The Main Features of Federally Incorporated Company
The major advantage of incorporating your business on a federal level is that your business will have increased protection and broader business rights. Registering your business with Federal Government entitles you to conduct your business across all Canadian provinces under the same trading name, even though, there might be a company in another province already operating under the similar or the same business name. For example, had you federally incorporated your business under the name of Cypress Technologies Inc. in Ontario, you’d still be eligible using the same business name in Manitoba even though there is another existing business operating under the same name.
This isn’t the case when you incorporate your company provincially. When you incorporate on the provincial level, you can only operate your business within that particular jurisdiction and you’ll have no business name protection outside of your province or region. Now, should you later decide to expand your business outside of your province of incorporation, you can still register your business in another province (see provincial registrars for more details). However, you may be running a risk that another province may already have an existing business operating under the same or similar name. This could prevent you from operating under your chosen business name and possibly increase your operating costs due to the need of running marketing campaigns for essentially two companies.
Another drawback of provincially incorporated business is that provincially incorporated companies don’t receive global recognition; so, you should take this into your consideration when trying to decide the best option for your business.
Disadvantages of Federal Corporation
As you are learning about differences between federally and provincially incorporated companies, you may be wondering why everybody in Canada doesn’t just follow the same suite. This may be due to the additional paperwork and increased cost of running a federally incorporated business.
Here is the list of the most common disadvantages of federal corporations:
- Although federal and provincial companies are regarded to as “any party” (they don’t require to be combined), should you choose to incorporate federally you’ll still be required to register your business in the province or region in which you intend to carry out the business. (Note that when you complete the federal company registration process through the Canadian Business Online Application Center, it allows you to register your business within provinces of Saskatchewan, Ontario, Nova Scotia, Newfoundland and Labrador within the same registration form, but you’ll still need to contact and register your business within other provinces that are outside of the registration form).
- A federally incorporated company will incur more administrative work due to the need of complying with the corporate requirements of the Federal Director of Legal Affairs, as well as providing a documentation required to be submitted to the provincial government within which the business operates.
- Operating federally incorporated company carries with itself an increased cost. The current filing fee for an online federal business registration (Filing the Articles of Incorporation) currently costs $200 ($250 if submitted by regular mail or fax). The NUANS name search report costs approximately $75 per search. The total cost increases with the additional registration requirements and added paperwork required by both levels of the government.
Bottom line is if your business requires nationwide trading name protection, or if you are intending to operate your business internationally, you should choose to incorporate your business as a federal entity.