What are the Advantages of Company Registration in Canada?

Ashish M. Shaji

15 Jan, 2021

Company registration in Canada is one of the preferred locations for entrepreneurs purely because of its advantages. Canada has always been a supporter of foreign investment because it has laws that safeguard investors, consumers and also the environment. It is favourable to register your company in Canada as it’s easier and the process is also less cumbersome.

What are the types of corporations in Canada?

The following types of corporations are there:

• Sole proprietorship

Sole proprietorship is one of the most sought after way of setting business primarily because of its low cost. It also involves less paperwork. In this form of a corporation, the sole proprietor is responsible and is fully liable for the company’s activities.

• Private Corporations

A private corporation may be formed with one or more people and the majority of its directors in Canada. It can’t sell shares or securities to the public.

• Public Corporations

It can sell shares or securities to the public. These corporations are required to comply with the Ontario Securities Act^[1].

• Co-operative

A co-operative is a type of structure where the returns are limited with interest in investment and distributes its profits to members proportionately. 

Advantages of Company Registration in Canada

Canada is a country that leads all G7 countries in ease of doing business. One of the main benefits includes your personal and business obligations would be separate. It means that you won’t be held liable personally for any debts or incorporation activities.

Some of the other advantages of company registration in Canada are as follows:

• Fast and straightforward incorporation procedure

Canada is among those countries which have easy incorporation procedure. The procedure can be completed at a faster pace and has a pretty straightforward and less complex incorporation procedure.

• Low incorporation and maintenance cost

Another reason why you would want to register your company in Canada is because of its low incorporation costs. Its maintenance cost is also minimal. The cost of operations in Canada is less than countries like the UK, US, Australia etc.

• Well developed infrastructure

Canada being economically stable and a developed nation, it boasts of a well developed infrastructure which promotes business incorporation.

• Industrial strength

Canada has diverse industries like aerospace, fibre optics, biopharmaceuticals etc. The manufacturing industry that comprises of aircraft and automobile industry contribute significantly to Canada’s economy. This can be beneficial for investors.

• Tax advantages

One of the notable advantages of company formation in Canada is tax advantages. Corporations can take advantage of Canada’s small business deductions. You may also choose to defer some tax payments and benefit from the new tax laws. The tax rates are lower in Canada.

• Favourable corporate legislation

Canada has some favourable corporate legislations such as a corporation has an unlimited life span which means if you sell your business, your company still continue to exist, ownership of business entity is transferable therefore you may sell your business or plan the succession. Another thing is that raising additional money is easier as incorporated businesses can sell shares and their equity to boost growth. The liability of members of a corporation is limited to the extent of their holding in the company. It benefits the members of the corporation a great deal.

• Skilled workforce

Canada economy is quite stable because of its highly skilled workforce. They have a highly educated population.

• Least corrupt countries

Canada is one of the least corrupt countries where investors can expect project qualification and processes to be transparent and their investments to be protected by law.

Other advantages-

Forming a company in Canada also confers advantages such as:

It is easy to open corporate bank accounts all over the world for a Company in Canada; it is possible to obtain employment as well as an entrepreneurial visa for you and for your staff.

An Overview of tax benefits for Company Registration in Canada

There are significant tax benefits if you register you company in Canada. It can help your operations in numerous ways. For many business owners tax benefits can be the primary reason to move forward with the process of registration. Some examples of tax benefits include small business deduction, lifetime capital gains exemption etc.

The small business deduction is reduced tax rate on a portion of corporate income. The lifetime capital gains exemption is a form of exemption from capital gains tax on a portion of taxable capital gains on the sale of qualified small business corporation shares.

Procedure of Company registration in Canada

Company registration in Canada involves a number of stages. We have discussed the procedure in detail below:

• Name business

You would be required to name the business right at the start and it should be unique and easy to remember. Such name should describe the product and services that the business provide.

• Business number

You would be then required to obtain business number to identify your business to municipal, federal and provincial government. Such a number shall be used to deal with government regarding various activities.

• Incorporation

Incorporation may be done provincially or federally.

• Application processing

The corporation is required to analyse and make sure article of incorporation has been properly and appropriately completed. The application will be processed if it has all necessary documents and it’s signed and requisite fees is paid.

• Obtain business number/permits/other requirements

According to the Canada Revenue Agency, a person doing business in province or in federal is required to obtain business number for GST/harmonized sale taxes, payroll deductions etc. Some may require permits to operate business in that locality such as alcohol license for restaurants.

Conclusion

Read our article:Steps for Company Formation in Canada