When starting a business, one of the first major decisions you’ll need to make is whether to incorporate your business federally or provincially. While the Business Corporations Act (Ontario) (OBCA) and Canada Business Corporations Act (CBCA) are almost identical with very few minor variances, there are some key differences to consider depending on your business goals, location, and future plans. In Ontario, businesses can either incorporate under the Business Corporations Act (Ontario) (“OBCA”) or the Canada Business Corporations Act (“CBCA”). Understanding the differences between these two approaches will help you make an informed choice.

Incorporating Provincially: The OBCA

Certain professions regulated by provincial bodies—such as lawyers, doctors, and accountants—are required to incorporate provincially. Additionally, if your business plans to operate primarily within Ontario, provincial incorporation may be the more straightforward and cost-effective option. Advantages of Provincial Incorporation:

1. Simplified Process for Local Operations: Incorporating in Ontario is generally simpler and less costly if you plan to operate primarily within the province. You do not require an extra-provincial registration for Ontario as the corporation is incorporated under the OBCA.
2. No residency requirement: There is no 25% Canadian residency requirement for directors of the corporation, unlike the federal corporations.
3. Simpler Name Registration: The corporate name registration process is significantly easier at the provincial level as there are no name examiners, and similar names are allowed as long as they are not exactly identical. The name only needs to meet distinctiveness criteria for Ontario, without requiring clearance through the national registry.
4. Transparency Register: You do not need to file the Transparency Register disclosing “individuals with significant control” with the registry. However, you are still required to maintain it.

Drawbacks of Provincial Incorporation:

1. Limited Name Protection: The corporation’s name is only protected within Ontario, which means it could be used by other corporations in different provinces.
2. Perceived Limited Scope: Businesses incorporated provincially may be perceived as more localized, which could affect potential partnerships or investment opportunities. Additionally, you will need to obtain extra-provincial registration to operate your business in any province outside of Ontario.

Costs of Provincial Incorporation:

• Government incorporation fee – $300.
• A NUANS name search (if you are looking for a specific name for your corporation – $20-$50 (depending on the urgency).
• Incorporation legal services and the creation of a minute book (e.g., by-laws, organizing resolutions of shareholders and directors, director, officer and shareholder ledgers and registers, etc.) – starting from $599 plus HST.

Incorporating Federally: the CBCA

Federal incorporation under the CBCA offers broader opportunities, especially for businesses that plan to expand across Canada or internationally. Advantages of Federal Incorporation:

1. Nationwide Name Protection: Federal incorporation provides exclusive rights to your corporate name across all of Canada, ensuring that similar names cannot be registered in any province or territory of Canada. There is also no need for a separate name search when applying for extra-provincial licenses in other jurisdictions.
2. Lower Initial Costs: The incorporation fee is $200, which is less than the $300 required for provincial incorporation.
3. National Reach and Brand Recognition: A federally incorporated business is recognized across Canada, enhancing your brand’s credibility and making your company more appealing to potential investors, partners, and customers.

Disadvantages of Federal Incorporation:

1. Extra-Provincial Registration Required: Federal corporations must register in each province or territory where they maintain a physical presence or conduct substantial business operations beyond basic sales. While the Ontario extra-provincial registration is free, other provinces will require additional fees. For example, if you have employees or a physical location in a province, you’ll need to register there.
2. Higher Costs and Complexity: Federal corporations are typically more complex and costly due to the additional filings and compliance requirements at both the federal and provincial levels.
3. Director Residency Requirement: At least 25% of your directors must be Canadian residents, which may limit the composition of your board.

4. Transparency Register: You have to maintain and file the Transparency Register with Corporations Canada.

Costs of Federal Incorporation:

• Government incorporation fee – $200.
• NUANS search (if you are looking for a specific name for your corporation – $13.80.
• Filing of annual returns – $12.
• Incorporation legal services and the creation of a minute book (e.g., by-laws, organizing resolutions of shareholders and directors, director, officer and shareholder ledgers and registers, etc.) – starting from $599 plus HST.

Key Comparison: Federal vs. Provincial Incorporation

Feature	Federal Incorporation (CBCA)	Provincial Incorporation (OBCA)
Name Protection	Exclusive rights across Canada	Limited to Ontario
Registration Fee	$200 + NUANS ($13.80)	$300 + NUANS ($20–$50)
Director Residency	At least 25% must be Canadian residents	No residency requirements
Extra-Provincial Registration	Required for business in each province and territory	Only needed if expanding outside Ontario

Steps Required to Incorporate a Business

The process of incorporating a business is similar under both the OBCA (Ontario Business Corporations Act) and the CBCA (Canada Business Corporations Act). Here are the key steps you will need to take:

1. Choose a Name: Select a corporate name for your business. For named companies, provincial incorporation is often recommended due to simpler name approval processes. Federal name registration involves strict examiner review and potential multiple rounds of rejection.
2. Decide on the Board of Directors: Decide on the initial members of the board of directors. The board is responsible for making key decisions about the corporation’s operations, except for decisions reserved for shareholders under the OBCA or CBCA (as applicable) or a shareholders’ agreement.
3. Decide on the Management: Identify the individuals who will manage the corporation’s day-to-day operations. At a minimum, the corporation should appoint a President, Treasurer, and Secretary, with clear responsibilities assigned to each role.
4. Prepare Articles of Incorporation: Draft the Articles of Incorporation in English, French, or both. The Articles of Incorporation outline important attributes of the corporation such as:
   • Authorized capital of the corporation
   • Description of share classes
   • Restrictions on business activities
   • Minimum and maximum number of directors
   • Restrictions on share transfers, among other details
5. Set Up a Registered Office and List Initial Directors: Establish a registered office where corporate records will be maintained and official documents can be received. The initial directors must be listed in the Articles of Incorporation but can be changed later.
6. File the Articles of Incorporation: Submit the completed Articles of Incorporation and pay the required fees. Articles are filed provincially under the OBCA or federally under the CBCA.

Once the articles are approved by the registrar, you will receive a Company Key, Certificate of Incorporation, and Articles of Incorporation, which must be included in the corporation’s minute book.

Should You Hire Advisors?

Incorporating and running a corporation involves compliance with various legal and financial requirements. It’s highly recommended to consult or hire professional advisors to ensure smooth operations. These advisors may include:

• Corporate Lawyers: They ensure compliance with business laws, assist with post-incorporation obligations, and provide ongoing legal advice.
• Accountants and Bookkeepers: Bookkeepers manage day-to-day financial records, while accountants ensure tax compliance and adherence to financial regulations.
• Financial Advisors: They assist with strategic financial planning and revenue growth.

Having these professionals on hand can help you navigate legal and financial complexities and ensure your corporation operates within the appropriate framework.

Need Help Making the Right Choice?

Incorporating a business can be a complex process and choosing the right structure for your corporation is a critical decision. Our experienced legal team is here to guide you through the incorporation process, helping you navigate the requirements of both federal and provincial laws. Contact us today to schedule a consultation and make the right choice for your business’s future.