time the incorporation application is filed.

  • Prepare Corporate Bylaws

    Bylaws is an internal corporate document that sets out the basic ground rules for operating your corporation. The Bylaws must be signed by each person(incorporator) forming the company. Usually the incorporators will become the shareholders and directors once the company is incorporated. There is no need to file with the government. You need to keep the agreement in your records book.  When opening a bank account, the bank may also ask to see this document.

  • Appoint a Registered Agent

    All corporations registered in B.C. must have a registered office and a records office on behalf of the corporations to receive/keep legal documents. The registered office and the records office may be located at the same place and must have a physical street address in B.C. Kaizen can provide a registered agent for your corporation in B.C.

  • File Incorporation Application

    To register your corporation in B.C., the Incorporation Application and the application fee are required to submit to B.C. Registries and Online Services.

  • Set Up a Corporate Records Book

    Set up a corporate records book in which you keep all your corporation's important papers, including minutes of director and shareholder meetings, stock certificates, and stock certificate stubs. Keep your corporate records book at the principal office of your corporation.

Q：
 Any other compliance rules should be imposed?
A：
 Qualified corporations are required to register for Goods and Services Tax (GST)/ Provincial sales tax (PST) regardless of federal or provincial corporations. If your corporation pays wages, salary, bonuses or tips to the employees, you need to register with WorkSafe and Canada Revenue Agency (CRA) for a payroll deductions account. If you are going to import or export goods, you will need to register with the Canada Border Services Agency (CBSA). Federal corporations are required to file annual report to federal government annually, while provincial corporations follow the provincial regulations separately.

Disclaimer

All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage.

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