Federal vs. Provincial Incorporation in Ontario

A provincial corporation under the Ontario Business Corporations Act (OBCA) exists as a creature of Ontario law. A federal corporation under the Canada Business Corporations Act (CBCA) exists under federal law. The most practical differences are: (1) Name protection — a CBCA corporation's name is protected across all of Canada, while an OBCA corporation's name is only protected in Ontario; (2) Director residency — the CBCA requires at least 25% of directors to be Canadian residents (with some exceptions for small boards), while the OBCA has no director residency requirement; (3) Registered office — a CBCA corporation must maintain a registered office in Canada (any province), while an OBCA corporation must maintain one in Ontario; (4) Annual returns — filings go to Corporations Canada for CBCA and to the Ontario Business Registry for OBCA.

Federal incorporation makes sense when: (1) The business intends to operate under the same name across multiple provinces and wants national name protection; (2) The shareholders include non-Canadian residents whose presence on the board would prevent meeting the CBCA's 25% residency requirement (though the CBCA's own residency rules would still apply); (3) The business anticipates contracting with the federal government, which sometimes requires a CBCA corporation; (4) The founders want to operate under the same name in both Ontario and Quebec, where the OBCA name protection would not extend. Note that a federally incorporated company that carries on business in Ontario must still register as an extra-provincial corporation with the Ontario Business Registry and maintain a registered agent in Ontario.

Provincial incorporation under the OBCA is appropriate for the vast majority of Ontario businesses that operate primarily in Ontario. Benefits include: no director residency requirement — particularly helpful for corporations with non-Canadian founders or directors; slightly simpler annual filing requirements; familiarity with the Ontario corporate law regime for Ontario lawyers, banks, and commercial counterparties; and no requirement to register provincially (since you are already an Ontario corporation). Most Ontario SMEs — professional corporations, holding companies, operating companies, and franchisee entities — incorporate under the OBCA.

A corporation incorporated in one province that 'carries on business' in another province must generally register as an extra-provincial corporation in that other province. In Ontario, extra-provincial corporations register under the Extra-Provincial Corporations Act, R.S.O. 1990, c. E.27. The definition of 'carrying on business' is fact-specific, but generally includes having employees, a physical location, maintaining a bank account, or regularly soliciting business in Ontario. Extra-provincial registration requires designating an agent for service in Ontario and filing periodic annual returns. Failure to register can prevent the corporation from suing in Ontario courts and may result in fines.