Incorporating in Canada or the US, what changes in your plan

What to take away

The choice in front of you: federal, provincial or US incorporation

A founder weighing federal versus provincial incorporation is really choosing a name regime, a filing calendar and a set of annual returns. A founder adding a US entity is choosing a second tax system.

Start with the customer and the money. If your first customers, first hires and first lender are all in one province, provincial incorporation keeps filings local and cheap. If you plan to operate under one name across several provinces, federal is usually tidier.

Read the federal pathway on the government's Starting a business hub before you draft. It lists the registration steps a plan's milestones page should mirror, including the business number and the provincial registrations that follow.

US incorporation is not a substitute for Canadian registration. A Delaware or Wyoming company that sells into Canada still deals with Canadian tax on its Canadian activity. That fact belongs in the plan's risk section, not in a footnote.

Federal incorporation under the Canada Business Corporations Act and what it triggers

Federal incorporation happens under the Canada Business Corporations Act, the statute that sets directors' duties, share structure and records. Corporations Canada administers it. The name is protected across Canada, which matters if you will trade in more than one province.

The statute sets minimum rules you must reflect in the plan: at least one director, with residency requirements that have loosened over time, a registered office, and a records book kept at a known place. Your legal section should name the articles you filed and the share classes you authorized.

Federal status does not let you skip provincial rules. You still register extra-provincially in each province where you carry on business, and you still file annual returns with Corporations Canada. A plan that promises national expansion should show those registrations as line items with owners and dates.

If you raise money, the plan's investor section should note that federal incorporation does not exempt you from provincial securities law. The OSC in Ontario, the AMF in Quebec and the BCSC in British Columbia each have their own filing regimes for offerings.

Provincial incorporation and extra-provincial registration in Ontario, BC and Quebec

Provincial incorporation is governed by each province's own statute: the Ontario Business Corporations Act, the BC Business Corporations Act, and Quebec's Business Corporations Act. Filing is usually faster and cheaper than the federal route, and one annual return goes to one registry.

The trade-off is reach. A provincially incorporated company that operates in another province generally must register extra-provincially there. That means a second registry, a second annual filing and, in some cases, a named agent for service.

Ontario is the common default for founders in the Toronto corridor, partly because so many lenders, advisors and investors sit there. BC suits companies whose market is the Pacific rim or whose staff are in Vancouver and Victoria. Alberta and the Prairies often favour provincial incorporation for cost.

Quebec adds a layer the other provinces do not. Bill 96 and the Charter of the French Language require French in commercial publications, contracts of adhesion and public signage. A Quebec plan should budget for translation and for the Office québécois de la langue française compliance work.

Atlantic Canada and the territories are smaller markets with their own registries, and federal incorporation often looks attractive there precisely because the customer base crosses borders. ACOA and CanNor programmes can appear in the funding section, but they do not change the incorporation choice.

The CRA business number, GST/HST registration and tax assumptions in the plan

The CRA business number is a nine-digit identifier that anchors your payroll, corporate income tax, import and GST/HST accounts. You get it when you register, and the plan's compliance page should list each account you will open and who is responsible for it.

GST/HST registration is generally required once you exceed the small supplier threshold, though many founders register voluntarily to recover input tax credits. The rate depends on the province: Ontario, the Atlantic provinces and parts of Quebec blend federal and provincial tax, while Alberta and the territories charge GST only.

Filing frequency follows revenue. Small businesses often file annually, larger ones quarterly or monthly. The CRA's page on how to file your GST/HST return sets out the methods, including online filing and the quick method.

Corporate income tax assumptions belong in the plan's tax note. Federal and provincial rates stack, and small business deductions phase out with income. The Income Tax Act governs deductions, instalments and filing deadlines.

Use the CRA's business taxes pages as your reference when you write the assumptions.

For the financial section, build the tax line from those assumptions rather than a flat percentage. Readers who lend against the plan will test whether the tax figure moves when revenue moves.

What changes in the legal section when you incorporate in Canada

The legal section stops being a paragraph about structure and becomes a schedule of facts. Name the statute, the jurisdiction, the incorporation date, the registered office and the share classes. Add the directors and officers with their roles.

Then list the registrations. Federal articles, provincial extra-provincial registrations, the CRA business number, GST/HST, payroll and any import account. Each gets a status and a date. This is where a plan earns credibility with a bank or a regional agency.

Intellectual property belongs here too. The Canadian Intellectual Property Office handles trademarks, patents and industrial designs, and a plan that claims a moat should show what has been filed and what is pending.

Contracts, leases, licences and any shareholder agreement go in an appendix, referenced from the legal section. If you have taken outside investment, describe the securities filing route and the commission involved.

Founders who have already drafted a US-facing plan will find the legal section reads differently once Canadian registration is in place, and the same is true in reverse for the state rules that differ when a US entity is added.

What changes in the financial section when you incorporate in the US

A US entity changes the financial section more than the legal one. You now have two tax systems, two filing calendars and a currency question. The plan must say which entity earns the revenue and which one books the cost.

State annual franchise or report fees range from about $60 in Wyoming to $175 in Delaware and higher elsewhere, and a registered agent typically costs $50 to $300 a year.

Transfer pricing is the usual trap. A Canadian company billing a US parent, or the reverse, needs a defensible basis for the charge. Describe the arrangement plainly and note that both countries tax the profit somewhere.

The US side also changes who reads the plan. US lenders and investors expect a format they recognise, which is why the what lenders actually check in an SBA-style package differs from what a Canadian bank wants. If you are raising in both markets, you may need two versions of the same plan.

If the US entity is a holding company for a Canadian operating company, say so, and show the intercompany flows. If it is the operating company, the Canadian entity becomes a service or IP holder, and the plan should reflect that.

Costs, filings and timelines compared

Costs vary by province and by whether you file yourself or use an agent. The table below gives the shape of the decision, with the caveat that government fees change and should be checked at filing time.

Government fees for the common routes sit in the low hundreds of dollars. Federal is $200 online, Ontario $300 plus a NUANS report, BC $350 plus a $30 name request, and Quebec a fee set by the Registraire.

Direct online filings clear in one to three business days. An agent or a lawyer adds a service fee on top, typically a few hundred dollars.

Timelines are usually days for a provincial or federal online filing, longer if a name is contested or a NUANS report raises an issue. Budget for a name search, a registered office address and, in Quebec, translation.

The steps below are the sequence most founders follow, and they map onto the milestones page of the plan.

The start-up visa business plan for founders coming through IRCC has its own expectations about how the legal and financial sections are ordered.

How the ownership and management sections are rewritten

Ownership becomes a cap table. List each shareholder, the class and number of shares, and the percentage. Note any vesting, any options pool and any shareholder agreement terms that constrain a sale.

Management becomes a set of named roles with authority. Who signs contracts, who is a director, who is an officer, and what the bylaws say about removing them. A lender will look for a second signature and a succession note.

If the company is venture-backed, the plan should reflect the actual share classes rather than a simplified story. Convertible notes, SAFEs and preference shares all change the dilution picture, and the projections should follow.

When you write for a single reader, the ownership and management sections shrink to what that reader needs. The discipline of choose the one reader applies here as much as anywhere in the plan.

Finally, check that the ownership narrative and the financial statements agree. Share capital on the balance sheet should match the cap table, and the three linked statements should carry the same share count through every year.

Common questions