Parsai Immigration: Registering a Business in Canada
by Al Parsai, CEO -Parsai Immigration Services
Some immigration or work permit applicants need to start businesses in Canada prior or upon their arrival. For example, consider the following options:
Start up visa immigration to Canada
Work permit under LMIA exemption code C11 (IMP)
This article explains what you potentially need to consider before registering a business.
Types of Businesses in Canada
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. This is the simplest form of a business. It is very easy to register and it costs less to operate. There is also no chances of double-taxation as your personal and business tax is the same. However, you are fully liable for your business. If an entity sues the business 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 sole proprietorship, but instead of one owner there are multiple owners. Each of the partners are fully liable for the business (depending to the province of the business, sometimes some of the 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 business only (some exceptions apply). In Canada, an 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 very broad. Depending on the province of the destination and the nature of the owners (e.g. foreign nationals or a group of businesses), the structure of the business 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.
Federal vs. Provincial
You may register your business provincially or federally. There is not much difference between these two options. In theory, if you register the business federally you may operate in any province of Canada and your name is protected everywhere in the country. However, this is not quite true. Many provinces expect federal corporations to make certain arrangements in their province to operate. The preferred option to 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.
Residency Requirements for the Directors
Canada is a member of WTO (World Trade Organization). Our country is part of the free world of trade. We have signed many international trade agreements with other countries such as CETA and USMCA (formerly NAFTA). Consequently, Canada welcomes foreign nationals’ investment. Regardless, some limitations exists 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 business 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 policy makers of the business. 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 business 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 of Canadian provinces expect a certain percentage of directors of a company to be Canadian citizens or permanent residents. T
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 typical 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.
Business Name Extensions
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 extension. You may pick anyone you like or do not pick anyone at all.
Other Matters to Consider
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, sales tax is called GST, HST, PST, or other names.
Read the following article for more information:
Canada Sales Taxes: GST, PST, RST, and HST
If you intend to hire people, then you also need to inform Canada Revenue Agency (CRA) and other government entities. You also need to setup 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 inform them.
For work permit and immigration options, read the following article:
Two-Stage Immigration for Self-employed and Entrepreneurs – IMP Code C11
Asking Help from Professionals
Due to complexities of business registration, I highly recommend getting help from professionals. A corporate lawyer can help you setup the structure of your business. A professional accountant may also help you register the business. You may do all of these yourself, but I highly doubt it if this is a good idea. We register many businesses for our clients and we always use help from those professionals.
If you wish to visit or move to Canada or if you have encountered any issues with the immigration authorities, you may fill out our free assessment form or book a consultation session to assess your potential opportunities or offer you immigration, visa, or citizenship advice.