When incorporating a business in Ontario, deciding whether to incorporate federally under the Canada Business Corporations Act (CBCA) or provincially under the Ontario Business Corporations Act (OBCA) is an important first choice. While both are good options and provide similar benefits, they have key differences that can impact your business.

Name Protection

Federal incorporation grants exclusive rights to your business name across Canada, not just the province in which the business operates. Although securing a business name is subject to approval by Corporations Canada, once a name is secured no other business can register the same name in any province or territory in Canada. In contrast, incorporating in Ontario only provides name protection within the province of Ontario, allowing businesses in other provinces the potential to register the same or a similar name in their province.

Operating Scope

The operating scope is similar for federal and Ontario corporations. While federally incorporated companies have the right to carry on business in any province or territory, they are generally still required to register in each province where they conduct business, just as Ontario incorporated businesses are required to do.

Costs of Incorporation and Maintenance

The federal incorporation fee is lower than Ontario’s. However, federal corporations have annual maintenance fees which Ontario corporations do not. Ongoing corporate compliance costs for both federal and provincial corporations will depend on the complexity of a business’ structure and operations.

Director Residency Requirements

Federal corporations require at least 25% of the company’s directors to be Canadian residents. If a federal corporation has less than four directors one of the directors must be a Canadian resident. In contrast, Ontario does not impose Canadian residency requirements on directors of Ontario corporations, making it an attractive option for businesses with foreign ownership.

Accessibility and Processing Times

Applications for incorporations for both federal and Ontario companies can be processed online quickly and efficiently. Incorporations at the federal level are done through Corporations Canada, while incorporations of Ontario businesses are handled by the Ontario Business Registry.

Privacy

Federal corporations have more extensive public disclosure requirements than Ontario corporations. For example, ownership information for federal corporations, is publicly accessible through the Corporations Canada database, whereas the Ontario Business Registry does not disclose this information for Ontario companies. While both federal and Ontario laws mandate the public disclosure of certain corporate information, Ontario offers slightly more privacy.

Which Option Should You Choose?

• If Canada wide name protection is a priority, federal incorporation may be preferable to Ontario incorporation.
• If you are a foreign business owner, Ontario’s lack of director residency requirements may be appealing to you.
• If privacy is a key concern, then understanding the different public disclosure requirements can help guide your decision.

Every business has unique needs and choosing between federal and Ontario corporate status depends on a variety of factors. Consulting with a corporate lawyer can help you make an informed decision that is tailored to your business needs.