Federal vs Provincial Incorporation in Canada: Which Should You Choose?

Federal incorporation costs $200 online with Corporations Canada and gives you the right to use your corporate name across Canada. Provincial incorporation, such as $300 in Ontario, protects the name only in that province but means reporting to one registry instead of two. The tax you pay is the same either way: it depends on where your business earns its income, not where you incorporate. For a business that operates in one province, a provincial corporation is usually simpler. For one that will operate in several provinces, or needs the same name everywhere, federal incorporation often makes more sense. Here's how the two compare.

Federal vs provincial incorporation at a glance

What's actually different

1. Name protection

This is the main reason people incorporate federally. Corporations Canada lists "the right to use your name across Canada" as an advantage of federal incorporation. A provincial corporation's name is protected only in its home province. If you later expand, the name you've built a brand on may already belong to another company in the new province.

Federal name approval is also simpler. Corporations Canada built the name search into online incorporation, so you don't need to order a separate Nuans report for a word name. An Ontario named company, by contrast, needs an Ontario-biased NUANS report from a private search company. Federal name rights aren't a trademark, though. If the brand matters, consider trademark registration as well.

2. Where you can do business

A federal corporation can carry on business anywhere in Canada, but it doesn't escape provincial paperwork. Corporations Canada says corporations must register in the provinces where they conduct business. So a federal corporation operating in Ontario registers there too, by filing an extra-provincial initial return, which is free.

A provincial corporation that expands registers as an extra-provincial corporation in each new province. The fee is the same whether you're federal or from another province:

Our guide to extra-provincial registration in Ontario explains the process step by step.

3. Cost

Federal incorporation is usually cheaper on day one but costs more to maintain if you also register in a province. Compare the government fees:

For an Ontario business, the first-year difference is small: $200 federal plus a $0 Ontario initial return, against $300 for an Ontario corporation and an Ontario-biased NUANS report if you want a name. After that, the federal corporation pays $12 a year and keeps its records current with two registries, while the Ontario corporation's annual return is free. In a province like British Columbia, though, a federal corporation would pay $200 plus the $350 extra-provincial fee, more than a $350 BC incorporation on its own.

4. Ongoing filings

A federal corporation files an annual return with Corporations Canada within 60 days after its anniversary date ($12 online), and reports its individuals with significant control (ISC) to Corporations Canada with the annual return and within 15 days of any change. Some ISC information is made public. It also keeps up its extra-provincial registration in each province where it operates, including any annual filings and fees there.

An Ontario corporation files one annual return with the Ontario Business Registry, free, within six months after its fiscal year-end, the same window as its T2 tax return. Our federal incorporation guide covers the federal filing calendar in more detail.

5. Director residency

The Canada Business Corporations Act requires that at least 25% of directors be resident Canadians; if the board has fewer than four directors, at least one must be. That rule was still in force in the consolidated Act current to September 30, 2026. Ontario, British Columbia, Alberta, Saskatchewan, New Brunswick, Nova Scotia, PEI, Newfoundland and Labrador and the territories have no director residency requirement. Manitoba is the exception among the provinces, with its own 25% rule.

For a non-resident founder with no Canadian co-director, this alone usually rules out federal incorporation.

6. Tax: no difference

Where you incorporate doesn't decide which province taxes you. Under the federal Income Tax Regulations, a corporation's taxable income is allocated to the provinces where it has a permanent establishment, such as an office or branch. If it has a permanent establishment in only one province, all of its taxable income is deemed to be earned there. If it has them in several, income is split by a formula based on gross revenue and salaries in each province.

So a federal corporation operating only in Ontario pays the same tax as an Ontario corporation: 9% federal plus 2.2% Ontario (from July 1, 2026) on the first $500,000 of active business income of a Canadian-controlled private corporation, or 11.2% combined.

Which should you choose?

When provincial incorporation makes sense

Choose provincial incorporation when your customers, office and staff are in one province and you don't expect that to change soon. You deal with a single registry, there's no residency rule in most provinces, and in Ontario the annual return is free. Provincial incorporation in Ontario is the common choice for local service businesses, consultants and holding companies. See our Ontario incorporation guide or start an Ontario incorporation.

When federal incorporation makes sense

Choose federal incorporation when the name is central to your business, when you'll operate in several provinces, or when you sell across Canada and want to stop a competitor registering your name in another province. Accept that you'll register in each province where you operate and meet the 25% resident director rule. You can start a federal incorporation online, and compare total costs on our pricing page.

Can you switch later?

Yes. A corporation can continue from a province into the federal regime, or the other way round, without dissolving. It's extra paperwork and government fees, so it's worth choosing carefully at the start.