Register a Business in Canada – For Visa and Immigration Applicants
Some immigration or work permit applicants need to start businesses in Canada before or upon their arrival. For example, consider the following options:
- Start-up visa immigration to Canada
- A work permit under LMIA exemption code C11 (IMP)
- Job Creators Work Permit Canada
This article explains what you potentially need to consider before registering a business.
Table of contents
- Business types in Canada
- Federal vs. Provincial
- Residency Requirements for the Directors
- Business Name
- Business Name Extensions
- Other Matters to Consider
- Asking Help from Professionals
- Let us help!
Depending on the province of destination, the business type you may register could vary, but generally speaking, these are the main business types in Canada:
- Sole proprietorship – You are the only owner and operator of the business. The sole proprietorship is the simplest form of a business. It is effortless to register, and it costs less to operate. There are also no chances of double-taxation as your personal and business tax is the same. However, you are entirely liable for your business. If an entity sues the company, you are fully responsible for it, and you may lose your personal property to cover the lawsuit against your business. If a sole business goes bankrupt, then the owner will also go bankrupt.
- Partnership – Partnership is somewhat similar to a sole-proprietorship, but instead of one owner, there are multiple owners. Each of the partners is fully liable for the business (depending on the business’s province, sometimes some owners could have limited liability). A partnership business usually takes shape between people who are very close and fully trust each other.
- Incorporation – An incorporated business is a separate entity from its owners, and that’s why the owners’ liabilities are limited to the company only (some exceptions apply). In Canada, incorporation may have one or more owners. The registration process of such businesses is more complex and costly, and there is a chance of double-taxation because you pay the corporation taxes, and then on top of that, you pay personal taxes. There are some tax relief systems in place to mitigate it, though.
The preceding definitions are comprehensive. Depending on the destination’s province and the owners’ nature (e.g. foreign nationals or a group of businesses), its structure could differ. When it comes to immigration or work permit to Canada, the recommended option is incorporation. Sometimes the other two options are not even available to the applicant.
You may register your business provincially or federally. There is not much difference between these two options. In theory, if you write the business federally, you may operate in any province of Canada, and your name is protected everywhere in the country. However, this is not entirely true. Many provinces expect federal corporations to make specific arrangements in their province to operate. The preferred option for visa and immigration applicants is federal registration, but you need to consult with a chartered accountant or a corporate lawyer to make up your mind.
Canada is a member of WTO (World Trade Organization). Consequently, our country is open to foreign investment. Our country has signed many international trade agreements, such as CETA and CUSMA. Regardless, some limitations exist over business registrations for them. A typical corporation has some shareholders and a board of directors. Shareholders are the owners of the company. They usually invest their own money in the business to make it happen. Some exceptions exist. For example, some shareholders do not invest in the industry or do not have the right to vote.
The board of directors of a corporation is the governing body of the business. They are the policymakers of the company. They, for example, hire and fire the CEO (Chief Executive Officer) of the business and oversee her or his management. They also monitor the financial health of the company and more. A member of the board of directors is called a director of the business. Directors may or may not be shareholders. It is, however, customary for a director to be a shareholder.
Both the federal government and many Canadian provinces expect a certain percentage of a company’s directors to be Canadian citizens or permanent residents. The following table shows the residency requirements for each province in Canada*.
|Directors‘ residency requirements
At least twenty-five percent of the directors of a corporation must be resident Canadians. However, if the corporation has fewer than four directors, at least one director must be a resident.
At least 1/4 of the directors of the corporation must be resident Canadians.
|Prince Edward Island
|Starting from July 5, 2021, no requirement.
At least 25% of the corporation’s directors must be residents of Canada.
If a corporation’s board comprises three or fewer directors, one must be a resident of Canada.
*Not in the actual Companies Act and not in the future new Business Corporations Act in Quebec.
At least 25% of the corporation’s directors must be resident Canadians, but if the corporation has fewer than four directors, at least one director must be a resident Canadian.
At least 25% of the directors of the corporation shall be resident Canadians*.
You may register your business without picking a name. We call these businesses “numbered companies.” If you do not choose a name for your company, then a familiar name for it will be “767676 Ontario Inc.”. If you decide to choose a name for your company, you need to make sure the name does not resemble other names to avoid future legal issues.
It is customary to have an extension for the business name. Some extensions could be Ltd, Inc, and Corp. There is no legal difference between these extensions. You may pick anyone you like or do not pick anyone at all.
Corporations need a sales tax number to be able to collect sales tax. These taxes are collected on behalf of the provincial and federal governments and will be returned to them. Depending on the province you are operating in, sales tax is called GST, HST, PST, or other names. Read the following article for more information:
If you intend to hire people, you also need to inform Canada Revenue Agency (CRA) and other government entities. You also need to set up a payroll account with the CRA.
If your company intends to import or export goods, you need to inform the authorities. If this is not your initial intent, you may later notify them.
For work permit and immigration options, read the following article:
Due to the complexities of business registration, I highly recommend getting help from professionals. A corporate lawyer can help you set up the structure of your business. A professional accountant may also help you register the company. You may do all of these yourself, but I highly doubt if this is a good idea. We have registered many businesses for our clients, and we always use help from those professionals.
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