How to set up a business entity in Canada | finder.com
Business entity Canada

How to set up a business entity in Canada

To incorporate in Canada, start by choosing the right business structure and hiring knowledgeable liaisons.

Canada is a lucrative market comprising unique demographic niches and offering an abundance of seed capital. These are just a few reasons it may be a smart move to do business in the country.

As it stands, creating a business in Canada can be tricky. But with the right knowledge and expert help, you can incorporate to expand your business into our northern neighbor.

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What kind of entity makes sense?

There are four common entities for foreign investors who want to do business in Canada: sole proprietorship, partnership, corporation or cooperative.

Sole proprietorship

This is the most straightforward way to set up a business in Canada, with fewer startup costs, less paperwork and minimal working capital required.

But this type of entity comes with unlimited liability — which means that should you find yourself in debt, potential creditors have the right to claim against your personal and business assets.

Partnership

For this entity, you simply create a contract between one or more partners to conduct business. In a general partnership, partners manage the business together and share legal liability. In a limited partnership, general partners manage the company, while liability and other contributions are limited for other partners.

Like a sole proprietorship, in a partnership you are ultimately responsible for business decisions. Which means that if a contract is broken, you could be financially liable.

Corporation

Unlike a sole proprietorship or a partnership, a corporation is not tied to specific individual owners. It’s a limited liability entity, whereby the legal structure of your business is a separate entity and you assume no risk of personal liability for debts or other obligations.
Because corporations are complex and closely regulated, they are more expensive to set up. You may also be required to prove residency or citizenship of your directors.

Cooperative

Under a cooperative, members democratically own and control the business, pooling their resources and providing access to common needs. A cooperative can be set up as a for-profit or nonprofit entity.

It’s the least common form of business, requiring the participation of all members in required to achieve success.

Should I hire a professional?

It’s an excellent idea to hire a liaison to navigate tricky incorporation waters. A liaison can interact with officials on your behalf, and they’ll tell you the appropriate places to register your business entity.

The Canadian American Business Council and US Commercial Service are great places to search for a qualified contact.

What kind of documentation will I need?

Here are a few documents you’ll need to register your business:

  • Certificates of incorporation
  • Bank reference letters
  • Passport copies
  • Resume and photo
  • Description of the scope of your business
  • Lease contracts of Canadian office address
  • Business license

You may need different documentation depending on where you’re registering and which officials you meet with. Consider working with a company that helps foreign investors create businesses in Canada.

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Where do I file my information?

Most provincial and territorial governments require that you register your business with them. If you decide to incorporate your business, you can incorporate federally or provincially.
Import/export guide: Canada

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Other factors to consider

  • Naming your business. Before registering your business, you’ll need to choose the right name for it. Depending on the province in which you’re doing business, you may need to register your business name separately.
  • Permits and licenses. You’ll need specific permits and licences from the federal, provincial or municipal governments, depending on your location, industry sector and specific activities that you plan to conduct.

International billing and payments

Your new business will require you to make and receive international payments, which means you’ll make transactions between currencies and across borders.

You can safely and affordably manage your business payments — with lower fees and stronger exchange rates — by comparing the services of a money transfer specialist.

Use a money transfer to manage your international business payments

Companies like Payoneer and HiFX can help you set up regular transfers to your vendors overseas.

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I want to send

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Min. Transfer Amount Transfer Speed Online Transfer Fee Rate Amount Received Description CTA Details

Compare up to 4 providers

Bottom line

It’s important to choose the right business entity to operate in Canada. Consider working with an organization that specializes in helping foreign businesses incorporate in the country — this will streamline your progress and help you avoid pitfalls along the way.

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