Setting Up a Company in Canada

Form and fees

Company Types in Canada

This form of company corresponds to a joint-stock company. It is owned by individual shareholders, who are not liable for the company’s obligations.
This form of company corresponds to a limited partnership, in which the limited partner is liable for the company’s obligations up to the amount of their unpaid contribution, while the general partner is liable for them with all of their assets.
This form of company corresponds to a general partnership. Each partner takes part in managing the business and is personally liable and responsible for the company’s debts.
This is the simplest form of business. It is owned by a single person who is responsible for its activities and obligations, and the owner is personally liable for all obligations incurred in the course of the business.

Taxation in Canada

Income tax rates range from 11% to 38%, depending on the deductible items the company is able to claim.
VAT (sales tax) ranges from 5% to 10%, depending on the province.
Annual fees for the companies register and the registered office.

Form and fees

Doing Business in Canada

Canada is a stable, well-regulated economy with close ties to the United States and Europe. Its legal system, business culture and use of English and French make it an attractive destination for international entrepreneurs. Before forming a company there, it is worth understanding how the Canadian system is organised and what running a Canadian business involves.

Federal or Provincial Incorporation

A company in Canada can be incorporated either federally or under the laws of a particular province or territory. Each option has its own procedures and requirements, and a company that operates in several provinces may need to register in each one where it does business. The choice can affect where the company’s name is protected and what administrative obligations apply.

Questions to Consider

  • In which province or provinces will you operate?
  • Are there residency requirements for directors in the chosen jurisdiction?
  • Which legal form best suits your liability and tax needs?
  • Will you need to register for sales taxes?
  • How will you open a Canadian bank account?

Taxes at Several Levels

Canadian companies may be subject to both federal and provincial corporate income tax. Sales taxes also differ by province, with some applying a harmonised system and others a combination of federal and provincial taxes. Rates and thresholds vary, so the location of your business and customers matters. Small businesses may benefit from reduced rates in certain circumstances.

Ongoing Obligations

After incorporation, a Canadian company must keep corporate records, file annual returns, prepare financial statements and file tax returns. If it employs staff, payroll deductions and remittances are also required. Keeping track of both federal and provincial obligations is essential.

Cross-Border Considerations

If you live outside Canada, your home country’s tax rules will also apply to your income from the Canadian company. Double taxation treaties can help determine where profits and dividends are taxed.

If you are considering forming a company in Canada, contact eTuls. We can help you choose the right jurisdiction and legal form and support you with formation and ongoing compliance.