We often get this question - I am based in Ontario and want to incorporate my business but don’t know if I should incorporate a Federal or Ontario corporation – where should I incorporate?
Deciding where to incorporate involves many factors including evaluating corporate and tax laws. A competent lawyer/accountant should be consulted to evaluate your specific circumstances. However, for most small corporations the following factors make Federal (Canada) corporations more attractive - read below. You can also check out this video about incorporations for more information.
Federal corporations have lower government incorporation fees than Ontario corporations ($200 versus $360). Also, although Federal corporations must register extra-provincially with the Ontario government, there is no government fee for this registration.
Federal corporations have the most stringent criteria in granting the right to use a corporate name. Ontario corporations (like most other provinces) offer very little protection of use, and will grant almost any name provided it is not identical. Moreover, if there is any protection, it is limited to that province, unlike federal corporations which afford Canada wide protection.
Federal corporations require that 25% of its directors be resident Canadians, while Ontario corporations require 51% be resident Canadians. This may be advantageous if you have foreigners involved in your business.
Delays for both are approximately the same where Certificates of Incorporation can generally be obtained within 2 working days or less.
However, Federal corporations must file annual reports at a cost of $20 per year whereas Ontario corporations’ annual reports are free.
You can check out our pre-incorporation checklist for Ontario incorporations. For a more detailed answer check out this link about where to incorporate in Canada.