Doing Business in Canada 101

Doing Business in Canada 101

by Lionel Perez, July 2011

When it's time to expand business internationally, many entrepreneurs find themselves looking into Canada. But just because they're a hop, skip and jump away, it doesn't mean that you should jump in blindfolded. With a little research, you'll find that there are many attractive reasons to set up shop in Canada, and it's a heck of a lot simpler than doing business in, say, Bulgaria.

Why Do Business in Canada?

Canada has lots of perks that make doing business in the North very appealing. Did you know that Canada leads the G7 countries in ease of doing business? And, according to the Economic Intelligence Unit, Canada is forecasted to be the #1 place to do business among the G7 countries for the next 5 years. Not only are business costs and tax rates low in Canada compared to other countries, but the country also boasts strong investment stability, industry leadership, a highly skilled work force, strategic location, and overall lifestyle advantage.

How to Start a Business in Canada

Canada welcomes foreign business investment and has many government resources to help business owners interested in expanding across the border. However, it's important to review and ensure compliance with the Investment Canada Act to be able to conduct business in the country. Non-Canadians must file an application for review of their investment to ensure that it is beneficial to Canadians. If you are starting a new business or acquiring a business in Canada with less than $5 million in assets, a review is generally not necessary, but a notification must be filed with the Investment Canada Agency before you make the investment. 

Incorporating in Canada

Though you can register your foreign corporation to do business in Canada, most foreign companies choose to run a Canadian incorporated company.  Before you proceed with incorporation, you'll need to complete a name report in order to ensure that your company name will not infringe on any other registered corporate name in the jurisdiction. Once you've established the name you want to incorporate, you'll need to consider whether you want to run your business as a subsidiary or conduct your business in Canada through a branch operation. Though both options require incorporation, they are treated differently in terms of taxes, capital, and liability. 

Federal vs. Provincial Incorporation

You will then need to decide if you want to incorporate federally or provincially. Federal incorporation allows you to conduct business across Canada, while provincial incorporation limits your business to the province(s) of incorporation only. Requirements, restrictions and fees vary federally and between each province. 

For foreign companies, it's important to note the residency requirements for each jurisdiction. On a federal level, 25% of the board of directors must have Canadian residency. Provinces such as Alberta, Manitoba, Saskatchewan and Ontario require at least 51% of the board to be Canadian residents, while British Columbia, New Brunswick, Nova Scotia and Quebec have no requirement for residency. These variables may influence with what jurisdiction you decide to register.

Canadian Advantage

Canada has a strong competitive advantage for business investment. With one of the most dynamic economies in the world, it is a nation of highly skilled and educated workers with a sophisticated infrastructure and a leader in many growth industries. Canada's location strategically places it in the global economic forefront and its inclusion in NAFTA gives access to millions of consumers in North America. Finally, Canada has done relatively well during the economic recession and lends stability to investors in an otherwise turbulent atmosphere.

For more information on incorporating your business in Canada, visit