The Quick & Dirty: Federal vs. Provincial (Ontario) Incorporation

The Quick: A Snapshot Comparison

Federal Incorporation

  • Governing legislation: 

The Corporation is governed by the Canada Business Corporations Act.

  • Lower fees up front:

Incorporation costs $200. The Corporation will also have to pay a $20 (if done online) or $40 (if sent by mail) filing fee for Annual Returns.

  • More paperwork:

Every year, the Corporation is required to file Annual Returns with Corporations Canada. This filing must take place within 60 days of the Corporation’s anniversary date. The Corporation must also update certain information, including Officers, Directors and Registered Office, when such information changes.

  • Stronger name protection:

The Corporation’s name is protected across Canada at the federal level. Corporations Canada does substantial vetting of corporate names across the country (including provincial corporations) to ensure that new corporations cannot be incorporated with names that are identical or similar to corporate names already in existence. Subsequent applicants for incorporation cannot get a corporate name that is similar to yours.

  • Rights:

The Corporation may carry on business anywhere in Canada, but needs to register for business in at least 1 province. Extra-Provincial Registration in Ontario is free at the time of incorporation. Corporations Canada places less restrictions on where the head office and corporate records of the Corporation must be located, and where the annual general meetings must be held.

  • Dissolution:

Even if the Corporation does not undergo a voluntary dissolution, Corporations Canada will automatically dissolve the Corporation if it has failed to file its Annual Returns after 1 year of non-filing. Typically, Corporations Canada will wait until there has been 2 years of non-filing and a notice warning has been sent.  

Provincial (Ontario) Incorporation

  • Governing legislation:

The Corporation is governed by Ontario’s Business Corporations Act.

  • Higher fees:

Incorporation costs about $400 ($300 to Service Ontario and approximately $75 to the intermediary filer, depending on which one is used).

  • Less paperwork:

The Corporation is not required to file Annual Returns, but is required to update certain information, including Officers, Directors and Registered Office, when such information changes. 

  • Less name protection:

The Corporation’s name is protected in Ontario; however, Service Ontario does less vetting of corporate names that are similar, but not identical, to the corporate names of corporations already in existence. Consequently, other businesses can incorporate in Ontario with corporate names that are similar to yours. The Corporation’s name will still be protected at the federal level.

  • Rights:

The Corporation may carry on business anywhere in Ontario and can register to carry on business outside of Ontario.

  • Dissolution:

Unless the Corporation undergoes a voluntary dissolution, it will remain active. Service Ontario will only cancel your company if there is a deficiency in your filing.

The Dirty: Consequences of Your Decision

If your business targets clients across the country or globe, we recommend that you incorporate federally. Federal corporations are perceived to have an elevated status in the global marketplace – non-Canadian corporations may prefer to transact with Canadian companies versus Ontario ones.

Canadian corporations are also advantageous from practical and economic viewpoints. Corporations Canada allows for direct payment and online filing of almost all government forms on its user-friendly platform – you don’t have to worry about any extra service fees. Conversely, many provincial forms must be submitted to Service Ontario by hand delivery or mail. For example, an Ontario corporation’s Articles of Amendment cannot be filed online. Where online filing is an option, Service Ontario requires documents to be submitted through one of three third-party intermediaries: Cyberbahn, OnCorp Direct, or ESC Corporate Services. Each of these intermediaries charge service fees in addition to standard government filing fees.

Despite the extra fees and inconvenient filing, there are some benefits to incorporating provincially. Notably, it is easier to incorporate a named company in Ontario than it is to incorporate a named company federally, since Service Ontario does less vetting of existing corporate names. Identical corporate names are not permitted, but similar ones might be. In addition, while provincial incorporation costs more up front, there are long-term savings, as Annual Returns and associated fees are not required.

Other factors may influence the decision to incorporate in one jurisdiction over another. For example, it might be in your business’ best interest to incorporate in the same jurisdiction as existing, related corporations. Likewise, a governing body may require a certain type of company to incorporate in a particular jurisdiction (e.g. lawyers can only incorporate via an Ontario professional corporation).

Thus, there are many factors to consider when determining which incorporation route is right for your business. Federal incorporation might be right for Company A, a software company, but wrong for Company B, a local barbershop.

How Momentum Can Help

We have the expertise to help you decide which incorporation route best suits your business’ needs and vision. Once this important decision has been made, we can incorporate your business at either the federal or provincial level. Our fixed fee for a standard incorporation and organization of a business is $400 + HST and disbursements (out-of-pocket expenses).