Canada Employer of Record Overview

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The Ultimate Guide To
Employment in Canada

Employing in Canada
Using Shield Geo Employer of Record Services in Canada
Payroll and Tax in Canada
Immigration and Work Permits in Canada
Setting up a Company in Canada

Canada Facts

Currency: Canadian Dollars

Employing in Canada: What You Need to Know

Canadian employment law appears complex and confusing when looking from outside view although in some ways there are many similarities to other countries. Other factors that complicate matters include the differences between laws at the federal and provincial level, and the requirements will vary depending on the industry. For these and many other reasons the following are only guidelines in the broadest sense, and professional legal services are recommended when employing in Canada.

Key Factors to Consider When Employing in Canada

There are several key areas to be aware of within Canada’s employment regulatory framework, especially for companies that plan to initiate a full local office and human resources department. These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the Canadian laws and rules for both Canadian employees as well as foreign nationals.

Employment standards in Canada provide a set of minimum standards by law for work conditions. Both the federal and provincial governments have authority over labour and employment law in Canada. The constitution gives the federal government exclusive jurisdiction over specific industries, including banking, radio and TV broadcasting, inland and maritime navigation and shipping, inland fishing, as well as any form of transportation that crosses provincial boundaries. Other industries are governed by the laws of the province.

Foreign companies entering Canada should take note that Canadian salaries may be quite high. The average salary in Canadian dollars has risen by around 18 percent since 2007. This rise, in combination with the strengthening Canadian dollar, has pushed the average salary in Canada higher than in the UK, the USA and most of Europe.

Visit the Canadian government website for labour laws

Official sites for local employment laws are also hosted per province. For example, visit Ontario’s labour website here.

Canada has both federal and provincial levels of law, thus there may be differences per the city you are doing business in. The following information should be considered as a broad and general guideline, and legal advice is recommended should you require further help. Following is a general summary of some of the more relatively distinctive aspects of Canadian employment law.

Hiring in Canada? Here's our latest article on employment in Canada.

Employee Entitlements

Information	Explanation
Working on Sundays ?	An employee of a retail business who was hired before September 4, 2001 has the right to refuse to work on Sundays. If an employee has agreed to work on Sundays, whether or not the agreement was made when he or she was hired, the employee can later decline to work on a Sunday by giving the employer at least 48 hours’ notice before the employee’s work was to begin. An employee of a retail business who was hired on or after September 4, 2001 does not have the right to refuse to work on Sundays if he or she agreed in writing at the time of being hired to work on Sundays, unless he or she is refusing to work on Sundays because of religious belief or observance (in which case the employee must give the employer notice before the Sunday at least 48 hours before the Sunday work was to begin). Note that if a Sunday falls on a public holiday, the employee could refuse to work on the day, even if he or she had agreed at the time of hire to work on Sundays. An employee who did not agree in writing at the time of being hired to work on Sundays may agree at some later point to work on Sundays or on a particular Sunday. In that case, the employee could subsequently decline to work the Sunday(s) by giving the employer at least 48 hours’ notice before the employee’s work was to begin.
Disclosure and Confidentiality of Personal Information ?	Employers and employees are often subject to privacy laws in Canada, one of which is the Privacy Act, which applies to employee information in federal government institutions and the Personal Information Protection and Electronic Documents Act (PIPEDA) applies to employee information in federal works, undertakings and businesses. It is considered an employer’s responsibility to safeguard employee data. Policies and procedures, in particular, should be put in place in reference to the methods they currently use to collect, use and disclose personal information, and make the proper determinations in relation to what is reasonably required for the purpose of establishing, managing, or termination an employee relationship.
Employee Protection and Anti-discrimination Rights ?	Most employees have the right to refuse work that they feel is unsafe to themselves or another worker or believes they are endangered by workplace violence or harassment
Time Off Work ?	Almost all employees have a legislative right to unpaid or paid time off work for the following reasons: Bereavement Citizenship Compassionate care Jury duty Leaves for family situations Maternity (pregnancy), parental, paternal, adoption and child care l Organ donor Reservist Sick Voting Wedding
Medical Leave ?	Not all jurisdictions have legislation in place relating to sick leave. Those do not have legislation in place rely on employer sick leave policies or general/emergency leave provisions in their legislation to cover individuals who are absent due to illness.

Employment Termination

Information	Explanation
Resignation / End of Service Payment ?	An employer must either give the employee a period of notice, or pay the employee wages in lieu of the notice period to an employee who has been continuously employed for 3 months (or 90 days) or more, depending on the jurisdiction.
Termination of Employment ?	All employers must complete a Record of Employment (ROE) when an employee experiences an interruption of insurable earnings. The employer must provide a copy to Service Canada, the employee and retain copy with the employee’s records. The ROE can also be completed online either through Service Canada or through a payroll service provider where the electronic copy is automatically led with Service Canada and the employee can access their copy on Service Canada’s website.

Information

Explanation

Resignation / End of Service Payment ?

An employer must either give the employee a period of notice, or pay the employee wages in lieu of the notice period to an employee who has been continuously employed for 3 months (or 90 days) or more, depending on the jurisdiction.

Termination of Employment ?

All employers must complete a Record of Employment (ROE) when an employee experiences an interruption of insurable earnings. The employer must provide a copy to Service Canada, the employee and retain copy with the employee’s records.

The ROE can also be completed online either through Service Canada or through a payroll service provider where the electronic copy is automatically led with Service Canada and the employee can access their copy on Service Canada’s website.

Probation

Information	Explanation
Probation Period ?	Canadian law does not appear to impose a limit on probationary periods. However, many employers choose a three month probationary period, as this period often coincides with the eligibility for group benefits, particularly because Canadian law requires no minimum pay in lieu of notice required for employees with less than three months of service.

GEO Solutions or DIY Employment in Canada?

When hiring employees in Canada, on top of the day to day activities, you will also need to manage your employee’s payroll, benefits, expense reimbursements and income taxes, making sure they are compliant with local laws. This is not only time consuming but can be risky and complicated especially if it’s your first time hiring in Canada.

Hiring in Canada doesn’t have to be hard! We have a team of tax, legal and finance experts and partners in Canada who fully understand and are equipped to make employment in Canada simple for you. It’ll be just like having an experienced HR team to support you in every country you’re hiring.

Learn how we've helped clients with employees in Canada in this case article!

With an Employer of Record, you won’t have to keep tabs on expenses, taxes, benefits, legal changes, leave and payroll for your employees in Canada. We’ll do that for you. We’ll ensure your employee’s monthly payroll runs smoothly and that they are fully compliant with local laws.

Tax

Income Tax Rates

Income tax in Canada is administered at both a Federal and Provincial level. Calculating income tax is thus a two-step calculation, basic federal tax and then applying the provincial rate to the federal tax payable. However, the federal government collects both the federal taxes and the provincial taxes on behalf of the provinces with the exception of Quebec.

You can find the Provincial/Territorial Tax rates here http://turbotax.intuit.ca/tax-resources/canada-tax.jsp

Expats are able to offset their taxable income with relevant business expenses.

Grossed income	Tax Rate (%)
0 – 43,953	15%
43,953-87,907	22%
87,907 – 136,270	26%
136,270+	29%

Tax Returns Supplied

Yes

CPP (Canada Pension Plan) 4.95%. Maximum contributions of $2,479.95 per annum

Employment Insurance Max $1,302.84 p/a

CPP (Canada Pension Plan) 4.95%. Maximum $2,479.95 p/a

Employment Insurance 1.88%. Max $930.60 p/a

Insurance requirements

Included in the Social Security but many Employers offer additional Medical Insurance.

Can supply private health care

Yes

Can assist opening bank accounts

Yes

Work Permits

Work Permits
Can Sponsor Work Permit	Shield GEO is not able to sponsor work permits in Canada.

Business Visas

Business Visas
Can do Business Visa	Shield GEO can not organize business visas in Canada.

Payroll and Tax in Canada

There are specific rules for payroll and taxation in Canada, depending upon whether your company employs foreign nationals or local Canadian employees, and the type of business structure used. The primary concerns for a foreign company that needs to comply with tax laws in Canada are: individual income tax (IIT) for employees in Canada, social security costs, payroll tax, GST/HST tax, withholding tax, corporate tax and permanent establishment concerns.

Here's our most recent article on running payroll and taxes in Canada.

Information	Explanation
Remote Payroll ?	A remote payroll in Canada is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Canada. This path will still require the company to report Canadian source earnings and tax withholdings, so it can carry quite an administrative burden. One option for a non-resident company to payroll its employees (local and foreign) in Canada is to use a fully outsourced service like a GEO which will employ and payroll the staff on their behalf.
Local Payroll Administration ?	In some cases, a company will register their business in Canada under one of the forms available, but prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.
Internal Payroll ?	Larger companies with a commitment to Canada may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a Canadian payroll, and can fulfill all tax, withholding, and payroll requirements. This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Canadian employment laws.
Fully Outsourced Payroll & Employment ?	Companies can outsource the employment and payroll of their staff in Canada to a GEO, like Shield GEO. This is possible for both foreign workers and Canadian nationals. This is the easiest, fastest and safest way to payroll staff in Canada. Shield GEO manages all aspects of payroll for workers in Canada, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client. Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips. Read more about outsourced payroll and employment through Shield GEO.

Setting up payroll in Canada

Information	Explanation
Currency ?	Canadian Dollars
Employee Information Required ?	Canadian laws require that the following information shall be provided to employees, or printed on employees’ pay statement: Employee name; Date of pay period; Rate of pay and hours of work at each rate; Gross earnings; Itemised deductions; Net pay.
Tax Registration Requirements ?	In Quebec, employers are required to register with Revenu Québec if income is paid to an employee who reports for work at one the employer’s establishments in Québec or the amount is paid to an employee who is not required to report for work at any of the employer’s establishments (in Québec or elsewhere), but is paid from one of your establishments in Québec.
Social Security Registration ?	Pension Plan contributions in Canada and Quebec are required by both the employee and employer.
Documentation Required for New Employees ?	Documents required for new employees in Canada are as follows: Written statement of the main terms and conditions of employment, signed by both the employee and employer. See the CPA’s New Hire Guidelines for more information (member login required). Itemised pay statement: Each employee must receive an itemised pay statement and the information reported must comply with employment/labour standards as per the legislation of where the work is performed.

Income Tax (Personal Allowance) ?

Generally, benefits, allowances and some expenses are considered taxable employment income unless specifically exempted by the legislation or an administrative policy. In particular:

Benefits: The employer pays a third party for goods or services enjoyed by the employee.
Allowances: The employer provides a non-accountable cash allowance to an employee.
Expenses: The employer reimburses the employee upon submission of receipts.

Time to prepare and Pay Taxes ?

131 hours

Time required to start a Business ?

1.5 days

Payments

Information	Explanation
Payment Mode ?	Online filing is preferred. Majority of payments, indeed, are done electronically and may be a requirement based on remitter type
Frequency of Salary Payment ?	Most common are: Weekly – 52 pay periods (53 every seven years) – 18% of employers Bi-weekly – 26 pay periods (27 every eleven years) – 60% of employers Semi-monthly – 24 pay periods – 15% of employers Monthly – 12 pay periods – 7% of employers
Invoice / Payslips required ?	A payslip is required and can be provided either by paper or electronically, depending on the jurisdiction.
Minimum Wage ?	Ranges from $8.90/hour to $11.00/hour by jurisdiction and legislated by the provincial and territorial governments.

Immigration and Work Permits in Canada

Foreign workers are required to have the proper visas and work permits in Canada, as established by immigration laws. Work permits must be secured for employees, and sponsored by a locally licensed and incorporated entity, which can be a problem for companies just entering the Canadian market. If you have yet to complete the incorporation process you can use an outsourced management company or GEO Employer of Record to sponsor the employee for the necessary permits.

To apply for a Canadian visa you can use the ‘Application for a Work Permit Made Outside of Canada [IMM 1295]’ procedure.

The list of countries that are exempt from requesting a visa to visit Canada is subject to change at any time. Obtain an updated list of Visitor Visa exemptions by consulting the Government of Canada website.

Use your own company?

The steps undertaken by the employer

As an employer, you may need to apply for a Labour Market Impact Assessment (LMIA) before you can hire a foreign worker or get pre-approval to hire a large number of workers.
A positive LMIA will show that there is a need for the foreign worker to fill the job you offer and that there is no Canadian worker available to do the job.
If you are hiring foreign workers in an occupation that requires prolonged and/or extensive recruitment and you would like approval in principle before you recruit, you can fill out the application form to hire foreign workers. You might use this process because of the large number of workers being recruited and/or the complexity of the required recruitment.
Leave blank the part of the application form regarding information about the foreign worker. Clearly indicate on the application that this is a request for pre-approval.
Submit the completed application to the nearest Service Canada Centre that processes foreign worker applications. If you have any questions on pre- approvals or on completing the application form, contact the nearest Service Canada Centre that processes foreign worker applications.
When a decision is made about the pre-approval request, you will receive a notice from Service Canada, which explains the decision. You can only begin recruiting if your pre-approval request has been approved.
After you have recruited foreign workers and the necessary information about them has been provided to Service Canada, positive LMIAs will be issued to each successfully recruited worker. In these cases, you as an employer must meet the conditions of the foreign worker application form and employment contract (if applicable).
Do not recruit if Service Canada refuses your pre-approval request. If you disagree with the Service Canada decision, you may submit any new information that you feel may affect the decision to the Service Canada Centre indicated in the notice.
Once a positive LMIA has been issued, you should provide a copy of the confirmation letter to each foreign worker and advise each worker to apply for a work permit and, if necessary, a temporary resident visa at a visa office abroad.
The requirements needed to obtain a work permit for an employee needs to meet the requirements of the Immigration and Refugee Protection Act (IRPA) and the Immigration and Refugee Protection Regulations that the employee will be in Canada for a temporary stay.
Employee makes work permit and Temporary Resident Visa application (if necessary) at their local Canadian High Commission.
The Work Permit and/or Temporary Resident Visa is approved.
Employee travels to Canada.
When the employee arrives at the point of entry in Canada, an officer will make the final determination.
Employee is legally permitted to work in Canada.

Documentation required (Employee):

The positive Labour Market Impact Assessment (LMIA) your employer received from Employment and Social Development Canada and your job offer, or
A copy of the Offer of Employment form (PDF, 1.12 MB) submitted by your employer and a copy of the fee receipt the employer received when they paid an employer compliance fee to Citizenship and Immigration Canada if you do not need an LMIA and you are not applying for an open work permit
Proof that you meet the requirement of the job such as proof of education and work experience
Educational and Professional Certificates
Scanned copies of all documents
A police certificate
Possibly a medical exam certificate
Provide any additional documents requested by the officer to establish your admissibility.

Setting up a company in Canada

When setting up a company you may want to consider these factors:

Business Factors
- The industry and type of business
- Nationality of the headquarters/individual(s) and
- Presence of existing trade agreements or relationships
Location

Location will be another factor since separate cities, regions and the different states may have different rules, costs and availability. It is always recommended to seek advice from relevant professionals, such as business or legal advisors, accountants and others depending on your needs.
Regional Language

Regional language may be an influence. Although English is the national language, different locations in Canada use different languages, such as French, meaning some terminology may be different in various regions. French Canadians constitute the main French-speaking population of Canada, accounting for about 22% of the total population of that country.

Side Note: For corporations, as per the Canada Business Corporations Act (Canada Business Corporations Act s118(3); “At least 25% of the directors must be resident Canadians (if 25% of the directors is not a whole number round up to the nearest whole number). Where a corporation has less than four directors, at least one must be a resident Canadian”.

Foreign companies generally establish a business presence in Canada in one of three modes:
1. Corporations
2. Partnerships (general or limited)
3. Extra Provincial Corporations

Establishing a Corporation requires 25% local ownership, while Partnership is 50% and an EPC requires at least a local resident agent or representative in the Province that the company registers in.

The first step no matter which mode a company decides to enter Canada is to do a name search so there is no conflict with a local named company.

Corporations Canada is the body responsible for administering companies via the Canada Business Corporations Act (CBCA), which has offices in Vancouver, Ottawa, Montreal, and Toronto. You can incorporate a business online, or get the forms and file them by fax or mail.

Corporation

Incorporation of a Canadian corporation can be done either at the federal or provincial/territorial level. When you incorporate your business, it is considered a legal entity that is separate from the shareholders. As a shareholder of a corporation, you will not be personally liable for the debts, obligations or acts of the corporation. It is always wise to seek legal advice before incorporating. This article bases its information on the federal process, while the provincial incorporation process is discussed later in this guide.

SEE STEPS INVOLVED

Corporation Advantages:

Limited liability
Ownership is transferable
Continuous existence
Separate legal entity
Easier to raise capital
Possible tax advantage as taxes may be lower for an incorporated business

Corporation Disadvantages:

A corporation is closely regulated
More expensive to incorporate than a partnership or sole proprietorship
Extensive corporate records required, including shareholder and director meetings, and documentation filed annually with the government
Possible conflict between shareholders and directors
Possible problem with residency of directors

Obtain Right to Use Corporate Name

As stated above, when incorporating, you must first conduct a name search and obtain the right to use the name, as detailed earlier in this article. This search can be done directly via NUANS or through a Search House, and confirms no one else has a business or registered trademark with the same name or similar to the name you’ve chosen for your corporation. You must provide a current NUANS (New Upgraded Automated Name Search) report with your application for incorporation.

Just as with a corporation or partnerships, there are restrictions on the names you may use. The name cannot include restricted words, such as “bank”, “trust”, “insurance”, “stock exchange”, “university”, “academy”, etc. or words that imply the business is connected with the Government of Canada.

Time: 5 days – 1 week

Cost: CAD $21.47 plus applicable taxes, but higher if using a Search House.

File Articles of Incorporation with Corporations Canada

All federally incorporated businesses must file certain documents with Corporations Canada. Among these are:

Articles of Incorporation;
Annual Return;
Notices of any changes in board of directors and/or address of registered office
Maintain certain corporate records
Corporate income tax returns
Register in each province or territory where it carries on business.

A business needs to be incorporated if it is to be established as a corporation. An incorporator, also called a promoter, is the individual, corporation or association responsible for the process; the business will not be fully incorporated until the incorporator signs and files the articles of incorporation. Incorporators play a minor role in the overall business, and their involvement typically ceases after the corporation is established.

Who are Incorporators?

Incorporators are typically the actual owners of the business, but may also be employees or members of the law firm handling the incorporation process — also referred to as ‘dummy incorporators’. If using a law firm cost will be incurred to perform this duty, cost will vary depending on the law firm.

Side note: Location flexibility Incorporation under the CBCA also gives you a degree of flexibility in choosing a location for your business. This flexibility is not always available under the legislation of other Canadian jurisdictions. For example, the CBCA sets no restrictions on the province or territory where registered offices can be located. Nor does it dictate where corporate records are maintained or where annual meetings are held. In fact, the CBCA even permit meetings to be held electronically or outside of Canada.

Time: 5 days

Cost: $200 CAD online filling, $250 CAD if filing by email fax or post (not including lawyer/incorporator fees).

Register Corporate Address (Office)

When federally incorporated, the office address must be provided, and this is automatically registered with Corporations Canada in the previous step. The office can be in any state you wish but likely needs to gain local state licenses and permits to operate within that state¹.

Time: No extra time registering the office as it is done when you apply for incorporation. However if the company changes its address later, the company must inform Corporations Canada.

Further time can depend on each state’s licensing and permit requirements.

Cost: None.

Side note: Naturally other time and costs related to establishing a physically office would include signing a lease, which will vary depending on the real estate agent, and require aside 1 to 4 weeks as a minimum for searching and paperwork to be approved. Signing a lease will likely include fees such as a deposit, rent payments in advance, insurance and possibly guarantor fees.

Open Company Bank Account

Generally it is relatively straightforward to open a bank account at most banks, and there are several international banks in major Canadian cities such as Citibank but also local banks such as the Royal Bank of Canada (RBC).

A copy of the branch office registration documents and seal will be required to open a bank account.

Time: 1 day

Cost: None

Register Business Number, Tax and Payroll

All these requirements can be obtained from one source, called Business Registration Online (BRO). It is a “one stop self-serve application” that allows you to register for a Business Number online, as well as registering for corporation income tax, GST/HST tax, and payroll. An application can also be sent via email or fax.

Time: All done in one application, which is processed immediately upon completions of application (or within 10 days if done via email or fax).

Cost: No registration costs

Obtain Right of Use of Corporate Name

For all types of businesses, including partnerships, you must get Corporations Canada to assign to you the exclusive use of the desired corporate name in Canada. There are two things to submit:

New Upgraded Automated Name Search (NUANS) report, and;
Corporate Name Information Form

The Corporate Name Information Form contains background information about the proposed name and reasons behind choosing it. While it is optional, it can prevent problems in the process, and thus is strongly recommended.

NUANS Name Search Report

This is a document that includes a list of business names and trademarks that sound similar to the name an incorporator is proposing. The list is drawn from NUANS, the national data bank of existing and reserved business names as well as trademarks registered and applied for in Canada. Note that a NUANS Name Search Report is valid for 90 days from the date of the report. If you do not apply to incorporate within this period, you will have to obtain a new report.

There are two ways to get a NUANS Name Search Report:

Directly Order a NUANS Name Search Report Online

Located at https://www.nuans.com, this system provides direct access to the NUANS name search service. However, as this is a self-service, it does not provide any professional assistance or recommendations available from a registered NUANS “search house”. The name in your NUANS Name Search Report may be rejected if it does not comply with CBCA name regulations. Thus if you go this route, be sure that you understand the requirements you must meet before Corporations Canada will approve a name.

Ask For a Report From a Search House

A search house is an independent, private-sector business that charges a fee for advice on the availability of your corporate name choice.

You can find a list of these firms on the NUANS website or in the Canadian Yellow Pages directory under “Searchers of Records.”

Corporate Name Information Form

Although this is optional the approval of a corporate name may be facilitated if you provide information about your reasons for choosing the name.

A form is available at the NUANS website.

However, instead of this form you may also simply submit a letter describing the corporation’s activities, products and services, target clientele, where you expect the corporation to operate, and the origin of the distinctive element(s) of the corporate name.

Side Note: If you intend to do business in the Province of Quebec, please note that the Province of Quebec does not currently provide corporate name data to NUANS. It is your responsibility to verify with the Registraire des entreprises, Quebec that the chosen corporate name is not used in Quebec by another business. You do not have to provide a report from the Registraire des entreprises, Quebec with your Articles of Incorporation.

Time: Allow 1 week for searches of all states

Cost: CAD $21.47 plus applicable taxes (higher if using a Search House).

Partnerships

Canada allows for two forms of partnership: a general partnership or a limited partnership. In certain circumstances, these can also later be ‘incorporated’ into a limited liability partnership.

SEE STEPS INVOLVED

General Partnerships

A general partnership is a good business structure if you want to carry on a business with a partner and you do not wish to incorporate a formal company.

With a partnership, financial resources are combined and put into the business. You can establish the terms of your business with your partner and protect yourself in case of a disagreement or dissolution by drawing up a specific business agreement. As partners, you would share in the profits of your business according to the terms of your agreement.

When establishing either kind of partnership, you should have a partnership agreement drawn up with the assistance of a lawyer, to ensure that:

You are protecting your interests
That you have clearly established the terms of the partnership with regards to issues like profit sharing, dissolving the partnership, and more
That you meet the legal requirements for a limited partnership (if applicable)

General Partnership Advantages:

Easy to start-up a partnership
Start-up costs would be shared equally with you and your partner
Equal share in the management, profits and assets
Tax advantage, if income from the partnership is low or loses money (you and your partner include your share of the partnership in your individual tax return)

General Partnership Disadvantages:

Similar to sole proprietorship, as there is no legal difference between you and your business
Unlimited liability (if you have business debts, personal assets would be used to pay off the debt)
Hard to find a suitable partner
Possible development of conflict between you and your partner
You are held financially responsible for business decisions made by your partner (for example, contracts that are broken)

Limited Partnerships

Limited Partnerships are another form of business registration in Canada, which creates a Canadian company, but does not generate filing and tax obligations in Canada for partners who are not residents of Canada.

This form of business registration is thus better for foreign businesses or individuals who wish to establish a business presence in Canada. It is extremely popular among software developers, web programmers, computer support specialists and IT service providers, who offer services to customers in Canada, US and Europe.

Other common uses of a Limited Partnership in Canada include: a regular trading company for doing business in Canada, US, EU and other highly regulated jurisdictions, an agent working under Sales Agency Agreement.

The principal may be any legal entity including companies registered in low and zero tax jurisdictions. Software development and IT support services, when major customers are located in Canada, US and EU. Online based businesses (website development, marketing services, auctions, webstores, etc.).

Unlike a general partnership, each partner is responsible only for his or her own liabilities. It makes partners more fully accountable to their clients or customers and ensures that all partners can engage in their business without the concern of having their personal assets at risk (unless there is negligence or wrongdoing).

Limited Partnership Advantages:

No restrictions on the residency of partners
Availability of one-man limited partnership, when one person is a sole general and limited partner
There is no minimum capital requirement.
No withholding tax on profit received by partners outside of Canada
No requirements to file corporate tax returns
No corporate income tax.
Each partner is only responsible for own liabilities

Limited Liability Partnerships

Finally, a Limited Liability Partnership (LLP) is a more formal structure that certain types of partnership may be eligible for. Eligible General or Limited Partnerships can be later registered as Limited Liability Partnerships and at such point the partnership ceases to be a registered general partnership or limited partnership (Partnership Act s103.).

In Canada, a limited liability partnership is usually only available to groups of professionals, such as lawyers, accountants and doctors. These partnership agreements and their formation requirements and eligibility requirements are governed by specific provincial legislation. For instance, currently in Ontario, only lawyers, chartered accountants and certified general accountants may form a Limited Liability Partnership.

Like the normal partnerships, the name must include an appropriate legal element, such as “Limited Liability Partnership” or “LLP” (Partnership Act s100) or the French equivalent, in its name. The name cannot include a last name or a distinctive corporate name unless it is the last name or corporate name of one of the general partners. The name of a Limited Partnership may be in English-form, French-form or both.

Limited Liability Partnerships also need to maintain an office where a current and alphabetical list of its partners is kept and make that information available for inspection and copying during normal business hours (Partnership Act part 6).

Limited liability partnerships are required to file with the registrar an annual report each year within two months of the anniversary date of its registration. Further, any change to the information provided in the registration statement will need to be filed with the registrar.

Registration Steps for All Partnerships

Obtain Right to Use Corporate Name

Like a corporation, you must first conduct a name search and obtain the right to use the name, as detailed earlier in this article. This search can be done directly via NUANS or through a Search House, and confirms no one else has a business or registered trade mark with the same name or similar to the name you’ve chosen for your corporation. You must provide a current NUANS (New Upgraded Automated Name Search) report with your application for incorporation.

Just as with a corporation there are restrictions on the names you may use. The name cannot include restricted words, such as “bank”, “trust”, “insurance”, “stock exchange”, “university”, “academy”, etc. or words that imply the business is connected with the Government of Canada.

Time: 5 days – 1 week

Cost: CAD $21.47 plus applicable taxes,higher if using a Search House

Register name of Partnership with Corporations Canada

Each Limited Partnership is required to have a legal name registered with Corporations Canada.

The name must include a legal element, such as “Limited Partnership” or “LP” (Partnership Act s100) or the French equivalent. The name cannot include a last name or a distinctive corporate name unless it is the last name or corporate name of one of the general partners. The name of a Limited Partnership may be in English-form, French-form or both.

Time: 1-3 days

Costs: CAD $275 plus CAD $21.47 name reservation fee.

CAD $35 annual report filing fee

Obtain Right of Use of Corporate Name

For all types of businesses, including partnerships, you must get Corporations Canada to assign to you the exclusive use of the desired corporate name in Canada. There are two things to submit:

New Upgraded Automated Name Search (NUANS) report, and;
Corporate Name Information Form

NUANS Name Search Report

There are two ways to get a NUANS Name Search Report:

Directly Order a NUANS Name Search Report Online

Ask For a Report From a Search House

A search house is an independent, private-sector business that charges a fee for advice on the availability of your corporate name choice.

You can find a list of these firms on the NUANS website or in the Canadian Yellow Pages directory under “Searchers of Records.”

Corporate Name Information Form

Although this is optional the approval of a corporate name may be facilitated if you provide information about your reasons for choosing the name.

A form is available at the NUANS website.

Time: Allow 1 week for searches of all states

Cost: CAD $21.47 plus applicable taxes (higher if using a Search House).

Extra-Provincial Corporation (EPC)

In Canada you can incorporate at a provincial level, such as British Columbia, Ontario etc each province has its own specific requirements to set up a business. One of the particular benefits of an EPC is that it does not have a minimum requirement of Canadian residents, therefore it can be wholly foreign owned and directed. However, an EPC must generally have permanent resident Agent for Service (e.g. in Ontario).

SEE STEPS INVOLVED

The following information is based on the requirements for an EPC in Ontario. Each province will have a similar approach but may have different specific requirements. This guide will use Ontario to show how a Non-Canadian company can use the Extra Provincial Corporation as a branch to enter Canada.

Advantages Of An EPC

Offshore and onshore companies from any jurisdiction may be registered in Ontario and get status of Ontario EPC
Status of Ontario EPC enhances image of non-Canadian companies
No restrictions on the residency of directors, officers and shareholders of Ontario EPC
Ontario EPC is able to open a bank account and office and conduct its business in Ontario
No tax obligations in Canada, when Ontario EPC conducts business outside of Canada
No filing of the tax return is required, when Ontario EPC conducts business outside of Canada
All Ontario business expenses (advertisement, salaries, office lease, etc.) are deductible from the taxable income received in Ontario
No annual meeting is required in Ontario.

Obtain Right to Use Corporate Name

Like a corporation, you must first conduct a name search and obtain the right to use the name, as detailed earlier in this article. This search can be done directly via NUANS or through a Search House, and confirms no one else has a business or registered trademark with the same name or similar to the name you’ve chosen for your corporation. You must provide a current NUANS (New Upgraded Automated Name Search) report with your application for incorporation.

Just as with a corporation or partnerships, there are restrictions on the names you may use, such as words that imply the business is connected with the Government of Canada.

Time: 5 days – 1 week

Cost: CAD $21.47 plus applicable taxes, but higher if using a Search House.

File Articles of Incorporation with ServiceOntario

An EPC’s incorporation can be filed with the local company registrar office. For example, in Ontario, it can be registered with a body called ServiceOntario.

To register an Extra Provincial Corporation in the Ontario, you will need to provide:

Name and address of the business.
Fresh NUANS report – less than 90 days old
Description of the business activity.
Name and address of each Director.
Name and address of each Shareholder

You need a minimum of 1 Director and Shareholder (though one person can hold both positions).

Register Corporate Address (Office)

Depending on the province, corporations generally require a registered address.

Many Corporations often use a separate corporate registered address to keep important government correspondence separate from other corporate correspondence. This is even more important if you have a home-based business, because this allows you to maintain an increased level of privacy. This address is provided in the application for incorporation as it is public record many companies use different address to their normal business address, this done for many reason an example of this is home business who does not wish their home address to be on public register.

Time: 2 to 3 weeks.

Cost: CAD $249.00 for one year, plus applicable taxes and an account activation fee of $35.

Side Note: time and price based on Ontario as an sample case, other provinces’ fees and time may have different figures and requirements.

Open a company bank account

A copy of the branch office registration documents and seal will be required to open a bank account.

Time: 1 day

Cost: None

Register Business Number, Tax and Payroll

Time: All done in one application, which is processed immediately upon completions of application (or within 10 days if done via email or fax).

Cost: No registration costs.

Obtain Right of Use of Corporate Name

For all types of businesses, including partnerships, you must get Corporations Canada to assign to you the exclusive use of the desired corporate name in Canada. There are two things to submit:

New Upgraded Automated Name Search (NUANS) report, and;
Corporate Name Information Form

NUANS Name Search Report

There are two ways to get a NUANS Name Search Report:

Directly Order a NUANS Name Search Report Online

Ask For a Report From a Search House

A search house is an independent, private-sector business that charges a fee for advice on the availability of your corporate name choice.

You can find a list of these firms on the NUANS website or in the Canadian Yellow Pages directory under “Searchers of Records.”

Corporate Name Information Form

Although this is optional the approval of a corporate name may be facilitated if you provide information about your reasons for choosing the name.

A form is available at the NUANS website.

Time: Allow 1 week for searches of all states

Cost: CAD $21.47 plus applicable taxes (higher if using a Search House).

Outsourcing Employment Through a GEO Employer of Record Service

Whether to incorporate in Canada, and what sort of entity to setup are just two of the many choices companies must make when expanding into a new market.

If the company intends to have staff in Canada they must also decide whether they will administer that employment internally or use a Global Employment Organization to handle payroll and Employer of Record responsibilities. A GEO Employer of Record solution is an attractive alternative where

the company is looking to setup an office quickly
the company wants to work within a defined budget
the company wants to limit its initial commitment in Canada
the company needs help with tax, employment, immigration and payroll compliance in Canada

The complexity of employment regulations in Canada makes the use of a GEO advisable coupled with local legal counsel to ensure full compliance with employment laws, for example the drafting of local contracts for workers.

Summary of Setup Steps

Co = Corporation

EPC = Extra Provincial Corporation

PT = Partnership/Limited Partnership

	Co	PT	EPC	Time	Cost (CAD)
Can non-residents be company members?	Yes	Yes	Yes
Percentage of members who are required to be residents:	25%	50%	0%in each province must have a rep or agent who is from that state
Conduct business across all of Canada?	Yes	Yes	only in province registered		–
Obtain Right / Register Business Name	Yes	Yes	Yes	1 week(Co/EPC) 1-3 days (partnership)	21.47 (Co/EPC)higher if using a Search House You can find a list of Search Houses on the* NUANS website
File Articles of Incorporation	Yes	–	Yes	5 days	200-250(Fee’s different in each Province for EPC)
Register an Office	Yes	–	Yes (in province office is registered)		part of the registration of business application no extra cost
Open a corporate bank account	Yes	Yes	Yes	1 day	0
Obtain Business Number	Yes	–	Yes	instant*	0
Register with social security office (payroll office)	Yes	Optional	Yes	instant*	0
Notify tax office	Yes	Optional	Yes(non resident can take profit out of country)	instant*	0
TOTALS*applications and processing times, not including internal document preparation, etc	COTime 2 weeks Cost: 221.47	PTTime: 4 weeks Cost: 296.47+ 35 annual reporting	EPC Time: 2 weeks Cost: 270.47+ 35 annual reporting Fee

* Note: Obtain Business Number, register with Social Security/Payroll Office and notifying the tax office are all done in a combined step under the Business Registration Online system.

Conclusion

Canada has three main ways to allow non-Canadian companies do this: company, partnership or extra-provincial corporation.

It would be wise for a foreign-owned company to understand that there is some protection for local companies through the need to engage locals within these structures. Establishing a Corporation requires 25% local ownership, while partnership is 50% and an EPC requires at least a local resident agent or representative in the Province that the company registers in. There are many companies within Canada that could provide this agency/representative service for a fee.

All documents towards setting up a company appear straightforward and there is a “one-stop shop” to register for a business number, welfare and the GST/HST federal tax system.

For all business structures the time to register may be delayed by actioning personal tasks such as preparing and collating the necessary documents required, so adding extra weeks when planning your company is always good practice.

There are many companies within Canada who have strategically placed themselves to help non-Canadians to set up businesses, providing the easiest way to enter the Canadian market and gain a foothold in the country. Naturally these services will incur not-insubstantial fees