As companies look to expand their markets outside the U.S., many are choosing to expand into Canada. An educated workforce, the lack of a language barrier and similar governmental and economic systems all combine to make Canada an attractive choice for a company looking to expand outside the U.S.
When deciding to operate in Canada, a U.S. corporation or LLC has several options including federal incorporation, provincial incorporation, and extra-provincial registration.
- Federal incorporation – often used for domestic corporations who wish to operate in multiple provinces, a federal corporation registers with Corporations Canada. (Learn more about registering federal corporations in Canada)
- Provincial incorporation – forming a domestic entity in a province
- Extra-provincial registration – similar to the qualification process in the U.S.
There are a large number of factors that go into this decision, including tax implications and laws governing employment, which are beyond the scope of this article. We will now look at the next steps required if, after considering all the options, a U.S.company decides to register extra-provincially.
Rules Governing Corporate or Business Entity Name for Extra-Provincial Registrations
When doing business in Canada, the first step is to verify the company’s ability to use its name in the chosen province and file the appropriate registration documents. This process is similar to, but not the same as, registering a company to do business in another U.S. state. Additionally, as is true of the states in the U.S., each province has its own quirks and requirements to register and maintain a company doing business there.
As in the U.S., Canadian provinces prohibit words that are considered misleading, such as words that would imply the company is another type of entity, a government agency or a company already in existence. Generally speaking, however, Canadian rules regarding name usage and availability are more stringent than those found in the U.S. Below are some key differences:
- Names of dissolved companies are deemed to conflict, even after years have passed since the company became inactive. In most U.S. states, inactive company names are considered to conflict only under certain conditions (such as the company was administratively dissolved) and for a much shorter period (months, rather than years). In Alberta, however, the name cannot be identical to the name of another company unless that company has been dissolved for more than six years. Saskatchewan has a similar provision for identical names, but looks at dissolved companies going back ten years.
- Consent: In the U.S., in the case of a similar name, it is often possible to obtain consent to use the similar name from the entity that holds it. This can be very convenient in the case of related companies with names that are considered too similar according to the regulations of a particular state. In Canada, a provision allowing for consent is often not included in the statute at all. When you do find allowance for consent, the consenting company must agree to change its name or dissolve within a given period of time, thus removing the conflict. This is true in Alberta, where the consenting entity must agree that it will change its name, dissolve or withdraw within six months of the new company’s registration.
- Name Generally Must Reflect Purpose: In some provinces, the company may come up against requirements to ensure the name is not too general – that the purpose of the company is clear from the name. While this is a strict requirement for domestic Canadian entities, and not generally used for extra-provincial entities, there are provinces, like Saskatchewan, with statutes that allow the provincial corporate administrator to decide that the name is not descriptive enough.
- In Quebec, you will run into French language requirements. Not only are all the forms and search results in French, in accordance with the Charter on French Language, the company name must also be in French. A company may also use the English version, but is required to use the French version when registering and anywhere the name is displayed in Quebec. Certain exceptions do get made – geographical and personal names do not have to be translated and exceptions can be made for certain expressions. For example, Toys “R” Us was not required to translate its name, but is registered in Quebec as Toys “R” Us, (Canada) Ltee. (“Ltee” is the French equivalent of “Ltd.”)
Registering a Limited Liability Company (LLC) to Do Business in Canada
When the U.S. company is trying to figure out how to incorporate in Canada as an LLC, it can add a wrinkle to the registration process. The provinces of Canada do not currently have limited liability company statutes and how they handle the registration of U.S. LLCs varies a great deal from province to province. The differences can range from treating them just like corporations to registering them under a different statute altogether. Below is a sampling of how different provinces handle LLCs wanting to register:
- Alberta: When a U.S. LLC wishes to register under Alberta’s statute governing extra-provincial corporations, the application for registration must be accompanied by a legal opinion issued by the company’s attorneys that attest that the LLC is a body corporate under the laws of its home jurisdiction, rather than a partnership or unincorporated association, and that it has the various attributes of a corporation, including limited liability for its members along with the ability to sue and be sued, make contracts, hold property, etc. in its own name.
- British Columbia: British Columbia specifically includes limited liability companies in the Business Corporation Act. It refers to “foreign entities” rather than foreign corporations and specifically refers to the structure of limited liability companies in its definitions, indicating that the term “director” refers to a manager and “shareholder” refers to member when used in relation to a foreign LLC.
- Ontario: In Ontario, extra-provincial LLCs do not register under the Ontario Business Corporations Act, but under the Ontario Business Names Act, as would a Limited Liability Partnership. Extra-provincial LLCs are not required to maintain an attorney for service or a registered agent, as an extra-provincial corporation would. Instead, they must provide their place of business either in Ontario, if such exists, or in their home jurisdiction if they do not have an Ontario place of business.
- Quebec: Extra-provincial entities of all types register under the “Act Respecting the Legal Publicity of Enterprises” (Loi sur la publicité légale des entreprises) and not the Business Corporations Act. U.S. LLCs are handled the same way as corporations for registration purposes.
- Saskatchewan: While The Business Corporations Act of Saskatchewan refers only to corporations when speaking of extra-provincial registrations, in practice, U.S. limited liability companies register under that act in the same way corporations do.
Registration is Only One Step in the Process
While registering as an extra-provincial entity is not a complex filing, there are a number of ways each province differs from the U.S. and from each other. When moving your business to Canada, knowing and being prepared for registration differences can help make the process smoother, minimizing delays and problems. The registration process is only one step for a U.S. company desiring to conduct business in Canada, paving the way for other tax and license registrations that may be required. To avoid issues and ensure that all the bases are covered, reviewing all requirements with an attorney versed in Canadian law is highly recommended.
This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.