Canada subsidiary setup is a complicated process that depends on the type of setup you choose, as well as federal or provincial laws. Each province has critical legal distinctions, and you need to stay well-versed on all of them to avoid fines or longer wait times.
How to Set Up a Canada Subsidiary
You can choose from three options for setting up a Canada subsidiary — establish a presence as a corporation, a partnership, or an extra-provincial corporation. Here are the differences between the three.
- Corporations: Incorporation is done at either the federal or provincial level. Your business is considered a legal entity separate from shareholders, and shareholders are not personally liable for any debt, acts, or other obligations.
- Partnerships: The two forms of partnerships include general or limited. Your business can also later get incorporated into a limited liability partnership in some instances.
- Extra-Provincial Corporation: Incorporation is only at the provincial level, and each province has its own requirements. Your company will not have a minimum requirement on the number of Canadian workers, so it can be wholly foreign-owned and directed.
Canada Subsidiary Laws
Canada subsidiary laws vary based on the province you’re working in. If you want your subsidiary to operate under certain conditions, you should find a region that has a climate conducive to your business. For example, Ontario, Alberta, Manitoba, Saskatchewan, Newfoundland, and Labrador require that at least 25% of the subsidiary’s directors be resident Canadians.
Consider exactly where you will conduct business in Canada. You need to register in every province in which you plan to do business if you are incorporated under the country’s federal laws.
When setting up your subsidiary, it’s also helpful to review certain business factors such as any existing trade agreements and the nationality of your headquarters. Although English is Canada’s national language, different provinces may have various dialects such as French.
Benefits of Setting Up a Canada Subsidiary
Although Canada subsidiary laws can often be confusing for businesses new to the country, you’ll find numerous benefits through the Canada subsidiary setup process. The biggest is that you can continue to grow your company while avoiding liability issues.
Subsidiaries typically operate under a parent company in the US that has control over all branch locations. If your Canada subsidiary faces any litigation, fines, or compensation issues, the parent company is responsible for dealing with them as the Employer of Record. The Canadian facility will still operate as part of the company — it will merely have decreased liability as opposed to the US location.
While parent companies shoulder liability, subsidiaries can still retain some independence. You choose how you want your Canada subsidiary to operate — whether the same or different from your US location. You can take the country’s laws and culture into account and can even tailor operations to fit the specific province where your business is located.
Other Important Considerations
You will need a significant amount of time, money, and energy to go through the Canada subsidiary setup process. First, you’ll register your business name and file articles of incorporation. You’ll also need to find and register a physical office space and open a corporate bank account in Canada. The entire process can take months, during which you could lose valuable candidates who do not want to wait for a job.
Instead, you can work with a global PEO such as Globalization Partners. We boil the process down to days instead of months by recruiting your talent and hiring them on your behalf. We act as the Employer of Record, so the liability falls on our shoulders instead of yours.
Let Globalization Partners Help With Your Expansion
You will not need to worry about keeping up with each Canada subsidiary law in your province. We stay up-to-date on all regulations. Contact us today to learn more about our services if you want to get your business in Canada up and running quickly.