If you’re considering setting up a corporation, you’ve probably wondered: what’s the difference between a Canadian corporation and an Ontario corporation? What’s the right decision for my business?
There are many similarities – and several differences – between Canadian corporations and Ontario corporations that you’ll want to consider before deciding where to incorporate. Below, we’ll discuss Canadian and Ontario corporations in greater detail and highlight their similarities and differences.
What is a Corporation?
Starting with the basics, a corporation is a business with its own legal personality. Through incorporation, a corporation becomes an entity separate from its owners – that is, a corporation carries the risks and liabilities associated with the business rather than those risks and liabilities falling personally on its owners.
How are Corporations Created?
Corporations are created through incorporation. To incorporate, you need to obtain articles of incorporation by applying for incorporation, a federal business number and Corporation income tax account, and any permits or licences you may require to do business.
When incorporating Canada, you will need to choose whether to create a Canadian corporation or an Ontario corporation.
What are Canadian Corporations?
Canadian corporations are corporations that are federally incorporated. These corporations are subject to the Canada Business Corporations Act, R.S.C., 1985, c. C-44.
What are Ontario Corporations?
Ontario corporations are corporations that are incorporated federally. These corporations are subject to Ontario’s Business Corporations Act, RSO 1990, c B.16.
What are the Similarities between Canadian Corporations vs. Ontario Corporations?
Whether you choose to incorporate a Canadian corporation or an Ontario corporation, there are several similarities between how they operate.
Similar Governing Legislation
While different legislation governs Canadian and Ontario corporations, the Canada Business Corporations Act, R.S.C., 1985, c. C-44 and Business Corporations Act, RSO 1990, c B.16 have very similar requirements.
Similar Protections
By incorporating either a Canadian or Ontario corporation, you’ll benefit from name protection (as in, corporations that incorporate at a later date won’t be able to use an identical name – and, in some cases, even similar names) and liability protection.
You’ll also benefit from the longevity of setting up a corporation. When you create a corporation, it becomes a separate entity that continues to exist even if the owners leave the company.
Filing Requirements
Business corporations need to file an annual return each year, whether they’re incorporated federally or provincially. This return provides the government with updated information on your registered office, changes regarding directors, and any amendments made to your articles of incorporation. Remember that an annual return differs from your corporate tax return.
Tax Advantages
There are many tax advantages to setting up a corporation, regardless of whether you incorporate it federally or provincially. Generally, corporate tax rates are lower than personal tax rates. And, if you sell your corporation, you may be eligible for tax exemptions. For example, if you sell a corporation, you can generally claim a capital gains tax exemption.
What are the Differences between Canadian Corporations vs. Ontario Corporations?
There are several differences between a Canadian corporation vs. Ontario corporation. Below, we’ve outlined just a few of the most common ones:
Different Jurisdiction
Ultimately, the primary difference between Canadian corporations and Ontario corporations is their jurisdiction. If your corporation does business exclusively in Ontario, incorporating an Ontario corporation will be your best option. If your corporation is doing business across Canada, incorporating federally will make more sense.
However, note the following difference:
Additional Registration Requirements for Federal Corporations
Even if you incorporate a federal corporation, you’ll still need to register in any province or territory where you do business. For example, if you incorporate federally but your physical office is based in Ontario, you must complete an extra-provincial registration in Ontario.
Different Incorporation Fees
The cost of incorporating a Canadian corporation is lower than incorporating an Ontario corporation. To incorporate in either jurisdiction, you will pay the following:
- Canada: $200
- Ontario: $360
Citizenship Requirements
If you incorporate federally, 25% of your listed directors must be either Canadian citizens or permanent residents. However, in Ontario, directors (or a portion of them) are not required to be Canadian citizens or permanent residents.
Business Name Protection
You’ll need a business name whether you’re incorporating federally or provincially. Regardless of how you incorporate, you’ll receive “name protection” – that is, if you incorporate under a business name, other businesses that later attempt to incorporate with the same or similar business name may not be able to do so.
If you incorporate a Canadian corporation, you’ll have name protection at a federal level. However, if you incorporate in Ontario, your business name will only be protected against other Ontario corporations.
Timing of Incorporation
Typically, individuals wishing to incorporate federally will wait longer than those wishing to incorporate in Ontario, which can create difficulties depending on your business goals.
Initial Notice Filing
Within 60 days of incorporation, Ontario corporations must file an Initial Notice (also known as an Initial Return). This document provides information about your corporation to the government and ensures that their information regarding your corporation stays up to date. includes information regarding the corporation, including officer positions. If you don’t comply with this requirement, you risk the Province of Ontario cancelling your incorporation application for non-compliance.
Final Notes on Canada Corporations vs. Ontario Corporations
Whether you incorporate federally or provincially, there are several factors you’ll want to consider to ensure you’re making the best decision for your business. Remember, too, that decisions regarding your business structure extend beyond incorporating federally or provincially. For example, if you choose to set up a not-for-profit corporation, you’ll want to review our blog post on setting up not-for-profit corporations in Ontario.
Choosing where to incorporate – or whether to incorporate at all – requires considering various issues. Consulting with an experienced business law lawyer early in the process is the best way to determine the right structure for your business and plan appropriately.
Contact the Lawyers at Tierney Stauffer LLP for Comprehensive Business Planning
At Tierney Stauffer LLP, our business law lawyers provide expertise in all facets of business law to individuals, sole proprietors, not-for-profit corporations, and financial institutions. We provide our clients with the legal framework to create and organize a new business.
We provide personalized service for specific legal matters and expertise for our client’s complex legal matters. Our experienced team provides a full scope of corporate legal services to enable our clients to successfully build, structure, and manage their legal affairs. Call us at 1-888-799-8057 or contact us online to set up a consultation with an experienced business law lawyer.