How to Incorporate in Canada: Step by Step, Federal or Provincial

How do you incorporate a business in Canada?

You incorporate by filing articles with a registry, federal or provincial, then organizing the corporation it creates. The federal route has five filing steps: name the corporation, set its articles, give a registered office and first directors, report the individuals with significant control, then file and pay $200 online (Corporations Canada; fees). Three more steps follow: organize the corporation, register it in your province and with the CRA, and keep the first year's filings.

A one-owner business run from one province is usually simple. A case needs more care when a founder lives outside Canada (the federal director-residence rule), when there are two or more founders (share split and transfer limits), when an existing business or its assets will move in, or when the corporation will work in more than one province.

Gather before you start: the proposed name or a decision to go numbered, the province where the business will operate, each director's name, address and whether they are a resident Canadian (a citizen or permanent resident living in Canada), a registered office address that reliably receives mail, who takes which shares and what they pay, the financial year-end you plan to use, and the date of birth, citizenship, tax residence and home address of anyone with 25% or more of the votes or share value, or control in fact.

Before you start: should you incorporate, and who can?

Whether incorporating pays off depends on your income and plans; see sole proprietorship or corporation. Under the federal Act, one or more individuals or corporations can incorporate; an individual must be at least 18, not declared incapable and not bankrupt (CBCA, section 5).

Section 5 sets no citizenship or residence condition for incorporators. The residence rule falls on directors (Step 4); newcomers and people abroad should read incorporating as a newcomer or non-resident.

Step 1: Should you incorporate federally or provincially?

A federal corporation gets a word name it can use across Canada but must still register in each province or territory where it does business, including its home province. A provincial corporation is registered in its own province and registers in any other province it expands into (Corporations Canada; BC example).

Federal or provincial does not set the corporation's income tax rate. What counts as doing business in a province, and the full comparison, are in federal or provincial incorporation.

Step 2: Named or numbered corporation, and do you need a NUANS report?

A numbered name is assigned by the registry and needs no name search; a word name must be approved. A federal numbered name looks like "12345678 Canada Inc.", and the corporation can operate under a different business name (Corporations Canada).

A federal word name, once approved, gives the legal right to use it across Canada. For trade names, invoices and switching later, see named or numbered company.

Step 3: What goes in the articles of incorporation?

The articles set the corporation's structure: its share classes, the number of directors, any limits on transferring shares and any limits on what the business may do. Federally you choose basic or custom articles (Corporations Canada).

Most small corporations' articles restrict share transfers, and each share certificate must then refer to that restriction (next steps). Changing the number of directors set in the articles later means amending the articles (directors). Two founders, or a spouse or children as shareholders, should settle the classes first: see share classes when you incorporate.

Step 4: Registered office and first directors

A federal corporation must always have a registered office in the province named in its articles (CBCA, section 19). Its records are kept there, documents are served there, and anything sent there is legally assumed to have been received, so choose an address where someone reliably collects mail (Corporations Canada). Annual return reminders are mailed there, or to another address on file, unless you subscribe to email reminders (next steps).

Every corporation needs at least one director. A director must be an individual, at least 18, not declared incapable and not bankrupt, and one person can be the sole director, officer and shareholder (directors). Federally, at least 25% of directors must ordinarily be resident Canadians; with fewer than four directors, at least one must be. A resident Canadian is generally a Canadian citizen or permanent resident who ordinarily lives in Canada, so living here on a work or study permit alone does not count (CBCA, section 2). The filing asks for each director's name, address and resident Canadian status.

Being a director carries personal risk. Directors are liable, with the corporation, for payroll deductions and GST/HST it fails to remit, unless they took the care a reasonably prudent person would have to prevent the failure; the CRA can pursue a director until two years after they stop being one (Income Tax Act, section 227.1; Excise Tax Act, section 323). Under the federal Act they also owe employees up to six months' unpaid wages (CBCA, section 119). A friend named only to meet the residency rule takes on the same risk.

The registered office address and the directors' names and addresses are public, even when the address is a home. A director may give an address for service instead of a residential address (next steps). Provinces set their own director rules: Ontario has eliminated its resident-director requirement (Ontario notice), the BC registry says its Act has no director residency requirement (BC registry), and Alberta repealed its rule but requires an agent for service who lives in Alberta (Alberta Business Corporations Act, sections 20.1 and 105). For other provinces and for founders without residence, see incorporating as a newcomer or non-resident.

Step 5: Individuals with significant control, then file and pay online

Before submitting, a federal corporation reports its individuals with significant control: anyone who owns, controls or directs 25% or more of the voting shares or of the shares by fair market value, or who has control in fact without owning shares (Corporations Canada). For each one, the register records the full legal name, date of birth, citizenship, country of tax residence, residential address, an address for service if they do not want the home address public, the date they became one and how they control the corporation. Corporations Canada publishes each one's name, residential address or address for service if given, dates and type of control (public disclosure).

Then file through Corporations Canada's Online Filing Centre and pay $200. Online incorporation is processed in one business day; an express option costs more (fees). You receive a certificate of incorporation, and the CRA automatically assigns the corporation a business number and corporation income tax account (CRA).

The corporation must keep its significant-control register, update it at least once a year and within 15 days of learning of a change, and file changes with Corporations Canada within 15 days (Corporations Canada). Filing yourself or through a lawyer is compared in incorporate yourself or use a lawyer.

Step 6: Organize the corporation: by-laws, first resolutions, shares and minute book

The certificate creates the corporation, but no one owns it until shares are issued for payment. The directors organize it at a first meeting, or by written resolutions signed by all directors (next steps; directors).

1. Make by-laws, which can set the financial year-end, banking arrangements and meeting rules. Shareholders confirm them at their next meeting.
2. Adopt the forms of share certificates and corporate records.
3. Pass a resolution to issue shares, and record it in the minute book.
4. Collect full payment, then issue the shares. A share cannot be issued until it is fully paid in money, property or past services, and a promissory note from the shareholder, or from someone not at arm's length with them, does not count as property (CBCA, section 25).
5. Give each shareholder a certificate showing the corporation's name, the holder, and the number and class of shares.
6. Appoint officers, make banking arrangements and start the significant-control register.
7. Within 18 months of incorporation, hold the first shareholders' meeting, or have every voting shareholder sign a written resolution instead, to elect directors and confirm the by-laws (CBCA, section 133; section 142).

A common trap is filing articles and stopping there. A person becomes a shareholder only when shares are issued in their name, so until then the corporation has no shareholder to pay a dividend to. See the minute book for a new corporation and, if you already filed online, after incorporating online.

Step 7: Register in your province and open CRA accounts

A federal corporation registers in each province or territory where it does business. Ontario, Nova Scotia and Newfoundland and Labrador registration may already be done from the federal filing (confirm with the province); Alberta, British Columbia, Manitoba, Saskatchewan and Quebec registration starts from Corporations Canada's partner service (Corporations Canada).

On the CRA side, federal incorporation and incorporation in Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario, Saskatchewan or Prince Edward Island assign the business number and corporation income tax account automatically. Elsewhere, including Quebec, register for both with the CRA (CRA).

In Quebec, Revenu Québec generally administers the GST/HST, and an employer there may also have to register with Revenu Québec for source deductions (CRA GST/HST; CRA payroll). How to add each account and fix one set up wrong is in after you incorporate; the GST/HST timing is in when to register for GST/HST.

Step 8: What does the first year's calendar look like?

The registry and the CRA each expect yearly filings, and the corporation's books must support them from day one (next steps; CRA T2 guide).

Corporations Canada can dissolve a corporation that stops filing annual returns; see the corporate annual return. The first tax year can be shorter than twelve months but cannot end more than 53 weeks after incorporation (Income Tax Act, section 249.1); see your first corporate tax year. From the first day, run the corporation's money through its own bank account and record the share payment; books for a new CCPC shows how.

How do the steps differ in Ontario, British Columbia, Alberta and Quebec?

The steps keep the same shape in every province; the name check, where you file and the yearly filing change.

Example

Illustrative only; figures are in Canadian dollars.

Ottawa consultant, numbered federal corporation

A consultant files basic articles online and takes a numbered name, paying the $200 federal fee. She is the sole director and a resident Canadian, and uses a business address as the registered office and as her address for service, since both are public. Ontario registration is filled from the federal filing; she confirms it with Ontario. After the certificate arrives, a directors' resolution issues 100 common shares to her for C$100, paid from her personal account into the corporation's new account and recorded in the minute book. She lists herself in the significant-control register with the same address for service, so her home address is not published. The first annual return is due within 60 days after the first anniversary, and the first T2 within six months after the year-end set in the by-laws.

Edmonton bakery, named Alberta corporation

The owners want the bakery's name on the certificate, so they order an Alberta NUANS report and file within 90 days through a registry agent: articles, notice of address, notice of directors, notice of agent for service and the report. They pay the agent's service fee on top of the government fee, and the business number arrives by email. Sales start at about C$8,000 a quarter and grow, and they track the running four-quarter total. If it passes the small-supplier limit without any single quarter doing so, the corporation stops being a small supplier at the end of the month after that quarter and must be registered for GST/HST from its first sale after that; it may register earlier by choice. Each year they file a T2 and check whether the corporation must also file an Alberta return or meets every condition of Alberta's filing exemption.

Two founders in Vancouver, BC company

Two founders submit a Name Request, wait about two weeks for approval, and incorporate within the 56-day reservation. Each signs the incorporation agreement taking 50 common shares, and their articles restrict share transfers so that shares cannot be sold without the directors' approval. The registered and records offices are at their leased studio, not a post office box. Incorporated on March 10, the company files its first annual report between March 10 and May 10 of the following year, and again each year after.

Different for you?

• A founder lives outside Canada or has no permanent residence: the director and office rules change the route, and control from outside Canada can stop the corporation being a CCPC, the status the small business rate needs; see incorporating in Canada from abroad, incorporating as a newcomer or non-resident, CCPC status for a new corporation and, for founders in mainland China, a Canadian company for a China-resident founder, then get business formation help.
• A founder is a US citizen or green card holder: owning a Canadian corporation can bring US filings from the first year; see American owners of Canadian corporations and cross-border tax help.
• Two or more founders, or family members as shareholders: settle classes, payment for shares and transfer limits before filing; see share classes when you incorporate and business formation help.
• An existing sole proprietorship or partnership will move in: the transfer has its own tax and GST/HST steps, and moving assets in can be a taxable sale unless you and the corporation file a joint section 85 election (Form T2057) by the earlier of your two return due dates for that year (Income Tax Act, section 85); see the sole proprietor to corporation checklist, moving a business into a corporation and business formation help.
• You are not sure a corporation is worth it: start with sole proprietorship or corporation.
• The business will operate in more than one province: see federal or provincial incorporation.
• You already incorporated, but shares, by-laws or registers were never done: see after incorporating online and business formation help.
• The corporation is running and its books, first T2 or annual return are behind: see your first corporate tax year and books for a new CCPC, then get bookkeeping help or corporate tax help.
• You want the full cost before choosing: see the cost to incorporate in Canada.