Incorporating in BC or Federally: Which Fits a Business Based in BC?

Founders in British Columbia can incorporate under the BC Business Corporations Act or under the federal Canada Business Corporations Act. Both create a company with limited liability, and both are used by businesses of every size.

The choice affects your name, your directors, your filings and your costs over time. This article compares the two routes so you can see which fits your plans before you file.

Two routes, one basic result

A BC company is formed under section 10 of the Business Corporations Act by signing an incorporation agreement and filing an incorporation application with the BC registrar. A federal corporation is formed by filing articles of incorporation with Corporations Canada under the Canada Business Corporations Act (CBCA).

Either way you end up with a separate legal entity that can own property, sign contracts and issue shares. The practical differences lie mostly in names, directors and ongoing paperwork. If you are still deciding whether to incorporate at all, our article on when incorporating in BC makes sense is a good place to start.

A federal corporation still has to register in BC

This is the point many founders miss. Under Part 11 of the BC Business Corporations Act, a corporation formed outside BC, including a federal corporation, must register in BC as an extraprovincial company within 2 months after it begins to carry on business here (section 375). Having an office, a warehouse or a BC address or phone number in advertising are among the things that count as carrying on business in BC.

A federal corporation does not have to reserve its name in BC before registering, and the BC registrar must register it once the application is complete (sections 376 and 377). After that it has ongoing BC obligations, including:

• A BC annual report, due within 2 months after each anniversary of its BC registration (section 380).
• Notices of change filed with the BC registrar when its registered information changes (section 381).
• An attorney in BC, unless its head office is in BC under its own charter (section 386).

The federal corporation also files its own annual return with Corporations Canada (CBCA section 263). In practice, a federal company based in Vancouver deals with two registries for the life of the business.

Names: national approval versus provincial reservation

A common reason to choose federal incorporation is the name. Corporations Canada reviews a proposed federal name against tests that apply across the country, and the Government of Canada describes an approved federal name as protected nationally. A BC company's name is approved and reserved through the BC registrar (section 22).

Two cautions apply. First, neither route gives you a trademark. If your brand matters, a trademark search and registration is a separate step. Second, if you plan to expand into another province, both a BC company and a federal corporation will usually need to register there as well.

Directors and residency

This difference can decide the question on its own.

• BC company: must have at least one director, or at least three if it is a public company (section 120). The director qualification rules in section 124 do not include a Canadian residency requirement.
• Federal corporation: under CBCA section 105(3), at least 25% of the directors must be resident Canadians, and if there are fewer than four directors, at least one must be a resident Canadian. Some regulated sectors have stricter rules.

If the founders or investors live outside Canada, the federal residency rule may require a local director you would not otherwise appoint.

Ownership records and ongoing compliance

Both regimes require privately held companies to track the people who ultimately own or control them. A BC private company must keep a transparency register of its significant individuals at its records office. Our article on the BC transparency register explains what goes in it. A federal corporation keeps a register of individuals with significant control and must also send information from that register to Corporations Canada (CBCA section 21.21).

Add the two sets of annual filings for a federal company registered in BC, and the ongoing administration is usually heavier on the federal side.

Which route fits your plans?

A BC company is often the simpler fit if:

• the business will operate mainly in British Columbia,
• some founders or directors live outside Canada, or
• you want one registry and one set of annual filings.

Federal incorporation may be worth the extra steps if:

• you plan to operate in several provinces soon,
• a nationally approved name is important to your brand, or
• investors, lenders or partners in other provinces expect a CBCA corporation.

You are not locked in forever. Corporations can continue from one jurisdiction to another, but continuation has its own approvals and costs, so it is better to choose with your plans in mind from the start.

Choosing where to incorporate? Get the structure right from day one

Our business lawyers can compare the BC and federal options for your business, prepare the incorporation documents and articles, and set up your records and filings.

Call 604-259-2844 or send us a message to arrange a consultation at our Vancouver office.