Setting Up and Doing Business in Canada
Canada is Open for Business
Are you a non-Canadian interested in doing business in Canada? Canada's open for business and welcomes foreign investment and business immigrants.
The Bottom Line for Business is Better in Canada
Why do business in Canada? Why not? Operating a business in Canada is better for your bottom line than operating your business in the United States, and thanks to NAFTA (the North American Trade Agreement), you'll still have access to the entire North American market.
Currently, according to a detailed 10-month study of international business costs in 11 countries in North America, Europe and Asia-Pacific by KMPG, Canada's business costs are the second-lowest recorded in the study, and 5 percent lower than in the USA.
Canada is the best country for business in the G-20 according to Forbes Magazine's November 2012 study. It remains one of the most welcoming and profitable places in the world for international business and foreign direct investment.
Among the competitive advantages you can enjoy doing business in Canada, the Invest in Canada website highlights:
- Canada's stability – Canada has "banks you can bank on". For the fifth consecutive year, the World Economic Forum rates Canada’s banking system as the world’s soundest.
- Canada's highly-skilled work force – Canada has the most highly-educated population in the OECD and "attracts the best and brightest from every corner of the globe".
- Canada's industry strengths – "Cutting-edge American producers recognize Canadian leadership in industries such as fibre optics, aerospace, and biopharmaceuticals." The country is also a world leader in fields as diverse as medical devices, digital gaming, and agri-food.
- Canada's strategic location – Canada is the "crossroads between the North American marketplace and the booming economies of Asia".
- Canada's lifestyle advantage – Clean, calm and spectacular sums it up. It's a stellar place to work, live and raise a family.
And to top off the list of advantages to doing business in Canada, Canada offers businesses very favourable R&D tax credits and incentives. Canada's appealing environment for leading-edge research is built upon several innovation-supporting policies: effective protection of intellectual-property rights; open competition in domestic market in the deployment of digital information and communications technologies and platforms; transparent government-procurement practices, and openness to high-skill immigration (government of Canada).
Perhaps one of the best reasons to consider doing business in Canada, though, is that Canada welcomes business investment.
Canada Welcomes Business Investment by Foreign Investors
If you're interested in doing business in Canada, the Canadian Trade Commissioner Service website is an excellent resource. Want to know about a particular Canadian province or territory? Go to Cities, provinces/territories and choose the province or territory you're interested in for a detailed snapshot. You'll find data about particular Canadian cities here, too.
The website also provides a great deal of information about Canada's industries. You'll find plenty of statistics and general information about the country's premier industries such as biopharmaceuticals, functional foods, renewable energy and financial services, just to name a few.
The Canadian Trade Commissioner Service (provided by Canada's Department of Foreign Affairs and International Trade), is another outstanding service for non-Canadians seeking to do business in Canada. This global network of business professionals with offices in over 130 cities around the world will help you find Canadian suppliers, put you in contact with Canadian companies so you can develop business relationships, and help you invest in Canada or expand your Canadian investment.
Statistics Canada is another outstanding source of industry information. On this page, you'll find free statistical information on the Canadian economy, including primary industries, communication, transportation and trade, and international trade.
A complete index of Canadian industry information online is on the Innovation, Science and Economic Development Canada website, another great place to find industry statistics.
Incorporating in Canada
If you want to establish a business in Canada, your first decision will be which form of business ownership to establish. Sole proprietorships, partnerships, cooperatives, franchises, joint ventures, and corporations are all legally recognized forms of business in Canada.
Most foreign companies choose to operate in Canada as corporations. If incorporating in Canada is your choice, you'll also need to decide whether to incorporate a subsidiary or conduct your business in Canada directly, through a branch operation.
Subsidiaries and branches are treated differently in terms of taxes, the ability to raise capital, and the extent of the parent company's liability. Generally, a Canadian subsidiary may not be consolidated with other operations for foreign tax purposes, so establishing a branch operation may be beneficial to offset initial losses. Steven W. Smith and Frank Zaid of Osler, Hoskin, and Harcourt LLP discuss the issue of Branch versus Subsidiary in Forms of Business Ownership In Canada.
The next decision is whether to incorporate your company federally or provincially. If you incorporate federally, your business will be empowered to conduct business throughout Canada. Although your corporation will still be subject to provincial regulations, and will have to pay a license or registration fee in some provinces, no province will be able to prevent your company from conducting business under its corporate name. See Doing Business May Require Extra-Provincial Incorporation.
A provincially incorporated company, on the other hand, may not be able to operate under the same name in another province, if another corporation with a similar name already exists in that province.
One disadvantage of federally incorporating your company is that the composition of your company's board of directors must meet the requirements of the Canada Business Corporation Act. Under this Act, a majority of the directors of a federally incorporated company must be resident Canadians, unless
"a holding corporation earns in Canada directly or through its subsidiaries less than five per cent of the gross revenues of the holding corporation and all of its subsidiary bodies corporate together, then not more than one-third of the directors of the holding corporation need be resident Canadians"
Industry Canada's Small Business Guide to Federal Incorporation provides detailed information on how to federally incorporate your company. Federal incorporation costs $200 (if done online) plus fees for other steps of the process, such as a NUANS report (name search).
If you incorporate your company provincially, you'll have to register and license your company through the appropriate provincial Registrar in each province and territory you wish to do business in, outside of the original incorporation jurisdiction. (See my Incorporating a Business in Canada library for information on incorporation procedures for different provinces.)
So if you incorporate your business in Ontario, and then want to operate in New Brunswick as well, you'll have to register your business with the New Brunswick Registrar as well, and pay the appropriate additional fees. Incorporation fees vary from province to province.
The Investment Canada Act and Doing Business in Canada
No matter which form of business you choose, to do business in Canada you must comply with the Investment Canada Act.
This Act provides for the review of investments in Canada by non-Canadians to ensure benefit to Canadians. Under this Act, Non-Canadians must file a notification or application for review of their investments, unless a specific exemption applies.
Don't let this deter you from doing business in Canada; if you plan to start a new business in Canada or acquire control of an existing Canadian business with less than $5 million in assets, usually the investment is not classed as reviewable. All that is required is that you file notification with the Investment Canada Agency before you make the investment or within thirty days of making the investment.
The notice is a simple two-page form. Once you've filed it, the Investment Canada Agency will acknowledge the notice with a receipt stating that the investment is not reviewable, or that the Agency reserves the right to send the notice for review.
Businesses related to Canada's national identity or cultural heritage are the exception to this general rule of less than $5 million in assets and are classed as reviewable. Generally, any investment is reviewable if the asset value of the Canadian business being acquired is over $5 million. This Overview of the Investment Canada Act provides details of which investments are reviewable, outlines the notification and review process, and provides contact information for Industry Canada's Investment Review Division.
If you're a Non-Canadian thinking of starting a business or want to expand your company's operations, think Canada! We have a lot more to offer business than just beautiful scenery. A stable financial system, highly-skilled work force and competitive corporate taxes are only some of the advantages of doing business in Canada that will benefit your business' bottom line.