Posted by Graeme Maitland — filed in Business Law
Incorporation is something that small business owners and entrepreneurs can use to get more protections and benefits out of the law. Business today rarely happens in one location. Because Canada has many legal jurisdictions, asking where to incorporate is a common question. The answer has more to do with personal preference than anything else.
In Canada, businesses can incorporate under the Federal Canada Business Corporations Act or under one of the many provincial corporation acts (like the Business Corporations Act in Alberta). These acts differ in how shareholders are set up, what other legislation governs them, and how the corporation is empowered. Ultimately though, the main differences are this: a Federal corporation is automatically granted a right to operate in all provinces; a Provincial corporation is not.
This does not mean you should not incorporate provincially. Provincially incorporated companies can be conferred the power by the Province they are incorporated in to carry on business within the Province and outside of it. The cannot be conferred the right to operate in another jurisdiction. This means that a corporation incorporated provincially can carry on business anywhere in the world so long as the jurisdiction where it’s operating grants rights to do so. All jurisdictions have procedure for this.
A Federal corporations is granted the immediate right to operate throughout Canada. A province cannot prevent a federally incorporate company from carrying on business in that province. Provinces may charge small fees to operate in them however. Also, some provincial laws about corporations must also be followed, like those around insider trading.
Where to incorporate really depends on personal preference. If you are a local business that intends to stay in the jurisdiction you’re in, incorporate provincially. If you intend to operate in multiple jurisdictions and want to avoid any red-tape, incorporate federally.
If you are looking to incorporate Federally or Provincially, speak to one of the lawyers at Aarbo Fuldauer LLP in Calgary.
Address: 3rd Floor, 1131 Kensington Road NW, Calgary, AB, T2N 3P4
Phone: (403) 571-5120