The company that will be set up within the borders of Canada has a few options to choose from, unlike what some other countries offer to business owners. The options include what type of business to set up, how it will be set up, according to the province or federal standards and how it reports its financial information. Some of the choices are optional, while others are not and will be required depending on the exact revenue earned and industry the business operates in. Going through all of the steps is not complicated, however, just a matter of getting the right ones done in order to remain compliant.
Operate as a Subsidiary or a Branch
The two ways to operate a business in Canada include forming a subsidiary or a branch operation of another business. Branch operations stem from a larger operation and have more tax breaks to a company, especially if the main branch is from a different country. A subsidiary often operates as a standalone business that is just affiliated with another business set up elsewhere. There aren’t nearly as many tax breaks for this route and therefore it is the lesser chosen of the two, especially for small and medium sized businesses.
Declare Federal or Provincial Corporation
Canada is unique in how a few other countries are, such as the United States, in that it has several provinces within the country. Some countries are simply a country and have no farther boundaries to work within, making for just one decision on how to set up business. When you are incorporating in Canada, there is an option to do business within the specific province, such as the Yukon or Alberta or to set it up under federal jurisdiction of Canada. The downside of filing under a province is that if the business grows and another branch needs to be set up in a different province, then the process needs to happen each time a new province is added. Filing a federal corporation only needs to be done once and covers all of the possible locations in the country.
Compliance in all Regards
No matter how the corporation is set up, it needs to follow all of the compliance rules when reporting income and taxes to the government. Companies that earn over $30,000 Canadian dollars per quarter will need to have a special account set up where their taxes can be monitored more closely. Smaller business can elect to set up these accounts even if they don’t hit the required revenue amount and actually receive a bit of the taxes they pay in refunded back to them. Failure to meet the compliance points could result in fines and penalties against the company that could put a halt to business operations and cost a lot of money. If one does not know how to be compliant, hiring a business consultant or an experienced accountant who is trained in business tax matters could save a lot of headache and money down the road for the business.