Incorporation: Provincial or Federal?


After you make the decision to incorporate, one decision you may be facing is whether to set up your company as a provincial or federal corporation.

In British Columbia, provincial corporations are subject to the Business Corporations Act. This provincial legislation governs the incorporation of, and regulation of companies in British Columbia. On the other hand, federal corporations are governed by the Canada Business Corporations Act, which is a federal statute of Canada.

There are many factors to consider when determining whether to incorporate as a provincial or federal corporation. Below, we discuss a few considerations for choosing one form of incorporation over the other.

Where the company will do business

A starting point is typically to consider where your company is currently doing business, or will do business. Will your business be primarily in British Columbia, or will it carry on business across Canada or even outside Canada?

One benefit of federal companies is that they may more easily carry on business through Canada under the same corporate name. With a federal corporation, once your name has been approved and granted by the registrar, you do not need to request approval of your name for use in each province.

This is often attractive to business owners who are doing business in several provinces, as the corporation can operate with the same name in each jurisdiction. However, it is not necessary to incorporate a federal corporation to protect your name. That may be done very effectively through the use of trademark law.

When a business is incorporated provincially, the name is approved for use within British Columbia only. Therefore, if the business decides to do business in another province at a later date, and there is another company in that jurisdiction operating with a similar name, your business may have to change its corporate name for that province.

In this sense, federal incorporation can often be attractive to business owners who do business across Canada and want to ensure naming consistency across the provinces (noting that alternate protections under trademark law are also available).

If you are concerned with name protection for your corporation, you may wish to speak with an incorporation lawyer about other intellectual property protection options (such as trademark) that can be done in conjunction with incorporation.

What laws will apply to the company

Companies are subject to the laws of each province where they do business. Thus, if a corporation is carrying on business in a province or territory, then it will be required to register as an extra-provincial or extra-territorial corporation in that jurisdiction. In other words, if a corporation incorporated under the BC Business Corporations Act conducts business in Alberta, it would be required under Alberta corporate law to extra-provincially register and identify an address for service in Alberta. Trade agreements between the provinces may facilitate the process.

If your business if operating outside of British Columbia, you may wish to speak with an incorporation lawyer to ensure that you properly register your business in the appropriate jurisdictions.

There are usually additional costs to register a company extra-provincially, as well as additional costs on an annual basis (such as extra-provincial annual reporting) to accommodate government, accounting and legal obligations. One of the unique aspects of a federal corporation is that it must extra-provincially register in every province or territory in which it operates. Therefore, incorporating a federal corporation can sometimes be more expensive and complex than incorporating a provincial company.

These are only a few of the factors to consider when deciding if a federal or provincial incorporation is right for your business. If you are planning on incorporating a company that will do business both inside and outside of British Columbia, or you think a federal company would be right for your business, it would be prudent to speak with an incorporation lawyer prior to moving forward.


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