Canada is undoubtedly one of the most business-friendly countries in the world. If you are still a foreigner looking to go into business over there, read this blog to gain an understanding of the legal requirements and procedures so that you’re better prepared for your venture there.
Select The Right Business Form
The best way to set up a company in Canada is to first identify the proper business structure. There are three basic forms:
- Sole Proprietorship – This is the most straightforward type of structure in which one individual owns and operates the business. It is very easy to set up but doesn’t offer any liability protection.
- Partnership – Two or more individuals share ownership, responsibilities, and profits. Partnerships can be either general or limited.
- Corporation – A separate legal entity that provides liability protection and tax benefits. It is the most popular choice for foreign business owners.
For most foreign entrepreneurs, incorporation of a business is the best alternative, as it enables them to operate as a Canadian company and enjoy tax benefits.
Choose Federal or Provincial Incorporation
Foreigners can incorporate their business either at the federal level or within a specific province:
- Federal Incorporation – This allows businesses to operate across Canada with name protection nationwide.
- Provincial Incorporation – This limits operations to a specific province but may have fewer regulatory requirements.
The best way to set up a company depends on your business goals. If you plan to operate in multiple provinces, federal incorporation may be ideal. However, if your business is limited to one province, provincial incorporation might be the better option.
Meets the requirements for residency in Canada
Foreigners can own 100% of a business in Canada. Nevertheless, most provinces require that a corporation have at least one Canadian resident as its director. A few exceptions to this include British Columbia, Nova Scotia, and Quebec, where a business owned 100% by foreigners can exist without having a resident director.
If you do not have a resident director in Canada, you may:
- Partner with a Canadian resident to serve as your director.
- Use a nominee director service.
- Register in a province that does not require resident directors.
Register Your Business Name
Your business name has to be unique and have to comply with Canadian naming regulations. If you are registering at the federal level, you would have to acquire a NUANS report to make sure that the name is available. Provincial registration could have other procedures for the approval of the name.
Get a Business Number and Required Licenses
After incorporation, you will need to get a Business Number (BN) from the Canada Revenue Agency (CRA). This number is required for tax filing, payroll management, and compliance with Canadian business laws.
Depending on your industry and location, you may also require additional permits or licenses to operate legally. These could include:
- Provincial or municipal business licenses
- Import/export permits
- Industry-specific certifications
Open a Corporate Bank Account
You will require a Canadian corporate bank account to do financial transactions. Typically, most banks ask for the following:
- Incorporation documents
- Business Number
- Identification for the directors and shareholders.
Having a corporate bank account also establishes credibility with your Canadian suppliers, customers, and government agencies.
Be Aware of Tax and Compliance Obligations
Canadian businesses pay corporate taxes. This includes:
- Corporate Income Tax: The federal corporate tax rate is 15%, with additional provincial taxes depending on the province.
- Goods and Services Tax (GST) / Harmonized Sales Tax (HST): If you earn more than CAD 30,000 a year, you are required to register for GST/HST.
- Payroll Taxes: If you hire employees, you will need to withhold and remit income tax, Canada Pension Plan contributions, and EI premiums.
You will be well on your way to running your business without breaking any laws with Canadian tax regulations.
Hire Employees and Adhere to Labor Laws
You need to meet Canada’s labor laws if you intend to hire employees. This encompasses:
- Fair wages and benefits.
- Workplace safety
- Compliance with employment standards and contracts
If you are planning to hire foreign workers, then you must obtain an LMIA, or you can directly apply through Canada’s Global Talent Stream for skilled professionals.
Conclusion
The best way to set up a company in Canada as a foreigner is a multi-step process, from choosing the structure of the business to meeting residency requirements, registering with government authorities, and compliance with tax regulations.
With the right planning and guidance, foreign entrepreneurs can establish and grow their businesses in Canada. For business establishment, regulatory compliance, and expansion strategies, Aadmi provides comprehensive consulting services to help businesses navigate the complexities of the Canadian market.
