You decided to incorporate your startup in Canada (instead of the U.S.) Next, you must decide what jurisdiction to incorporate in. Since our clients are frequently based in British Columbia, the question often asked is “do I incorporate federally or in British Columbia?”
I usually recommend incorporating in British Columbia. This comes down to the two main (in my opinion) differences between B.C. and federal corporations.
1. Residency. Federal corporations are required to have a board of directors containing 25% Canadian citizens resident in Canada or, if four or fewer directors, 1 resident director. Conversely, B.C. corporations do not have any director residency requirements. As most startups are interested in receiving foreign (often U.S.) investment, I find that the federal residency requirements may pose barriers in the future if a company receives multiple foreign investments (and multiple foreign directors).
2. Extra Provincial Registration. B.C. corporations must register in each province in which they do business (called an extra-provincial registration) but, since they are incorporated in B.C., do not need to register extra-provincially within the province. Conversely, federal corporations must register in the province where the registered office is located and any other provinces where business is carried on. As such, at the moment of incorporation, federal incorporation involves additional costs and administrative requirements to register extra-provincially in the province where its registered office is located (and, if different, the provinces where it does business.)
Combined, these two differences lead me to recommend incorporating in B.C. when the startup is based here. Nonetheless, there may be additional considerations to take into account when choosing where to incorporate and I recommend running your particular situation by your legal advisors.