How to set up a company in Canada

There are numerous types of business entities in Canada. The procedures and requirements to register these lightly vary in each province, it also varies whether you have a local or foreign entity.

Before you register your business, you will need to know the type of business that suits your needs the best. In Canada the most popularly chosen business type is the limited liability company, locally known as a private corporation because it is efficient and it has a simple structure which legally allows minimizing Canadian corporate income tax. If you would like to find out which business entity fits your needs the best, please find more details on this topic below.

If you would like to set up business in Canada with a local entity you can choose from the following business entities.

– limited liability company (private corporation)

– limited liability partnership

– public limited company (public corporation)


1. The Canadian limited liability company (private corporation)

A Limited Liability Company (LLC) is a hybrid structure with characteristics of both a corporation and a partnership. Like a corporation, LLC offers legal liability protection to its members, and similar to a partnership, this investment entity offers flow-through treatment for tax purposes.

A Canadian limited liability company can be registered with a minimum capital of only CA$1 and by a minimum of one or two shareholders depending on which province you would like to register in. Most of the provinces additionally require the appointment of one resident director except British Columbia, New Brunswick, Nova Scotia, Quebec and Yukon.

After the setup, the company shall file an annual tax return and financial statements. The best uses for this type of business entity is good for most Clients willing to do business in Canada.

2. The Canadian limited liability partnership

Currently only Ontario and British Columbia arrange registration of limited liability partnerships. The registration requires the promotion of general partner(s), who can profit from limited liability to the partnership’s losses and debt and limited partners, who profit from full limited liability. Regarding the appointment of resident partner(s) or manager there is no requirement. In the rest of the Canadian provinces, local regulations particularly restrict their use to lawyers, accountants and other regulated professions or do not even arrange registration of limited liability partnerships.

Limited liability partnerships are tax transparent entities which means that the earnings are automatically deemed distributed to the partners, therefore they must figure in their personal/corporate income tax statements. A statement of income must be prepared by the partnership to the local tax authority.

Canadian limited liability partnerships have become a popular choice to the registration of a company for foreigners, but it is highly recommended to the Clients to carefully consider their advantages and their risks before opting to register this entity.

3. The Canadian public limited company (public corporation)

Basically, the Canadian public corporations are the same type of business entities as the private corporations described above. They require CA$1 minimum paid-up capital upon incorporation and it can also be formed by people with a foreign entity. The only significant difference is that their mergers and acquisitions will allow issuing freely transferable shares.

A Canadian public corporation is commonly formed when the company owners would like to finance their business by raising capital on the Toronto Stock Exchange or the Canadian Securities Exchange or by issuing to third party investors.

In case you are a non-Canadian who would like to start a business in Canada you have many opportunities to do so.

4. Starting a Canadian business when you have a business already

If you are a non-Canadian who has a business in your own country and would like to start a business in Canada you have to go through different registration procedures for extra provincial incorporation. For example, if you already have an operating corporation in Hungary, and you would like to open business in Ontario, you need to register your business as an extra-provincial corporation in that province. Generally all the Canadian provinces have similar requirements. If you would like to do business in more than one province, you shall register with each province separately.

5. Starting business in Canada as an immigrant

If you would like to live in Canada and start a business, you will be able to come to Canada as a business immigrant.

As a business immigrant you can choose between being a self-employed person or to do a start-up visa. Also, you must have either experience in cultural activities or athletics, and intend and be able to make a contribution to the cultural or athletic life on Canada, or to be able to buy and manage a farm in Canada.

6. Starting a business in Canada without living in Canada

If you would like to start a business in Canada without immigrating or becoming a Canadian citizen or a landed immigrant, you still have possibilities to do so. Although the rules regarding who can and who can’t start different types of businesses vary in each province, the main concept is the same. The most flexible rules regarding non-resident businesses is in British Columbia where anyone has a possibility to start a sole proprietorship, partnership or corporation if you fulfill some conditions. You need to have a physical address for your business, and the correct work permit from Citizenship and Immigration Canada and to submit an Investment Canada application for review. After these, you shall follow the necessary steps to set up your business in Canada.

In some provinces they might not allow non-Canadians to start the type of business they would like to start, so you might set up a partnership or a corporation with one or more Canadian citizens or landed immigrants.

For corporations, as per the Canada Business Corporations Act,

“At least 25 per cent of the directors must be resident Canadians (if 25% of the directors is not a whole number round up to the nearest whole number). Where a corporation has less than four directors, at least one must be a resident Canadian (S. 118(3))”.

When you start a company in Canada, if that company is a partnership, you will need to register your partnership in the province or territory you are going to do business in.

Contact the provincial registry of the province you want to do business in and go through its required procedure.

If the company you are starting is a corporation, you will first need to decide whether you are going to incorporate your business federally or provincially.

Are you interested in setting up a company in Canada? We, as a Hungarian Budapest based law firm (ügyvédi iroda) can assist you, with the assistance of our Canadian partner, in the company formation procedure in Canada as well!

Dobos István attorney at law (ügyvéd; Budapest)/ Zatykó Anna


Phone / Whatsapp: +36303088151