As companies look to expand their markets outside the US, many are choosing Canada as an option. An educated workforce, lack of a language barrier, and similar governmental and economic systems all combine to make Canada an attractive choice for a company looking to expand outside the US.
When deciding to operate in Canada, a US corporation or LLC has several options including federal incorporation, provincial incorporation, and extra-provincial registration.
- Federal incorporation – often used for domestic corporations who wish to operate in multiple provinces, a federal corporation registers with Corporations Canada. (Learn more about registering federal corporations in Canada).
- Provincial incorporation – forming a domestic entity in a province.
- Extra-provincial registration – similar to the qualification process in the US.
There are a large number of factors that go into the decision including tax implications and laws governing employment, but these are beyond the scope of this article. We will now look at the steps required if a US company decides to register extra-provincially.
Rules Governing Corporate or Business Entity Name for Extra-Provincial Registrations
When registering a business in Canada, the first step is to verify the company’s name is available for use in the chosen province, and then file the appropriate registration documents. This process is similar to, but not the same as, registering a company to do business in another US state. Additionally, and similar to the US, each province has its own quirks and requirements to register and maintain a company.
As it pertains to a company name in Canada, a good rule of thumb is that a corporation name consists of 3 elements: distinctive; descriptive; and, legal. Similar to the United States, Canadian provinces prohibit words that are considered misleading, such as words that imply the company is another type of entity, a government agency, or a company already in existence. Generally speaking, Canadian rules regarding name usage and availability are more stringent than those in the US. Below are some key differences:
- Names of dissolved companies are deemed to conflict, even after years have passed since the company became inactive. In most US states, inactive company names are considered to conflict only under certain conditions (such as the company was administratively dissolved) and for a much shorter period (months, rather than years). In Alberta, however, the name cannot be identical to the name of another company unless that company has been dissolved for more than six years. Saskatchewan has a similar provision for identical names but looks at dissolved companies going back ten years.
- Consent: In the US, in the case of a similar name, it is often possible to obtain consent to use the similar name from the entity that holds it. This can be very convenient in the case of related companies with names that are considered too similar according to the regulations of a particular state. In Canada, a provision allowing for consent is often not included in the statute at all. When you do find allowance for consent, the consenting company must agree to change its name or dissolve within a given period of time, thus removing the conflict. This is true in Alberta, where the consenting entity must agree that it will change its name, dissolve or withdraw within six months of the new company’s registration.
Need more information? Considering a move to Canada? Put our filing expertise to work for you. Visit our resource page here.
- Name Generally Must Reflect Purpose: In some provinces, the company may come up against requirements to ensure the name is not too general – i.e., the purpose of the company is clear from the name. While this is a strict requirement for domestic Canadian entities and not generally used for extra-provincial entities, there are provinces like Saskatchewan with statutes that allow the provincial corporate administrator to decide that the name is not descriptive enough.
- In Quebec, there are French language requirements. Not only are forms and search results in French, in accordance with the Charter on French Language, but the company name must also be in French. A company may also use the English version but is required to use the French version when registering and anywhere the name is displayed in Quebec. Certain exceptions are made – geographical and personal names do not have to be translated and exceptions can be made for certain expressions. For example, Toys “R” Us was not required to translate its name but is registered in Quebec as Toys “R” Us, (Canada) Ltee. (“Ltee” is the French equivalent of “Ltd.”)
Registration is Only One Step in the Process
While registering as an extra-provincial entity is not a complex filing, there are a number of ways each province differs from the US and from each other. When moving your business to Canada, knowing and being prepared for registration differences can help make the process smoother, minimizing delays and problems. The registration process is only one step for a US company desiring to conduct business in Canada, paving the way for other tax and license registrations that may be required. To avoid issues and ensure that all the bases are covered, reviewing all requirements with an attorney versed in Canadian law is highly recommended.
This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.
