When starting or expanding a business in Canada, one of the first key decisions to be addressed is whether to incorporate federally, under the Canada Business Corporations Act (“CBCA”), or provincially, under the Business Corporations Act (Ontario) (“OBCA”). Both options create a separate legal entity and offer limited liability protection, but differ in scope, cost, name protection, and compliance requirements. Understanding these differences and trade-offs is critical to help business owners choose the structure that best supports their operations and growth plans.
Regardless of the jurisdiction of incorporation, all corporations must maintain proper corporate records, including by-laws, annual resolutions, and registers & ledgers. They must also file annual returns and keep their registered office and director information current and up to date.
Federal Incorporation (CBCA)
Name Approval and Protection
Incorporating federally under the CBCA allows a corporation to operate across Canada. Federal incorporations are subject to a stricter name approval process, because the proposed name must be cleared nationally to ensure it is distinct from existing corporations across the country. Once approved, the name is protected in all provinces and territories. This route often appeals to businesses that plan to expand nationally, want stronger name protection, or prefer the perception of being a “Canada-wide” enterprise.
Director Residency
Moreover, the CBCA requires that at least 25% of the directors of a federal corporation must be Canadian residents. If the board has fewer than four directors, at least one must be a Canadian resident. This is an important consideration for foreign businesses.
Costs and Ongoing Administrative Obligations
The cost to incorporate federally is typically $200 (online). Federal corporations must thereafter also file an annual return with Corporations Canada and pay a modest $12 filing fee each year. In addition, a federal corporation carrying on business in Ontario must also register extra-provincially in the province, and continue to file annual returns with the Ontario Ministry of Public and Business Service Delivery (the “Ministry”) at the provincial level. This results in a slightly higher ongoing compliance obligation than a corporation incorporated solely at the provincial level.
For businesses operating across multiple provinces, the broader name protections and unified brand presence often justify these added obligations, filings and costs.
Provincial Incorporation (OBCA)
Incorporating under the OBCA is generally more straightforward and cost-effective for corporations operating mainly within Ontario. Importantly, Ontario does not have any residency requirements for directors, unlike at the federal level. This flexibility can be attractive for corporations with foreign directors or investors.
Many small and medium-sized businesses, family-owned enterprises, and professionals operating primarily in Ontario choose this route for its administrative ease. In fact, certain regulated professions in Ontario are required to incorporate provincially by their governing statutes and governing bodies.
Name Approval and Protection
Ontario’s name approval process is less stringent, given that an Ontario corporation’s name is protected only within the province. If the business later expands, it may need to register in other provinces and ensure the name is available there. For many family-owned businesses, professional corporations, and small or medium-sized enterprises focused on Ontario clients, this level of protection is sufficient.
Costs and Ongoing Administrative Obligations
The cost to incorporate provincially in Ontario is typically $300 (online). While the cost at the outset is slightly higher than at the federal level, the ongoing administrative burden is generally lower, and there is no fee imposed to submit provincial annual return filings. Federal corporations face slightly more complex compliance requirements as they must coordinate filings with both Corporations Canada and the Ministry. Ontario corporations generally have fewer steps to manage, as all filings are handled at the provincial level.
Which Option is Best for You?
There is no universal answer as to whether federal or Ontario incorporation is “better.” Foreign businesses that plan to expand into Canada can incorporate federally or provincially.
Before incorporating, business owners should consider how and where they intend to operate, their long-term goals, and their tolerance for ongoing corporate maintenance. Businesses with operations or clients across Canada, or those that anticipate national growth, often find federal incorporation more advantageous. Businesses that are based in Ontario, or seeking a simpler and more cost-effective structure generally prefer provincial incorporation. If circumstances change over time, corporations can later elect to continue from provincial to federal jurisdiction, or vice versa.
If you’d like help in weighing these options, feel free to reach out for a consultation. Our Business Law team would be happy to help you determine which option best aligns with your business objectives.
At Mills & Mills LLP, our lawyers regularly help clients with a wide range of legal matters including business law, real estate law, estate law, employment law, health law, and tax law. For over 140 years, we have earned a reputation amongst our peers and clients for quality of service and breadth of knowledge. Contact us online or at (416) 863-0125. The material provided through the Mills & Mills LLP website is for general information purposes only. It is not intended to provide legal advice or opinions of any kind.
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