US Corporations can do business in Canada. They have to comply with local laws, which may mean that they have to register as an extra-provincial corporation in each province where they have sufficient presence and that they may have to set up tax accounts such as HST (a type of sales tax) and remit certain taxes to the Canadian tax authorities. Canada generally has lower corporate tax rates than in the USA. Consider setting up a separate Canadian corporation, if the Canadian portion of your business earns enough profit in Canada to make it worthwhile to take advantage of the lower corporate tax rates in Canada, or if you prefer to keep liability from the Canadian operations away from your US operations.
Individuals who are US residents can take advantage of the North Amercian Free Trade Agreement (NAFTA) to obtain visas allowing them to work in Canada. We suggest you refer to a guide such as those published by Self Counsel Press to determine what visa you should apply for, or consult a qualified immigration professional (we can provide a referral). You only need a visa if you plan to work in Canada. If you can conduct the business from the US, for example, as an internet based business, you don't require a visa if you don't plan to travel to Canada.
Individuals usually want to incorporate to benefit from the limited liability afforded by corporations to its shareholders. If a corporation suffers losses, it must bear those losses to the extent of its own resources, and not the personal assets of the individual shareholders. Be aware, though, directors and officers of a corporation can be personally liable to pay debts owed by the corporation to the government, for certain debts owed to employees, and for other specific issues having to do with environmental contamination or breaches of securities laws.
US resident individuals can easily start a Canadian corporation to conduct business in Canada. What is more difficult is to decide whether to use a US corporation or a Canadian corporation to conduct business in Canada, whether to incorporate a federal (Canada) corporation, or a provincial incorporation such as in British Columbia or Ontario, and whether to own the shares in the Canadian corporation through a US corporation or LLC or individually or through a trust. Be sure to consult with your US tax adviser in making a decision to go cross-border.
US tax residents who own shares in certain foreign corporations including Canadian corporations are required to file IRS Form 5471. Similarly, US tax residents who form trusts in Canada are required to file IRS Form 3520-A. There are significant penalties for failure to file such forms. Other filing requirements may also apply, such as those under FATCA (Foreign Account Tax Compliance Act).
You can incorporate federally or in any province you wish -- there is no legal requirement that says you have to incorporate in each province in which you conduct business. A general rule-of-thumb is to incorporate in the province that your company has its principal operations, especially if your business is primarily within a single province. Many businesses choose to incorporate federally to get Canada wide name protection. Many businesses choose to incorporate in British Columbia because BC does not require Canadian resident directors.
All Canadian corporations require a registered office in the jurisdiction where you incorporate. A registered office is responsible for receiving any court actions on behalf of the corporation.
INC Business Lawyers Tip!
Every Canadian Corporation is assigned a Business Number automatically. Your corporation's business number is used as its number for all tax accounts such as GST, PST, Payrolls deductions and Corporate Taxes. However, you need to apply for most tax accounts as they are not required for many companies. Canadian corporations are required to file T2 corporate tax returns every year. Ask us to help you find out what accounts you require and to help you set them up quickly and easily.