Business Setup & Incorporation in Canada
Choose the right structure, set up your shares and shareholders correctly, and open your Canadian business on a solid foundation. Solaris helps entrepreneurs plan and prepare the setup, and coordinates with independent lawyers and accountants.
Book a Free Consultation Compare Business StructuresWhat Setting Up a Business Really Involves
Many owners think incorporation is just filing a form. In practice, the decisions you make on day one (structure, who owns what, how profits are shared, who is responsible if something goes wrong) are the hardest and most expensive to change later.
Choose a structure
Sole proprietorship, partnership, corporation or another form. Each has a different level of personal liability, tax treatment and cost to maintain.
Choose where to incorporate
Federal or provincial. This affects name protection, where you can operate, annual filings and some governance rules.
Design your ownership
Share classes, number of shares, who holds them, and a shareholders’ agreement that sets out each owner’s rights and exit options.
Business Structures in Canada Compared
This table gives a quick comparison. Your best choice depends on your goals, your partners, your risk level and your tax situation.
| Structure | What it is | Liability of owners | Typical use | Main points to know |
|---|---|---|---|---|
| Sole proprietorship | One person operates the business in their own name or a registered business name. Not a separate legal entity. | Unlimited. Personal assets can be used to pay business debts. | Freelancers, very small low-risk businesses. | Cheapest and simplest. Business income is reported on your personal tax return. Name registration is required in most provinces. |
| General partnership | Two or more people carry on a business together. Not a separate legal entity for liability. | Unlimited, and each partner can be responsible for the whole debt (joint and several). | Small businesses between trusted partners. | A partner can bind the partnership. A written partnership agreement is strongly recommended. |
| Limited partnership (LP) | At least one general partner who manages the business and one or more limited partners who invest. | General partner: unlimited. Limited partner: limited to their investment, if they do not take part in management. | Real estate and investment projects, fund structures. | Must be registered. Often the general partner is itself a corporation. |
| Corporation (federal or provincial) | A separate legal person owned by shareholders and run by directors and officers. | Limited. Shareholders risk what they invested, with exceptions (see “Liability” below). | Most operating businesses that want to grow, hire, or bring in investors. | Can hold assets, sign contracts, issue shares and continue after an owner leaves. More filings and records are required. |
| Unlimited liability company (ULC) | A corporation where shareholders can be responsible for the company’s debts if it cannot pay. | Unlimited for shareholders, in certain circumstances. | Mainly cross-border tax structures. Available only in some provinces (for example BC, Alberta and Nova Scotia). | Specialized. Get tax advice in both countries before using one. |
| Professional corporation | A corporation owned by regulated professionals (for example doctors, lawyers, accountants). | Limited for business debts, but not for professional negligence. | Licensed professionals. | Needs approval from the professional regulator and has ownership restrictions. |
| Non-profit corporation / society | An organization set up for a purpose other than profit. Governed by federal or provincial non-profit law (for example a society in BC). | Limited for members and directors, with some exceptions. | Community, cultural and charitable groups. | Profits cannot be paid out to members. Different rules apply for charity status. |
| Co-operative | A business owned and controlled by its members, usually one member one vote. | Limited, generally. | Member-owned businesses and community enterprises. | Governed by provincial or federal co-operative legislation. |
| Branch of a foreign company | The foreign company itself registers to carry on business in Canada. No new legal entity. | The foreign parent is directly responsible for the branch’s obligations. | Foreign companies testing the Canadian market. | Requires extra-provincial registration in each province where it operates. Tax filing for Canadian income is still needed. |
| Canadian subsidiary | A new Canadian corporation owned by the foreign parent. | Limited. The parent is generally protected from the subsidiary’s debts. | Foreign companies planning long-term operations or hiring in Canada. | Separate legal entity with its own directors, records and tax filings. Often the preferred structure. |
Tax treatment, registration rules and professional regulation vary. This comparison is a general guide, not advice for your situation.
Liability: Who Is Responsible If Something Goes Wrong?
Limited liability (corporation)
A corporation is a separate legal person. If it cannot pay its debts, creditors can generally go after the company’s assets, not the shareholders’ personal assets. A shareholder normally risks only the amount they paid for their shares.
This separation is often called the “corporate veil”.
Unlimited liability (sole proprietor, general partner)
There is no legal separation between you and the business. Business debts, lawsuits and unpaid taxes can reach your home, savings and other personal assets. In a general partnership, you can also be responsible for the actions and debts of your partners.
When limited liability may not protect you
- Personal guarantees. Banks, landlords and suppliers often ask the owner to guarantee the company’s debt personally.
- Director liability for certain debts. Directors can be personally responsible for unpaid employee wages (within limits set by law), unpaid payroll source deductions and unpaid GST/HST, and for some environmental obligations.
- Directors’ duties. Directors must act honestly and in good faith in the best interests of the corporation and with reasonable care. Breaching these duties can lead to personal claims.
- Piercing the corporate veil. A court may ignore the company if it is used as a sham, to commit fraud, or if business and personal finances are mixed together.
- Your own wrongdoing. Incorporation does not protect you from claims for your own negligence or professional errors.
Good records, separate bank accounts, proper insurance and a clear governance structure all help keep the protection you set up.
Federal vs Provincial Incorporation
In Canada you can incorporate under federal law (the Canada Business Corporations Act, CBCA) or under the law of a province or territory. Both create a real corporation with limited liability. The differences are mostly about name protection, where you can operate and how you file.
- The corporate name is protected across Canada (subject to existing names and trademarks).
- You can carry on business in any province, but you must still register in each province where you operate (extra-provincial registration).
- Filed with Corporations Canada, usually online.
- Corporations must keep a register of individuals with significant control (generally owners of 25% or more of votes or value). Corporations Canada also keeps a public registry of this information.
- Good fit for businesses planning to operate in several provinces or to build a national brand.
- The name is protected only in that province.
- Often simpler and cheaper for a business operating mainly in one province.
- Filed with the provincial registry (for example BC Registry Services, Ontario Business Registry, Alberta Corporate Registry, Quebec’s Registraire des entreprises).
- You must register extra-provincially in each other province where you do business.
- Rules on directors, shareholder agreements, annual filings and transparency registers differ by province.
Key differences by province
| Jurisdiction | Governing law | Names and filings | Points to watch |
|---|---|---|---|
| Federal | Canada Business Corporations Act | Name search (NUANS) required. Annual return filed with Corporations Canada. | Register of individuals with significant control. Extra-provincial registration is needed to operate in each province. |
| British Columbia | Business Corporations Act | Name approval through a Name Request. Notice of Articles and Articles filed with BC Registry. Annual report. | Private transparency register for significant individuals kept at the company’s records office. Unlimited liability companies are allowed. Numbered companies are common. |
| Alberta | Business Corporations Act | Name search report required. Annual return filed with the Alberta Corporate Registry. | Unlimited liability companies are allowed. Shareholder agreement and share terms are set by the articles and bylaws. |
| Ontario | Business Corporations Act (Ontario) | Name search report required. Annual return filed with the Ontario Business Registry. | Register of individuals with significant control must be kept. Ontario does not have unlimited liability companies. |
| Quebec | Business Corporations Act (Quebec) | Registered with the Registraire des entreprises. Annual update required. | The company name and public signage must comply with French-language rules. Civil law, not common law, applies to many contract and property matters. |
| Nova Scotia | Companies Act (and others) | Registered with the Registry of Joint Stock Companies. | Nova Scotia unlimited liability companies are widely used in cross-border structures with U.S. owners. |
| Other provinces and territories | Each has its own business corporations legislation | Each has its own registry, name rules and annual filing. | We confirm current rules for your province at the time of filing. |
Rules on minimum directors, resident directors, registers and annual filings change from time to time. Solaris confirms the current requirements for your province before filing.
Shares and Share Classes
A share is a unit of ownership in a corporation. The articles of incorporation set out what classes of shares exist and what rights attach to each class. Setting this up correctly at the start gives you flexibility later for investors, family planning, employee incentives and tax planning.
Common types of share classes
| Class | Votes | Dividends | On wind-up | Typical use |
|---|---|---|---|---|
| Common shares | Usually yes, one vote per share. | Paid only if the directors decide to declare a dividend, after any preferred entitlements. | Share in what is left after creditors and preferred shareholders are paid. | Founders and main owners. Most small corporations have only common shares. |
| Preferred shares | Often non-voting. | Usually a fixed rate or priority over common shares. | Paid before common shares. | Investors who want priority and lower risk, or planning tools such as estate freezes. |
| Voting shares | Yes. | Depends on the class terms. | Depends on the class terms. | Owners who control the company. |
| Non-voting shares | No votes (except where the law gives a class vote). | Often participating. | Participating. | Family members, employees or investors who share in profits but not in control. |
| Discretionary dividend classes (Class A, B, C…) | Varies. | The directors can pay dividends to one class and not another, within the law. | Usually equal or by class terms. | Flexible income sharing among several shareholders. Needs tax advice. |
| Redeemable / retractable shares | Usually no. | Usually a fixed rate. | The company may buy them back (redeemable), or the holder may require the company to buy them (retractable) at a set price. | Loans converted to shares, estate planning and exit planning. |
| Convertible shares | Depends. | Depends. | Depends. | Investors who may convert to common shares later (common in start-ups). |
Share features explained
Voting
Voting shares elect directors and approve major changes. A person with more than 50% of the votes controls ordinary decisions. Some decisions (such as changing the articles or selling substantially all assets) need a higher threshold, often two-thirds.
Participating
Participating shares share in the company’s profit and growth beyond any fixed dividend. Non-participating shares receive only their stated amount.
Cumulative
Where a preferred dividend is cumulative, unpaid dividends from past years must be paid before common shareholders receive anything.
Redemption and retraction
Terms that allow shares to be bought back by the company or sold back by the holder, at a stated price and under solvency tests set by law.
Conversion
The right to exchange one class of shares for another, often used to protect investors in early rounds.
Pre-emptive rights
A right to buy new shares first, so an owner’s percentage is not diluted without their agreement. Usually set in the articles or a shareholders’ agreement.
Example ownership structures
One class of voting common shares held by the founder. Simple and low-cost, with room to add classes later.
Common shares split by agreed percentages, with a shareholders’ agreement covering decisions, salaries, dividends and exits.
Founder holds voting shares. Investors or family members hold non-voting or preferred shares, often with set dividends or conversion rights.
Private companies are normally restricted from offering shares to the public. Issuing shares to investors is subject to securities law, and a private issuer exemption usually applies when the company has a limited number of holders and share transfers are restricted. Check the rules before raising money.
Shareholders: Rights, Roles and Agreements
Who can be a shareholder
- Individuals (resident or non-resident).
- Other corporations, including foreign companies.
- Family trusts and holding companies.
- Employees through share plans or options.
- Outside investors.
Foreign ownership can have tax and regulatory consequences. See “Foreign-owned businesses” below.
Basic shareholder rights
- Vote on electing directors and on major corporate changes.
- Receive dividends if and when declared, in line with the share class.
- Receive financial statements and certain company information.
- Share in assets on wind-up, in line with the share class.
- Apply to court if the company acts in a way that is oppressive or unfairly prejudicial to them (the oppression remedy).
Majority and minority shareholders
| Level of ownership | What it generally means |
|---|---|
| More than 50% of votes | Controls the election of directors and ordinary decisions. |
| 66.67% or more of votes | Can pass “special resolutions”, such as changing the articles, amalgamating or approving some sales of assets. |
| Less than 50% | Minority shareholder. Protected mainly by the law (for example dissent and oppression rights) and by the shareholders’ agreement. Without an agreement, a minority owner can be outvoted on most matters. |
| Exactly 50 / 50 | Risk of deadlock. A shareholders’ agreement should set a way to resolve disputes. |
What a shareholders’ agreement should cover
- Who sits on the board and who runs day-to-day operations.
- Decisions that need unanimous or special approval.
- How profits are paid out and when salaries, bonuses or dividends are paid.
- Restrictions on selling shares, including a right of first refusal for other shareholders.
- Tag-along rights (minority can join a sale) and drag-along rights (majority can require everyone to sell).
- Buy-sell provisions for death, disability, divorce, departure or deadlock (including “shotgun” clauses).
- Non-compete, non-solicitation and confidentiality undertakings.
- How new shareholders or investors are brought in and how new shares are priced.
- How disputes are resolved (mediation, arbitration).
If all shareholders agree, a unanimous shareholder agreement can transfer some of the directors’ powers to the shareholders. It also transfers the related liabilities to them. A lawyer should draft it.
Records every corporation must keep
- Articles of incorporation, bylaws and any shareholder agreements.
- Registers of shareholders, directors and officers, and share transfers.
- Register of individuals with significant control (where required by the jurisdiction).
- Minutes of directors’ and shareholders’ meetings and written resolutions.
- Annual financial statements and tax filings.
Directors and Officers
Directors
Directors manage or supervise the management of the corporation. They are elected by the shareholders. A corporation needs at least one director. Directors owe duties of loyalty and care to the corporation and can be personally responsible in the situations listed in the liability section above.
Officers
Officers (for example President, Secretary, Treasurer) are appointed by the directors and handle daily operations. One person can be shareholder, director and officer of a small corporation.
Residency rules for directors have been removed in many jurisdictions in recent years, but some provinces and some types of company still have conditions. Confirm the rule for your province before you appoint directors.
Foreign-Owned Businesses and Subsidiaries
Non-residents can own and operate Canadian corporations. A few business and tax points are worth planning for early.
Branch or subsidiary?
A branch is the foreign company operating directly in Canada, so the parent is directly responsible for its obligations. A Canadian subsidiary is a separate corporation that limits the parent’s exposure and is usually easier for hiring, banking and contracting.
Canadian-controlled private corporation (CCPC)
CCPC status gives access to certain tax benefits for small businesses, including the small business deduction. A corporation controlled directly or indirectly by non-residents generally does not qualify, which changes the tax picture.
Investment Canada Act
When a non-Canadian establishes or acquires a Canadian business, a notification or review under the Investment Canada Act may be required, depending on the size and sector of the investment.
Dividends and payments abroad
Dividends and some other payments to non-resident owners are generally subject to Canadian withholding tax. Tax treaties may reduce the rate. Get tax advice before planning payments to the parent.
Solaris does not provide immigration advice or services. If you also need immigration advice, please speak to a licensed Canadian immigration consultant (RCIC) or lawyer.
How Solaris Helps With Setup and Incorporation
We guide you through the business decisions, prepare the information needed for filing and coordinate with independent legal and tax professionals where their advice or signature is required.
Structure planning
We walk you through the options in this page and prepare a clear summary to discuss with your lawyer and accountant.
Federal or provincial incorporation support
Name search coordination, preparation of incorporation information, and filing support with the relevant registry.
Share and ownership planning
Help preparing a proposed share structure, ownership table and list of points for your shareholders’ agreement.
Minute book and records
Setting up the corporate records: registers, resolutions and minute book.
Registrations after incorporation
Coordination of business number, GST/HST, payroll, provincial registrations, business licences and extra-provincial registration.
Business plan and launch support
Business plans, financial projections, market research and growth planning to take the new company from registration to operation.
Our Setup Process
Free consultation
We learn about your business, owners, funding and plans in Canada.
Structure and jurisdiction recommendation
We prepare a summary comparing the options that fit your situation, for review with your lawyer and accountant.
Name selection and search
We check that your preferred name is available and meets the registry’s rules.
Share structure and ownership
We map out classes of shares, who owns what, and the key terms for your shareholders’ agreement.
Filing and registration
The incorporation documents are prepared and filed with the federal or provincial registry.
Corporate records and tax accounts
Organizational resolutions, registers and minute book, then business number, GST/HST and payroll accounts as needed.
Launch support
Banking, licences, business plan and market entry planning.
Checklist After Incorporation
Within the first weeks
- Hold the first directors’ meeting or sign organizational resolutions.
- Issue shares and record them in the share register.
- Sign the shareholders’ agreement.
- Open a corporate bank account.
- Get a CRA business number and register for GST/HST if required (generally once revenue passes $30,000 over four consecutive quarters, or earlier by choice).
- Register for payroll if you will have employees.
Ongoing every year
- File the annual return or annual report with the registry.
- File the corporate income tax return (T2) within six months of year-end.
- Hold annual shareholder meetings or sign annual resolutions.
- Keep records, registers and the minute book up to date.
- Renew municipal licences and any required insurance.
Frequently Asked Questions
Is Solaris a law firm or an immigration consultant?
No. Solaris is a business consultancy. We do not give legal, tax or immigration advice and we do not represent clients before government. Legal and tax matters are handled by independent Canadian lawyers and accountants. For immigration matters, please speak to a licensed RCIC or lawyer.
Should I incorporate federally or provincially?
If you will operate mainly in one province, provincial incorporation is often simpler and cheaper. If you plan to operate across Canada or want the name protected nationally, federal incorporation may fit better. In both cases you must register in each other province where you do business.
What is the difference between a sole proprietorship and a corporation?
A sole proprietorship is you, so you are personally responsible for business debts. A corporation is a separate legal person that generally limits your personal responsibility, but needs more paperwork, records and filings.
What is a numbered company?
A corporation whose legal name is a number (for example 1234567 B.C. Ltd.) instead of a chosen name. It can use a different operating name registered separately. Numbered companies are faster to incorporate because no name approval is needed.
How many shares should I issue?
There is no required number. Many small businesses issue 100 common shares or a larger round number to make future splits easier. The more important decision is how the classes and voting rights are set up.
Can a non-resident own a Canadian corporation?
Yes. Non-residents can own and operate Canadian corporations, subject to tax rules (such as loss of CCPC status), possible Investment Canada Act requirements and any sector-specific restrictions. We recommend taking legal and tax advice before you start.
Do I need a shareholders’ agreement if I am the only owner?
Generally no, but it becomes important as soon as there is a second owner, an investor or a family member holding shares. It is much easier to agree on terms at the start than during a dispute.
Are directors personally liable?
Not for ordinary company debts, but the law can make directors personally responsible for certain obligations, such as unpaid employee wages, source deductions and GST/HST, and for breach of their duties. Good record keeping and insurance reduce the risk.
How long does incorporation take?
Online filings can be completed within a few days once the name and documents are ready. Preparing the share structure and shareholders’ agreement takes longer and depends on how many owners are involved.
Ready to Set Up Your Business in Canada?
Book a free consultation. We will help you compare structures, plan your ownership and prepare for incorporation with your lawyer and accountant.
Book Your Free Consultation See Business Plan WritingSolaris Business Development Corporation is not a law firm, accounting firm or licensed immigration consultant and does not provide legal, tax or immigration advice or representation. Information on this page is general and may not apply to your situation.