Canada has simple requirements for entities looking to conduct business; be it a start-up or a foreign entity wanting to establish a business in Canada. Corporations are required to comply with federal or provincial incorporation and registration requirements.
DETERMINING THE TYPE OF VEHICLE
In Canada, business can be structured as:
- Sole Proprietorship: A sole proprietorship is an individual person carrying on a business with a view to making profits.
- Partnership: Two or more persons carrying on a business with a view to making profits may decide to form a partnership, which either may be in the form of general partnership or limited liability partnership.
- Corporation: A corporation is a business structure that is a separate legal entity from its owners where no personal liability for the debts or obligations of the company is assumed by the owners (shareholders). The types of corporations include private corporations and public corporations.
- Branch office: A foreign corporation may carry on business in Canada through an unincorporated branch office. A branch office is not a separate legal entity and the foreign corporation will be liable for debts and liabilities of the branch in Canada.
- Unlimited liability company: A unlimited liability company (“ULC”) is a flow through entity and may be of interest to foreign entities for tax purposes. A ULC can be incorporated in certain provinces of Canada.
- Joint Ventures: A joint venture is a contractual arrangement between two or more parties to carry on a business without incorporating a separate legal entity. A joint venture is not recognized for tax purposes and each party is liable to taxes.
COMPLIANCE FOR RESIDENT REQUIREMENT
For companies formed under federal laws of Canada or provincial laws, at least twenty-five per cent of the directors of a corporation must be resident of Canada except for the province of British Columbia, New Brunswick and Quebec which do not have a requirement of directors being resident of Canada.
In Canada, accounting standards for all entities outside the public sector are issued by the Accounting Standards Board. The AcSB has adopted International Financial Reporting Standards (IFRSs) as the accounting standards to be used by publicly accountable enterprises. Private enterprises and not-for-profit organizations can choose to use separately developed standards for those entities or IFRS. The CPA Canada Public Sector Accounting Handbook is the primary source of GAAP for the public sector.
The Canada Business Corporations Act and provincial corporations and securities legislation generally require companies to prepare financial statements for their shareholders in accordance with GAAP as set out in the CPA Canada Handbook – Accounting. Other legislation applies to financial institutions and certain other types of reporting entity.
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