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Can Non-Canadians Start a Business in Canada? Understanding the Requirements for Ontario and Federal Corporations
Can Non-Canadians Start a Business in Canada? Understanding the Requirements for Ontario and Federal Corporations
Introduction
Canada is an attractive destination for entrepreneurs and investors from around the world. If you’re a non-Canadian considering starting a business in Canada, you might be wondering about the legal requirements, especially in terms of incorporation. This article will guide you through the key considerations for incorporating a business in Canada, focusing on both Ontario and Federal Corporation requirements related to shareholders, directors, and officers.
- Can Non-Canadians Start a Business in Canada?
Yes, non-Canadians can start a business in Canada. However, there are specific legal requirements and considerations that must be taken into account, particularly when it comes to incorporating a company. The rules differ depending on whether you choose to incorporate federally or provincially (e.g., in Ontario).
- Federal Incorporation in Canada
Federal incorporation allows you to operate your business across all provinces and territories in Canada. This can be advantageous if you plan to do business in multiple regions.
2.1 Shareholder Requirements
- Residency: There are no residency requirements for shareholders in a federally incorporated company. This means that non-Canadians can own 100% of the shares.
- Number: A federal corporation must have at least one shareholder. There is no maximum limit on the number of shareholders.
2.2 Director Requirements
- Residency: At least 25% of the directors of a federally incorporated company must be Canadian residents. If the company has fewer than four directors, at least one must be a Canadian resident. Canadian resident for the purpose of this requirement is defined as permanents residents or Canadian citizens.
- Number: The corporation must have at least one director. The number of directors can be specified in the articles of incorporation.
2.3 Officer Requirements
- Residency: There are no residency requirements for officers in a federal corporation. Non-Canadians can serve as officers (e.g., CEO, CFO) without restriction.
- Ontario Incorporation
If you plan to operate your business primarily in Ontario, you may choose to incorporate provincially. Most professional corporations must also be incorporated at the provincial level.
3.1 Shareholder Requirements
- Residency: Similar to federal rules, there are no residency requirements for shareholders in an Ontario corporation. Non-Canadians can hold all the shares.
- Number: An Ontario corporation must have at least one shareholder.
3.2 Director Requirements
- Residency: Contrary to federal corporations, there is no requirement that at least 25% of the directors of a federal corporation must be resident Canadian. Because of this reason, many of our clients who are non-residents choose to incorporate at the provincial level.
- Number: The corporation must have at least one director.
3.3 Officer Requirements
- Residency: Like federal rules, there are no residency requirements for officers in an Ontario corporation. Non-Canadians can occupy these positions freely.
- Choosing Between Federal and Ontario Incorporation
Deciding whether to incorporate federally or in Ontario depends on your business needs. Federal incorporation is ideal if you plan to expand across Canada, while Ontario incorporation may be simpler if your business will operate primarily within Ontario. You may choose to proceed with an Ontario corporation if you are not a Canadian resident as there is no requirement that at least 25% of the corporation be Canadian residents (permanent resident or Citizen).
- Conclusion
Starting a business in Canada as a non-Canadian is entirely possible, but understanding the legal requirements is crucial. Whether you choose to incorporate federally or in Ontario, knowing the rules around shareholders, directors, and officers will help you navigate the process smoothly.
Contact Us for Legal Assistance
If you’re considering starting a business in Canada and need legal guidance, our firm specializes in business law. Contact us today for a consultation to ensure your business is set up for success.
ABOUT THE AUTHOR:
Shahriar Jahanshahi is the founder and principal lawyer at Jahanshahi Law Firm with a practice focus on representing business star-ups and investors in the province of Ontario. For further information about Shahriar Jahanshahi, click here.