Canada is a straightforward market in which to extend your business operations due to its proximity to the U.S. However, because it has a very different legal system than the United States, there may be some early difficulties. The fact that each of Canada’s 10 Provinces and 3 Territories has its laws and regulations is one of the most distinctive aspects of the country’s legal system. Therefore, it is necessary to be familiar with the relevant municipal, provincial, and federal laws when conducting business in Canada. The overview that follows is meant to assist businesses as they enter the Canadian market.
Entering the Canadian market
From a linguistic and cultural standpoint, foreign enterprises may readily operate in Canada because it is a largely English-speaking nation (except for the provinces of Quebec and New Brunswick, which are bilingual in French and English). As a result, many American businesses will take into account the variations in province rules when deciding how to enter the Canadian market. The primary industrial activity in each of its commercial hubs is another aspect that is frequently taken into account. For instance, Vancouver, British Columbia, Toronto, Ontario, Montreal, and Quebec City, Quebec, are home to Canada’s major technology clusters.
Incorporating a business in Canada can be done either federally or provincially. The best option for American businesses that intend to have their headquarters predominantly in one province is to incorporate there (which does not exclude future growth potential). The corporation will also need to incorporate provincially in that province if it is federally incorporated but operates principally from that province. It is necessary to ensure that the company name complies with the criteria of the Charter of the French Language when incorporated in the province of Quebec because of additional, distinctive regulations that are exclusive to that region.
The company must also submit an annual report to the relevant corporate registration; failing to do so could result in the loss of its incorporation.
Complying with corporate tax obligations
The directors of a company must be natural individuals, regardless of whether it is a federal or provincial corporation. The company must meet strict conditions to be classified as a Canadian corporation for income tax purposes and pay the lower corporate tax rate (people that file Canadian income taxes). Currently, at least 25% of the Directors must be Canadian citizens, and Canadian shareholders must hold the majority of the issued shares.
The corporation will be subject to a higher rate of taxation as a foreign entity if those conditions are not satisfied.
Applying for work visas
Once a U.S. business has decided to open a physical location in Canada, the next step is for its workers to apply for work visas to show proof of their right to reside and work there. Immigration regulations are governed by federal legislation (and will change depending on status), and it is typical for the Provinces to provide certain incentives meant to draw particular groups of immigrants.
For instance, according to the basic immigration regulations for entrepreneurs, the applicant must establish or acquire, and then actively manage, a small business that qualifies in Canada. Holders of “Entrepreneur Visas” can eventually become Canadian citizens by meeting certain requirements and becoming permanent residents of Canada.
Building a local workforce
Securing the correct skills and staff will be crucial once a corporation is established in Canada to operationalize your business development strategy. While many American businesses, particularly technology startups, prefer to maintain R&D in-house, you can use local staff to market to Canadian customers. Even if the majority of activities are still housed in the company’s home country, a local salesforce will be able to execute a local sales plan and comprehend Canadian sales and marketing objectives.
Provincial laws govern how Canadian workers are employed. You will need to go through laborious registration processes at both the provincial and federal levels as soon as you hire your first employee. In addition, except in Quebec, where civil law is applicable, the common law of employment is consistently applied across the entire country of Canada. Working with an employment attorney who is based in your desired Province is crucial.
