Incorporated a new company in Canada - my experience so far

[DBeker]

So I thought I'd share my experience in setting up a company in Canada and if others are interested in this sort of set up, hope this helps! Essentially I recently set up a new Ltd. company in Ontario, Canada. I am an EU resident, but dual citizen with Canada. (however this Canadian citizenship should not have much influence as all foreign nationals should be able to do the same, if they wish)

Opening a Ltd. company is pretty simple and quick. It can be done online and if you are the sole shareholder/director, you don't really need to go through an accountant. I got banking sorted with RBC Royal Bank - a mainstream bank and not some EMI. I got both USD and CAD accounts as the purpose of my business is mainly for doing some import/export commodity trading (physical, not derivatives). I may or may not only focus on Canada specific trade, but I am likely to do a fair bit of third country trading as well (i.e. largely between Africa, India and the EU, but via my Canadian company).

You can set up an account online at ontario.ca and incorporate in like 10 minutes. Cost is around 300 CAD for incorporation and around 40 CAD for Business name registration

You don't need to be a Canadian citizen/resident to set up a company in some provinces in Canada (this is the case for Ontario, Quebec, BC and Alberta I think. The others might have some residency requirements)

Basic steps:
1. You should get set up with a virtual mailbox service i.e. Anytime Mailbox, iPostal1 etc. This may or may not need to be your first step (as you need to have company documents along with your ID), but if you don't have a physical address, you will need one and these are the cheapest options that I found. You will need this address during the incorporation and bank account opening process.
2. If you want a named company, then you need to reserve a name in advance. This reservation is done through private companies and the prices can vary a lot. The cheapest I found was for like 40 CAD at IncorpDirect.ca. This report is called a NUANS report
3. In less than an hour you will get an email with your reservation number and NUANS report.
4. You should then create a MyOntario account here https://signin.ontario.ca and from there you will need to get set up with the Ontario Business Registry. Set up is quick and easy, but I admit the interface isn't always user friendly. Once you get the hang of it, it's pretty straight forward to use.
5. Once in the Ontario Business Registry you can fill out the online submission along with your NUANS number and your articles and certificate of incorporation will be issued pretty much immediately after payment.

In terms of Privacy, in Ontario, your directorship, while public, is not accessible over the Internet. Only other professional services firms can access this info. So it's semi private. In Quebec it's different as they need a copy of your ID during incorporation and the Beneficial Ownership data is publicly accessible as far as I know.

This aside, once your incorporation is done, you can open a bank account. I happen to be physically in Canada this week and so I did it person - takes about 1hour and some light KYC. I spoke with the banker and she said there are no nationality/residency restrictions beyond belonging to sanctioned countries. While they prefer opening accounts in person, they are able to open remotely over Zoom and through some sort of online ID verification system. This is with RBC. My experience with my previous Ontario Limited Partnership was with National Bank and this was less easy.

I do plan on doing some trade with India and in Canada there are branches of major Indian banks that can facilitate trade finance solutions for India trade. I can open an account with them, while I am here and this is the plan. This is something that I'm keen to develop and I find in Europe this is less easy to do when you are a small-sized trader. In Canada, it seems a bit easier.

Next steps would be to get a Canadian Import/Export account number and for this I would need a GST/HST number. Both can be applied for online at the Canada.ca portal and also here foreign nationals/residents can apply. However if you are not doing Import/Export, you would not need to go through all this. GST/HST isn't manadatory unless you exceed a certain amount of revenue. I think (but not sure) that this is Canadian revenue only but not International one. Don't quote me on that part!

I am sourcing some commodities (mainly waste by-products, but also edible oils) from Canada, hence why I set up here. My next steps will be to register this Canadian company to have a branch office in the EU (most likely Belgium as I will be working with a lot of Belgian logistic partners, the port of Antwerp etc.). This EU Branch should normally get my an EORI/VAT number and hopefully a bank account. I admit banking in the EU, while better than the Canadian system, is more difficult to get set up with, beyond EMI's. But given the nature of my business, I need a 'real' bank, so potentially I may encounter some challenges.

As for Canadian/EU taxes - I don't know how this will work out just yet. I will learn as I go along I guess. In my case I need some presence in Canada due to some suppliers and buyers being here. I estimate my accounting costs to be around 500 CAD per year, at least this first year when my transactions are unlikely to be complicated.

Overall I expect my Canadian running costs to be around 1000 CAD per year, including Accounting. This figure does not include the registration fees as these are just on-off charges. Given that I need a real bank, not an EMI and need some sort of local corporate presence, this is probably the best deal that I can get. If I operate an LLC in the US as a non resident, I may save on taxes, but I won't be able to get decent banking for example. So everything has a trade off I guess. Going offshore to a more tax efficient place would not be very practical neither given my requirements.

So for those who do wish to consider Canada, this is more or less how I got the ball rolling and I hope this helps others, should they have a similar interest in setting up like this.

All the best!

 

[drspak]

HI,
your post is very interesting also because I am preparing to do a British Columbia LLP.
from my research the members of the british columbia llp have limited responsibilities to the fees paid, so it is similar to the "s.r.l." Italian.
While in the Ontario LP there are partners with liability and partners with total liability and partners with unlimited liability.
The llp british columbia is complicated to open it yourself.
The physical address is important for opening wise or other emi, a post office box is not suitable but at least a virtual office is needed.
Perhaps a USA LLC could be created to make it a partner with liability and the natural person as a partner without liability.

 

[DBeker]

HI,
your post is very interesting also because I am preparing to do a British Columbia LLP.
from my research the members of the british columbia llp have limited responsibilities to the fees paid, so it is similar to the "s.r.l." Italian.
While in the Ontario LP there are partners with liability and partners with total liability and partners with unlimited liability.
The llp british columbia is complicated to open it yourself.
The physical address is important for opening wise or other emi, a post office box is not suitable but at least a virtual office is needed.
Perhaps a USA LLC could be created to make it a partner with liability and the natural person as a partner without liability.

So I cannot say much on the BC LLP as I'm less familiar with that. However I would not say the LLP is similar to an Italian SRL. To me, in Canada you can apply the SRL abbreviation in French to LLP's (at least in Ontario, not sure about BC) but this is not the same 'definition' as the Italian SRL. The actual Italian SRL is more like a Canadian Ltd (i.e. an actual incorporation). That said I do have an Ontario LP in addition to the Incorporated Ltd I mentioned in my original post. For the type of business that I am doing, I need an incorporated entity and the LP would not let me do all that I need to do. My experience with the two is that while you don't have any real reporting requirements nor compliance obligations with the LP/LLP, banking and getting access to trade finance etc. is more complicated. On the other hand, the Ltd. has more compliance obligations, but it's easier to engage in financial transactions. Indeed you can get a Wise account for the LP/LLP but I am under the impression that getting a normal bank account for the LP needs to be done in person due to the lax reporting structure of this type of entity. The Ltd. has more obligations and thus easier to sort out banking - as they are more confident in dealing with such structures, and therefore they have more tolerances to open accoutns remotely (at least with an RBC branch in suburban Toronto, but possibly other banks as well)

 

[JohnLocke]

Thank you for your detailed feedback about setting up a company in Canada, it is really very informative for someone who has not yet dealt with this.

 

[drspak]

HI,
I currently import humalite from Canada to a European country.
the problem that many European customers have tried to contact my supplier directly which is written on the bags.
I want to create a company in Canada, have my own private label bags made and export to Europe.
Humalite is also present in Spain, Germany and Hungary but of very poor quality, not to mention the one that comes from China.
I ask you how much your limited company in Ontario costs you to manage as an accountant.
did you open it as a Canadian citizen?

for Ontario LP how did you do for the second partner?

Thank you

 

[DBeker]

Ok - I too am in the import/export game. I am not a premium member here so I have no idea if we can talk through DM's on Humalite. I am in Canada until Thursday and I might be able to help, while I'm on the ground here (am in the Toronto area). I am based in Europe otherwise. I am not familiar with Humalite, but I do trade in other commodities - so maybe some of these lessons learned can apply to Humalite. For you to export from Canada under your own name - I don't think your LP will be a suitable vehicle for this. Mainly because I don't think you will find a suitable banking solution, as a non-resident and not physically in Canada to open the account. I think you will be better off incorporating instead. You will stand a better chance in opening a bank account if your company is incorporated as it will be a legal entity with its own tax obligations. An LP is pass-through and I get the feeling that Canadian Banks are increasingly more difficult with these types of structures. So while I do not claim any expertise on this subject matter - please just treat this as an unqualified opinion at best.

For my Ontario LP, I previously used my French company (SAS) as the General Partner. Since incorporating my Ontario Ltd. I have changed the GP to this. I have a very different use case for my Ontario LP, although it is closely related to my Ltd. If you happen to have an Italian SRL (I may have misunderstood, but I assume you are Italian?) you can register that in Ontario as an Extra-Provincial Limited Liability Company and make that as a GP of your Ontario LP. BUT I will tell you right now that you are so not likely to ever be successful in opening a bank account if you do so.

To export (or import) with Canada, in addition to having an incorporated company (or LP as well I suppose), you will need a GST/HST number and once you have this, you will need a Canadian import/export account number. Both of these are issued from the federal government and not the Ontario provincial one.

I will be setting up these accounts for myself in the coming days (or perhaps after I return to Europe, depending on my schedule here). That said these can be done online and are not particularly complicated to obtain.

If you don't want to do all this, the only other suggestion I have is that you form an agreement with your suppliers to bag the humalite under your own branding and contact details. For the actual exporting, I guess the supplier will be the consignor (they will likely have all the Canadian credentials to do so) on the B/L when you import and warehouse the goods, this B/L data won't be known to your customers (at least not casually - but they can find out easily through various EXIM trade portals that scan global trade flow data that passes through customs. ) The EU fortunately makes this somewhat difficult. But US, Canada and many other countries can make this info readily available.

 

[clemens]

To export (or import) with Canada, in addition to having an incorporated company (or LP as well I suppose), you will need a GST/HST number and once you have this, you will need a Canadian import/export account number. Both of these are issued from the federal government and not the Ontario provincial one.

Is it difficult to get this number if you already incorporated a company in Canada?

 

[Xshore]

For my Ontario LP, I previously used my French company (SAS) as the General Partner

Great info!
Do you have more info on starting a LP in Ontario? Is the process similar to a Ltd?
Say if I don't need a bank account, can this be done even simpler and cheaper?

 

[DBeker]

Great info!
Do you have more info on starting a LP in Ontario? Is the process similar to a Ltd?
Say if I don't need a bank account, can this be done even simpler and cheaper?

Process for an LP is very similar - all can be done online in your MyOntario account. Fees, might be slighly higher - can't remember. It's either 300 CAD or 360 CAD - however an LP has a lifespan of 5 years and needs to be renewed. If you don't need any bank account and just need an LP for 'cosmetic' purposes, then it's a very simple process to set up. You can even use a fake name for the GP and even a fake Ontario address if you want if you don't need any bank account. But you won't be able to do any real transactional business like this.

Is it difficult to get this number if you already incorporated a company in Canada?

It's pretty straight forward - a few days after incorporating in Ontario (and also other provices too, except for Quebec and maybe a couple of others) you will get a letter from the Canada Revenue Agency, informing you of your Canadian Federal Business Number. In fact even prior to receiving this letter, you will be able to see this Federal Business Number in your MyOntario online account. With this number you can go online to the Canadian Revenue Agency website and apply for GST/HST, Import/Export accounts etc.

 

[kilor]

Overall I expect my Canadian running costs to be around 1000 CAD per year, including Accounting. This figure does not include the registration fees as these are just on-off charges.

That's very cheap compared to most other western European countries.

 

[DBeker]

That's very cheap compared to most other western European countries.

In my case it would be a small structure and simple import/export business, I don't have complex operations, nor any employees. Hency why my estimated operating costs for the first year would be around this 1000 CAD marker. Of course if this business grows into something, then I would expect these operating costs to go up as well. I have another company in France (the French equivalent of an LLC, called an SAS) and my operating costs in France are significantly higher than what I'd have in Canada. Mind you in Canada, I'm using Quickbooks for low-cost accounting (coupon code for the first year - so heavily discounted subscription), while in France I use a a real accounting service - so this makes a big difference cost wise.

 

[Thomas278]

As an ex Canadian resident, let me add the crucial distinction in terms of the corporation type. Ideally, you are able to set up a CCPC (Canadian Controlled Private Corp) which is taxed at under 11% - it varies based on province. See https://assets.kpmg.com/content/dam...ial-tax-rates-for-income-earned-by-a-ccpc.pdf has a good overview.

The catch is that you HAVE TO BE a tax resident in Canada. Better said, 50.1% of the NewCo share must be held by Canadian tax residents. This is a federal requirement, not provincial. Does not matter if you are a citizen or not. Otherwise, as far as I know, you can only set up a general company subject to 38% tax rate.

Hope this helps

 

[drspak]

HI What type of company did you set up? are there 2 members? Is the liability of the partners limited? Can you recommend the accountant role?

 

[Thomas278]

I set up a regular Alberta Corporation. In Alberta, Corp. has shareholders, not members.
Liability is limited to the Corp. paid up capital so long as the execs do not cross the line and ended up in criminal territory. I certainly can recommend an accountant but he is not exactly cheap. He is currently retiring. I had used his services for a few years when I had lived in Canada. Please advise.
Thomas