Which is Best for Your Business: Provincial or Federal Incorporation?

Once the decision is made to incorporate, business owners must consider whether to register their company as a provincial or a federal corporation.  The following article provides a brief overview of the advantages and disadvantages of both options.

Legislation

On the provincial level, each province and territory in Canada has their own laws governing the incorporation of corporations within their jurisdiction. In British Columbia, provincial corporations are subject to the Business Corporations Act (the “BCA”). This provincial legislation governs the incorporation of, and regulation of companies in British Columbia. On the other hand, federal corporations are governed by Corporations Canada under the Canada Business Corporations Act (the “CBCA”), which is a federal statute of Canada.

Benefits of Provincial Incorporation

• The federal “Significant Control Register” is typically more challenging to comply with than the provincial version (in BC, this is known as the Transparency Register).
• There are proposed amendments to the CBCA which would require federal corporations to:
  • provide disclosure on:
    • diversity; and
    • employee well-being.
  • provide shareholders with a non-binding “say on pay” vote.
• Complying with these obligations can be time consuming and expensive.
• The proposed amendments may also expand the scope of directors’ duties.
• Protecting your business name
• Businesses incorporated at a federal level must also extra-provincially register in each province or territory in which they are doing business.

Benefits of Federal Incorporation

• Federal companies receive greater name protection than their provincial counterparts.
• With a federal corporation, once your name has been approved and granted by the Registrar, the name is protected across all Canadian provinces and territories.
• This may be attractive to businesses operating in several provinces or territories, as the corporation can easily operate under the same name in each jurisdiction.
• If a business incorporates provincially, the corporate name is not protected outside that province or territory.
• For federal corporations, there are no restrictions regarding the province or territory where the company’s head office is held, or where the company’s corporate records are required to be kept.

It’s worth noting that it is not necessary to incorporate a federal corporation to protect your company’s name. This can also be achieved through trademark law.

Conclusion

When deciding whether to incorporate your business provincially or federally, there are a number of things to take into consideration, such as the nature of business, corporate name protection, and whether your business will be operating locally, nationally or internationally.  As each business and circumstance is unique, it’s important to examine and explore the relative merits of both options.

For more information on any of the above, or if you are seeking legal advice more generally, feel free to reach out to Alon Segev or David McHugh, attorneys at Segev LLP based in Vancouver, BC.  Segev LLP has extensive experience advising businesses across diverse industries. Alon can be reached directly at [email protected] or 604-629-5406.  David can be reached directly at [email protected] or 604-629-5408.

Disclaimer: 

The above blog post is provided for informational purposes only and has not been tailored to your specific circumstances. This blog post does not constitute legal advice or other professional advice and may not be relied upon as such. If you require legal advice, you should contact a qualified lawyer.