Federal incorporation and provincial registration in Canada – Basic Rules

Federal incorporation and provincial registration in Canada – Basic Rules

When incorporating federally, every corporation must be registered in at least one province in Canada – the process is called Extra Provincial registration.
Since Canada is a federal jurisdiction with tax regulations based on the combination of a federal and provincial portions, every corporation must be registered in the province of its “residency” – place where they create their income and hence pay the corresponding income tax rate.
Every provincial corporate legislation requires each business having its presence in the province to be registered with the local corporate registrar.
Based on the scope of these mandatory requirements, federal corporations should follow these rules:

1. Upon incorporation:
During the initial federal incorporation process a new corporation must be registered with the province of its head office location.
This should be done promptly after the incorporation.

2. During business operations
In case your business grows, and you find yourself operating in multiple provinces, you will have to register in each of those provinces.
Based on the legal requirements of most of the provinces, a local registration is required once a corporation has an “active presence” in the province. While most would not define what it means, the basic criteria would include:
a. Having an office operating in that province
b. Having employees working for your business in a province
c. Having warehouse or other business operations (production, distribution etc.).
In my personal opinion, mailing your products to various provinces (as in the case of an e-commerce) will not justify registration in each and every province where your products end up.
In case of a consulting businesses, if you have to travel to your clients’ locations in various provinces, but your head office is located in one province only, and these travels are occasional – it is insufficient to justify extra-provincial registration.
This might change if the volume of your operations in one of the provinces increases and you hire a local consultant to perform the services on behalf of your corporation on a constant basis – in this case you might be required to register there.

3. When should you register
The registration should be done as soon as your business falls under the definition of “active presence” or “active business” in a province.
A provincial registration is required mostly for the tax purposes – to apply a provincial tax rate to the profits generated there. Therefore, the registration is definitely must be done before the end of the fiscal year during which your corporation established its active business presence in that province.

4. The meaning of the extra-provincial registration
It is important to understand that the process of an Extra Provincial registration does not create a separate legal entity and does not “split” your corporation. It only provides for the registration of your existing corporation in the province of its active business.
The confusion comes from the fact that an extra provincial registration results in the issuance of a provincial corporation number for your existing corporation, which already has its original corporation number. This provincial registration number is required exclusively for the tax purposes during your corporation’s income tax reporting. All other corporate information, such as CRA business number, and articles of incorporation remain intact and do not change with the extra provincial registration.

5. What is needed for the extra provincial registration?
Most provinces will require a local provincial representative of the corporation to act as the agent for receipt of a legal correspondence. Additionally, most would require a registered office address in the province (not a PO Box).
Most provinces will also require a registration fee, usually similar to the incorporation fee in that province.
Unfortunately, many will facilitate only a paper-based process, where a registrant will have to attend a local office of the registrar or their agents, pay the fee and submit the application, or mail the forms with the payment to the local provincial registrar – this complicates and extends the process.
Following the completion of the process, the corporation will receive a local registration certificate with the provincial corporation number.

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