Location is Everything - Choosing Where to Incorporate

Location is Everything - Choosing Where to Incorporate

So you’ve made the decision that incorporation is right for your business, but there’s another critical incorporation decision ahead – where do you incorporate? In Alberta, incorporation is governed by the Business Corporations Act (the “ABCA”).[1] Federal incorporation is governed by the Canada Business Corporation Act (the “CBCA”).[2] There are a number of factors differentiating provincial and federal incorporation to guide your decision.
Fees
The cost of provincial incorporation is $275 plus service fees.[3] The cost of federal incorporation is $200 for online applications or $250 for paper applications.[4]
While incorporating a federal corporation appears less costly in terms of incorporation fees, there is an additional cost consideration for a business seeking to incorporate federally – federal corporations are also required to extra-provincially register in the provinces in which they will carry on business. The definition of “carry on business” triggering the extra-provincial registration requirement includes running a business, having an address, post box or phone number, or offering products and services for a profit.[5] The fee to register an extra-provincial corporation in Alberta is $275 plus service fees.[6]
Address
The ABCA requires a business to have its registered office in Alberta.[7] The requirement to have a registered office in Alberta is not satisfied by merely having a post office box in Alberta.[8] The requirement is a physical address in Alberta accessible during normal business hours.[9] The ABCA requires shareholder meetings to be held in Alberta unless all shareholders entitled to vote at the meeting agree to hold it outside of Alberta.[10]
The CBCA allows a federally incorporated business to have a registered office and hold annual meetings in any province in Canada.[11]
Filing Requirements
The CBCA entails additional paperwork by requiring a corporation to file annual returns.[12] Current annual federal filing fees are $20 (online) or $40 (paper filing).[13] The filing requirements must be completed annually, whether or not there have been director or address changes for the corporation.
The ABCA has its own annual return requirements.[14] These requirements also apply to registered extra-provincial corporations.[15] A federal corporation registered in Alberta will have to file annual returns under the ABCA to comply with the statute. A corporation operating in Alberta has more onerous filing requirements if it incorporated federally as opposed to provincially.
Name Protection
Federal incorporation allows a business to use its corporate name across Canada.[16] This degree of name protection can only be defeated by a trademark. Federal name searches are therefore more rigorous than provincial name searches.
Provincial incorporation only allows a business to use its corporate name in Alberta, and a corporation will need to conduct a name search in each additional province in which it wishes to carry on business. There is a risk that its corporate name will be rejected in another province, requiring the use of an alternative name.
Privacy
Corporations Canada maintains a register of the Registered Office Address, Directors, Annual Filings, and Corporate History of federal corporations, publicly available online at no cost.[17] Provincial corporations have relative privacy with respect to the accessibility of their corporate data, as such information from provincial corporations is not publicly available online, and a fee is required for a search.
Structure
The ABCA permits the establishment of Unlimited Liability Corporations – this is an unusual incorporation structure that makes the liability of shareholders unlimited in extent and joint and several in nature.[18] This structure is not supported by the CBCA.
Prestige
Federal incorporation may have the advantage of prestige from global recognition standpoint, as a Canadian corporation is more recognizable than individual provinces. [19] This is primarily a consideration for businesses intending to operate internationally.
Ultimately, a corporation is not permanently confined to the jurisdiction in which it was originally incorporated. A corporation can choose to change from provincial to federal incorporation, vice versa, or from one province to another, by way of a continuance. Both the ABCA and the CBCA contain provisions allowing corporations from another jurisdiction to effectively re-incorporate under their statute.[20]

For further assistance with incorporating under the ABCA or the CBCA, contact the BLG Business Venture Clinic. We can assist with drafting articles and bylaws to get your corporation set up the right way and avoid costly changes down the road.
 
Ana Cherniak-Kennedy is a member of the BLG Business Venture Clinic and is a second-year law student at the Faculty of Law, University of Calgary.
 
References
[1] RSA 2000, c B-9 [ABCA].
[2] RSC 1985, c C-44 [CBCA].
[3] Open Alberta, “Registry agent product catalogue” (2019), online: Government of Alberta <https://open.alberta.ca/publications/6041328>.
[4] Corporations Canada, “Services, fees and turnaround times – Canada Business Corporations Act” (2017), online: Government of Canada <https://corporationscanada.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs06650.html>.
[5] Corporations Canada, “Steps to Incorporating” (2016), online: Government of Canada <https://corporationscanada.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs06642.html#toc-06>.
[6] Service Alberta, “Registry agent product catalogue” (2019), online: Government of Alberta <https://open.alberta.ca/publications/6041328>.
[7] ABCA, s 20.
[8] ABCA, s 20(4).
[9] ABCA, s 20(6).
[10] ABCA, s 131.
[11] CBCA, s 19(1).
[12] CBCA, s 263.
[13] Corporations Canada, “Policy on filing of annual returns – Canada Business Corporations Act” (2012), online: Government of Canada <https://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs02544.html>.
[14] ABCA, s 268.
[15] ABCA, s 292.
[16] Corporations Canada, “Is incorporation right for you?” (2016), online: Government of Canada <https://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs06641.html>.
[17] Corporations Canada, “Search for a Federal Corporation” (2019), online: Government of Canada <https://www.ic.gc.ca/app/scr/cc/CorporationsCanada/fdrlCrpSrch.html>.
[18] ABCA, s 15.2(1).
[19] Corporations Canada, supra note 20.
[20] ABCA, s 188; CBCA, s 197.