Canada: Where to Incorporate your Startup

Founders have a lot to worry about, from marketing and product development to securing investors and motivating employees. Ultimately, being able to manage resources and time is one of the most challenging aspects of bringing a product to market. So what factors should Founders consider while choosing a jurisdiction, and is there even a difference?

Every company or corporation must choose their “place of incorporation”; this also dictates the rules that must be followed and is usually cemented in legal documents like the Shareholders’ Agreement and the Articles of Incorporation. In Canada, there are provincial jurisdictions like the OBCA (Ontario Business Corporations Act) or the NSCA (Nova Scotia Companies Act) and the federal jurisdiction (CBCA, the Canada Business Corporations Act).

The acts are quite similar and there’s a general consensus on what rights attach to whom. Moreover, identical procedures ensure that corporations are held to the same standards no matter where they choose to incorporate. Table 1 highlights some jurisdictional differences that could be advantageous based on the circumstances of your start-up. Certain remedial actions allow stakeholders of a corporation to sue the directors, either for harm to themselves (oppression remedy) or harm done to the corporation as a whole (derivative action). But the slight differences in their application can have rippling effects. For example, one of British Columbia’s useful features for investors is its oppression remedy, which has been encouraged for shareholder use rather than creditor use. Conversely in Ontario, the oppression remedy has been highly sympathetic to creditors. Although this may make an investor feel that a venture is riskier, it also encourages investment in start-ups through small business loans.

Aside from the acts, there are different expenses associated with incorporating in these jurisdictions as well (Table 2). One of the reasons for Ontario’s popularity as a place of incorporation is its Corporations Informations Act which makes annual return filings free by combining them with the tax return (the T2 form submitted to the CRA). The annual return is required as it tells the government about any changes to the business and other information to keep records up-to-date while the tax return is often separated as it provides purely financial information and is required to comply with the Income Tax Act. Combining them cuts administrative costs, and Ontario is the only province to have done so.

But federal incorporation has its advantages too. The strict naming rules of the CBCA means that the registration of your business’ name may take a bit more time to validate and might cost more initially, but it can be registered across all of Canada. This allows for a smoother process if your business is looking to expand outside of the province. Though not always mandatory, name registration and reservation are important to prevent legal conflicts and to preserve brand identity.

In reality, other factors like the product, market information, residency of current stakeholders, and other provincial considerations are more important in choosing a place to incorporate rather than differences in initial costs or corporate laws. And your choice of incorporation doesn’t have to be permanent, you can always continue your start-up under a new jurisdiction (subject to conditions and fees).

Table 1: Canadian Incorporation Jurisdictions (as of 2021).

JurisdictionActCanadian Resident DirectorsRemedial Action
Oppression Remedy (OR)Derivative Action (DA)Notes on Application
CanadaCBCA (Canada Business Corporations Act)25% (of the Board)S241S239Actions can overlap;

Shareholders, directors, and creditors can bring either actions

AlbertaABCA (Alberta Business Corporations Act)25%S242S240S242(3)(q) allows DA to be considered even if only OR invoked
British ColumbiaBCBCA (British Columbia Business Corporations Act)No RequirementS227S233OR must be brought in a “timely manner”;

Fewer creditors bring actions

ManitobaMCA (Manitoba Corporations Act)25%S234S232Applies like CBCA
Newfoundland and LabradorNLCA (Newfoundland and Labrador Corporations Act)25%S371S369Applies like CBCA
New BrunswickNBBCA (New Brunswick Business Corporations Act)No RequirementS166S164Applies like CBCA
Nova ScotiaNSCA (Nova Scotia Companies Act)No RequirementSchedule 3 S5Schedule 3 S4Applies like CBCA
NunavutNu BCA (Nunavut Business Corporations Act)No RequirementS243S241Applies like CBCA
OntarioOBCA (Ontario Business Corporations Act)25%S248S246Separates actions;

More creditors bring actions

Prince Edward IslandPEICA (Prince Edward Island Companies Act)No RequirementS194S192Applies like CBCA
QuebecLSAQ (Loi sur les Sociétés par Action (Québec))25%S450S445Can directly sue directors without OR under the Civil Code;

Unlikely to permit OR for creditors

SaskatchewanSBCA (Business Corporations Act of Saskatchewan)25%S234S232Applies like CBCA

Table 2: Canadian Incorporation Fees (as of 2021)

JurisdictionFees
IncorporationName SearchOther
Canada$200 (online)

$300 (online expedited)

$250 (paper)

NUANS

$40

Annual Return: $12 (online), $40 (paper)
Alberta$275NUANS

$40

Administrative Costs: ~$225

Annual Return: $50

British Columbia$350Provincial

$31.50

$100 (expedited)

Name Approval: $30

Annual Return: $43.39

Manitoba$300Provincial

Free

$5/company (detailed search)

Name Reservation: $45

Annual Return: $65

Newfoundland and Labrador$270 (online)

$300 (paper)

Provincial

Free

Name Reservation: $10

Annual Return: $90 (online), $100 (paper)

New Brunswick$262 (online)

$312 (paper)

$362 (paper expedited)

NUANS

$40

(Cover page required)

Annual Return: $60 (online), $80 (paper)
Nova Scotia$200NUANS

$40

Annual Return: $118.35
Nunavut$300Provincial

Free

Name Registration and Reservation: $25

Annual Return: $70

Ontario$360 (in person)

$300 (online)

NUANS

$40

Name Registration: $60 (online), $80 (in person)

Annual Return: Free

Prince Edward Island$250NUANS

$40

Annual Return: $30
Quebec$326Provincial

Free

 

Name Reservation: $22, $33 (expedited)

Annual Return: $84, $126 (expedited)

Saskatchewan$255Provincial

$60 (with Trademark)

Name Reservation: $50

Name Registration: $60

Annual Return: $50

A special thank you to Samson (Sung An) for his help and contributions to this article!

The content of this article is written for general information purposes only and does not constitute specific legal advice. This article should not be used as a substitute for competent legal advice from a licensed lawyer. Please contact us at 416-238-5527 if you’d like to speak to an Emerge LLP lawyer.