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Canada Company Formation for Foreigners

Establishing a business in Canada as a foreigner can provide a gateway to thriving markets and immigration opportunities. This guide covers the essential steps to forming a company in Canada, including types of business structures, costs, requirements, tax implications, and additional services to help you get started smoothly.

Company Formation Types and Costs

  1. Sole Proprietorship

  • Description: The simplest and least expensive type of business to establish. It involves a single owner who is personally responsible for the business’s debts and obligations.

  • Time to Register: 1–2 business days.

2. Partnership

  • Description: This form is suitable for two or more owners sharing profits and responsibilities. Partnerships can be general (where all partners share liability) or limited (where liability is shared differently).

  • Time to Register: 1–2 business days.

3. Corporation (Inc.)

  • Description: A separate legal entity with limited liability for its shareholders. Incorporating provides credibility, easier access to capital, and potential tax advantages.

  • Time to Register: 5–10 business days for federal incorporation; provincial timelines may vary.

Documents Required for Foreigners to Register a Canadian Company

To register a company in Canada, foreigners must typically provide:

  • Valid Passport or Government ID: Proof of identity.

  • Proof of Residency: If applicable.

  • Canadian Business Address: A physical address in Canada (a virtual address can be used).

  • Company Name: Must comply with Canadian regulations, be unique, and cannot mislead the public.

  • Details of Directors: At least one director is required; for federal incorporation, one must be a Canadian resident unless an exemption applies.

Name Selection

  • When registering a company name in Canada:

  • Name Reservation: You may need to conduct a name search and reserve your name to ensure it’s unique.

  • NUANS Report: For some provinces and for federal incorporation, a NUANS (Newly Upgraded Automated Name Search) report may be required to show that your proposed name is unique.

Timeline to Receive Company Documents

  • Sole Proprietorship & Partnership Registration: Typically completed within 1–2 business days.

  • Incorporation (Provincial and Federal): Document processing usually takes 5–10 business days for federal incorporation, while provincial times vary.

  • Tax Numbers and Registrations: Once registered, you may need to obtain a Business Number (BN) from the Canada Revenue Agency (CRA).

Taxation on Income

  • Corporate Tax Rates: The combined federal and provincial tax rate for corporations typically ranges between 25%–31% depending on the province.

  • Small Business Deduction: Qualifying small businesses may pay lower tax rates on the first CAD $500,000 of active business income.

  • Self-Employment Tax: For unincorporated businesses, self-employed individuals must pay personal income tax on their net income.

Bank Account Requirements

  • Opening a business bank account in Canada requires:

  • Proof of Incorporation or Registration: Official documents confirming business registration.

  • Director Identification: Passport or government-issued ID.

  • Canadian Business Address: A local address.

  • Bank Requirements: Each bank may have specific requirements, including a business plan.

Cost: Bank accounts often have monthly fees ranging from CAD $10–$30 per month.

GST/HST Registration (Sales Tax)

  • Threshold for Registration: If your business’s revenue exceeds CAD $30,000 annually, you must register for the Goods and Services Tax (GST) or the Harmonized Sales Tax (HST), depending on your province.

  • Registration Process: You can register for GST/HST through the Canada Revenue Agency (CRA) either online or by mail.

Tax Filing Requirements

  • Corporate Tax Return: Must be filed annually with the Canada Revenue Agency (CRA). Provincial returns may also be necessary.

  • Self-Employment Income Tax: For unincorporated businesses, income is reported on your personal tax return.

Virtual Address & Phone Number

  • Virtual Address: Provides a local business address for registration and mail handling. Essential for foreign owners without a physical location.

  • Cost: CAD $200–$400 per year.

  • Business Phone Number: A dedicated business phone number to make and receive calls.

  • Cost: CAD $15–$30 per month.

Accountant for Tax Filing

Hiring an accountant can ensure your taxes are filed correctly and in compliance with Canadian regulations.

  • Cost: CAD $1000–$5000 per year depending on business size and complexity.

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