Setting Up a Business in Canada

Filed in Articles by on June 12, 2016

Canada enjoys the benefit of being a bilingual (English and French) nation, and having two distinct legal heritages. In Quebec the Civil Code governs civil matters and the rest of
Canada follows the Common Law. Canada is one of the most advanced countries in the world with respect to its legal and commercial infrastructure.

TYPES OF BUSINESS ENTITIES

Canadian law recognizes several different business entities each of which has its own merits depending on the use for which it is intended. In order to set up a business in Canada, one may employ any of these vehicles. If one was intending to establish a Canadian office of a pre-existing business from outside of Canada a branch or subsidiary of that enterprise is possible.

Sole Proprietorships

A sole proprietorship is the simplest for of business enterprise in  Canada. The

business is directly owned by one person who is responsible for the
business, including all liabilities. Unless the sole proprietorship operates
under a name other than the name of the individual who owns it there is no
registration of that business. If however a business name is going to be used
other than the name of the owner, registration is required in each province
where the business operates.

Partnerships

Partnerships are businesses operated by two or more individuals or corporations
together pursuant to an agreement between them. Partnerships must be registered.
There are three types of partnership, general partnership, limited partnership
and limited liability partnership.

General partnerships provide no protection from liability for the partners
against debts, losses or torts.

Limited partnerships comprise of one general partner and limited partners.
General partners are liable for all debts, losses or torts and are responsible
for the management of the business. Frequently, if not always, the general
partner is a corporation. Limited partners are protected from liability but are
not allowed to participate in the management of the business. Profits are
dispersed pursuant to an agreement between the partners.

Limited liability partnerships are used for professional business. The limited
liability partnership protects each individual partner from the liabilities of
another partner and that other partner’s employees that are under their
exclusive supervision or control.

Canadian Corporations

In Canada, a corporation is in law a person with independent legal status. A
corporation is owned by its shareholders. Because of the legal status of the
corporation however, the shareholders are not responsible for the liabilities of
the corporation. Corporations must be incorporated pursuant to the applicable
statute in its jurisdiction, either provincial or federally.

Branches of Foreign Corporations

In order to conduct business in Canada a foreign business can operate as a branch operation. The branch must be registered in Canada

Unlimited Liability Company

In Nova Scotia a “hybrid” exists called an Unlimited Liability Company. This vehicle is frequently employed by foreign businesses to operate in Canada because of the flowthrough nature of any losses incurred by the Unlimited Liability Company which may be used by the foreign business.

Joint Ventures

Joint ventures are simply associations of two or more businesses with a view to
undertaking a specific enterprise or goal. This association can be achieved by
way of partnership or separate incorporation of the joint venture. Joint
venturers can be any combination of individuals and corporations.

Franchises

A franchise is a business form wherein the franchisor allows the franchisee to
sell its products and/or services using the franchisor’s business name, logo
etc. by way of license. The franchisee is charged a fee and royalties for the
use of the business name etc.

FOREIGN INVESTMENT IN
CANADA

Foreign investment in Canada is regulated. Investment in cultural industries, banking and insurance,
broadcasting, telecommunications, transportation and certain other industries is
limited. Foreign investment in Canada is also regulated by size. The Investment Canada Act provides that where the
investor is not from a WTO nation investments are $5 MM and one half of the
aggregate of the entire entire transaction or where the investment is above 50
MM, these investments are reviewable. If the investor is from a WTO country the
thresholds are much higher.

INTELLECTUAL PROPERTY

Canada is a member of the Paris Convention for the Protection of Industrial Property.  Canada
provides protection of Patents, Trade-marks, Copyright, Industrial Design and others.

TAXATION

Canada taxes it’s residents on their worldwide income. Non residents are subject to
withholding tax. Tax is imposed on both the Federal and Provincial level.

IMPORTING GOODS

Canada imposes a Customs Tariff on all goods entering Canada

. Duties are paid by the importer upon receipt. Customs duties are subject to
the Customs Tariff depending on the nature of the goods and the origin of the
goods. Canada has entered into a Free Trade agreement with the  United States
, Mexico Chile and Israel. There are no duties on goods being imported from the
U.S. and duties are being phased out on goods from Mexico, Chile and Israel

Warning: this Article is of general reference only is only current to the date of publication. Any corporation or individual seeking to establish a business in Canada should seek legal counsel prior to doing so.

© 2001-2016 Bruce Marks All Rights Reserved.

About the Author ()

Mr. Marks is a lawyer with OZ Optics Ltd, a Hi Tech Company in Ottawa, Canada. If you would like to reach Mr. Marks you may telephone at 343-883-7087 or email him at bruce.marks@marks-lawyers.com

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