What's the difference between Federal and Provincial Incorporation?

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Incorporation is the act of making your business a corporation and is one of several forms of business ownership you can have in Nova Scotia and across Canada. It makes your company its own legal entity, distinct from its shareholders. A shareholder is someone who owns a percentage of the company and so is an owner. When you incorporate and separate the owners from the company itself, your company is considered a person under the law. It will have the ability to have its own money, take out a loan, sue or be sued, contract with other persons and even be convicted of crimes. Generally speaking, shareholders are protected from liability for the company’s actions, though there are some exceptions. This is one of the benefits of incorporation.

There are two different ways you can incorporate, federally or provincially. The basic procedure for incorporation is similar at both levels, and the basic benefits are the same. Owners are protected from liability regardless of the form of incorporation. However, there are advantages and disadvantages to both federal and provincial incorporation, and you need to consider the type of business you have now, and what you would like it to look like in the future in order to make the best choice for your company.

If you incorporate provincially in Nova Scotia (or in whichever province you wish to register) your company is recognized as a corporation there but not in other provinces across Canada. It is common for companies who only want to do business here in Nova Scotia to incorporate provincially. Once you incorporate you will have to file the required yearly paperwork and pay the yearly registration fees for the province you are registered in.

However, if you want to expand your business outside the province you initially registered in, you will have to do what is called extra-provincial registration. This is an option if you are already provincially incorporated in one province but have realized you want to expand to another. The downside is that there is no guarantee that your company name will be available in the other province.

In contrast, federal incorporation allows you to do business in any province in Canada and your name becomes registered in all of them. Federal incorporation is the usual choice for businesses who want to operate in more than one province. As an added bonus federal incorporation will also allow your company to do business internationally at lot more easily.

The downside of federal incorporation is that you also have to have extra-provincial registration in all the provinces in which you want to conduct business. This means you have to pay the fees and do the paperwork for every province you do business in. The laws your company has to follow may also differ province to province, as each branch of the company is subject to the laws of the province in which it resides.

There are many important and technical steps to both create and maintain a corporation, and the online “do it yourself” options do not give much guidance on the common pitfalls to avoid. A lawyer can help you navigate the process and ensure it is done properly so that there are no issues down the road. If you are considering incorporating either federally or in Nova Scotia, we would be happy to help.

We charge the same legal fees regardless of how you wish to incorporate. Our basic incorporation fee is $1600 and includes your legal fees, registration fees, your minute book, seal and other required disbursements.

If you are thinking about incorporating or have any questions, we’d be happy to walk you though the options. You can call us at (902) 826-3070 to set up a meeting or contact us online.

By Taylor Nesdoly, Law Student

The information and materials on this blog are provided for general informational purposes only and are not intended to be legal advice. Nothing contained on this blog is legal advice or constitutes a legal opinion. While it is our goal to provide information which is current, legislative changes and court decisions, among other matters, may result in some information no longer being current or accurate. You should consult a lawyer before relying on any information. The views expressed herein by individual contributing lawyers posting entries to the blog are solely those of the authors and should not necessarily be attributed to or considered representative of the firm of Highlander Law Group Lawyers.