Once I decided to incorporate, I started looking into what this meant. In the end, it was not as scary as I thought it would be. On the other hand, doing this involved some paperwork, so be ready for that. In this post, I will describe my federal incorporation experience and the decisions/dilemmas I faced along the way.
Provincial vs. Federal
Federal or provincial was the first question I needed to answer. In short, a corporation can be registered federally or provincially in Canada. Federal registration is overseen by Corporations Canada, whereas provincial is handled by one of the provinces or territories.
I have researched extensively online to find the differences between the two. This article particularly stood out. It gives an excellent overview of the differences and benefits of each. I then read this comparison of federal vs. provincial. This is how I summarized the main differences for myself.
- Federal gives better name protection than provincial.
- With federal, you can operate in any province under the federally chosen name.
- Federal is more paperwork.
- Federal might be more expensive than provincial.
Why I chose federal incorporation
I liked the name protection that federal incorporation offered and the ability to operate in any province under one name. Being strategic in my thinking, I always prefer investing extra effort today than deal with hasty decisions later. Additional paperwork did not scare me as this was and still is a learning exercise in starting and running a business, so the more to do, the better.
I also was not too concerned about the fees as federal incorporation was listed at $200 at the time, and it still is as of March 2020. Interestingly, as you can see later in this post, federal incorporation cost me less than provincial as I am operating out of Ontario. To get a sense of incorporation fees across Canada, see this article.
There was one additional consideration that benefited federal incorporation. As I was planning to run an import micro-business, I had a gut feeling that being federally incorporated is beneficial as the business would be “officially recognized” in each port of entry of my shipments.
What I had to do to incorporate federally
The process for federal incorporation is quite simple. I highly recommend reading this guide provided by Corporations Canada.
I incorporated in two easy steps.
- Ordered a NUANS search – this report validates your company name and reserves it for 90 days.
- Filed my articles of incorporation – this is the necessary information about your company, such as a physical address, first board of directors, shares structure, etc.
If you feel intimidated about the articles of incorporation – don’t. The online form is a sequence of multiple-choice questions that allow you to write your articles of incorporation in proper legal terminology that applies to the majority of new small businesses. You can also read an excellent guide on how to fill the articles of incorporation.
When incorporating federally, you would also need to register provincially in every province/territory your business will be operating. Operating is a bit of murky term – it means physically conducting business. If you are selling stuff online, then only register where your head office would be. Provincial registration is not incorporation. It just lets the province/territory know that you would be operating within its borders.
Corporations Canada can automatically register the business for you in some provinces. There is an additional fee for this provincial registration, which could result in higher costs overall. Luckily for me, Ontario registration was (and still is) free.
Using a third-party service provider for registration is not necessary
There are many services online that offer federal/provincial incorporation services, including NUANS search. The ones I saw amount to about $300-$700 in addition to incorporation fees themselves. All they do, however, is fill out the web forms for you.
I did not find these services to be useful valuable. If your situation is unique (such as complex ownership, non-standard share structure), you might need to seek real legal advice from a real lawyer that specializes in Canadian corporate law. The majority of simple, straightforward cases can be handled in a DIY fashion by reading the guides I linked in this post and also following the steps on the Corporations Canada website.
How much it cost me
The bottom line of federal incorporation for me was $213.80 (tax included).
- NUANS search – $13.80.
- Articles of Incorporation – $200.
- Ontario registration – Free.
- Federal vs. Provincial incorporation in Canada
- How much does it cost to incorporate in Canada
- Choosing between federal incorporation and provincial/territorial incorporation
- Steps to incorporating
- Articles of Incorporation in Canada
- NUANS search
- Filing articles of incorporation
- Automatic provincial registration of federal business corporations