Questions To Ask When Incorporating A Numbered Company
Differences | Company Name | Numbered Company |
|---|---|---|
Name Search Fee | $60 | N/A |
Name Search Process | 30 minutes | N/A |
Government Fees to Incorporate | $200 Federal/ $424 Provincial * | $200 Federal/ $362 Provincial * |
Government Fees to Register an Operating Name (Valid for 5 Years) | N/A | $60 |
Government Fees to Amend Corporation Name | N/A | $150 + $60 (Name Search Fee) |
CRA PSB Risk | Low | High |
Overall Cost | Less Costly Long term | More Costly Long term |
* The Government offers an expedited Express Service at an additional cost of $100 (1 Business Day vs 5 Business Days).
Q. Why would anyone be motivated to opt for a Government assigned numbered company in preference to a company of their own name?
A: It’s cheaper: Not really much cheaper
The name search fee is only $60.
A: It’s expedient (time is money)
The $60 cost and 30 minutes time far outweighs the higher cost to make changes to the corporation in the future.
We would suggest that a reputable firm would:
- Never advise client to set up a numbered company because there is no value in doing so, especially since that is a risk factor with CRA.
- Inform a client that processing articles of amendment to change the name of a corporation can be expensive and stressful. The cost of processing a name search is $60 and the government fee for filing articles of amendment is $150; additional administrative fees will also be charged. An amendment may end up costing you $600.
- Process a pre-search at no cost to the client to verify if the name is already taken before processing the official name search report to reserve the name. This saves the client added cost of needing to process an alternate name search if the name requested is already taken.
Q: If your corporation is a numbered company, what might you consider?
- Rename the company (one cost) – We do suggest to clients who have a numbered company to look into processing an amendment to the company name. And we look at not just amending the name of the company, but also reviewing their Articles of Incorporation to determine if there needs to be changes to the share structure and director information. The majority of clients who incorporate on their own, with a numbered company or named company, typically have a badly structured company which limits some of the tax benefits of giving out dividend income to family members.
- Register an operational name (i.e. dba first name, last name, Consulting Services Inc.) – The cost to set up an operating name is $60, and this is required to be renewed every 5 years. Note that the government does not remind the client that the operating name is up for renewal. An operating as name is mainly used for marketing a client’s business, but CRA will always refer to the company by its legal name which is the numbered company.
Q: Should my registration be Provincial or Federal?
Differences | Provincial Incorporation | Federal Incorporation |
|---|---|---|
Name Search Cost | $60 | $60 |
Name Search Process | 30 minutes | 3 - 5 Business Days * |
Government Fees to Incorporate | $362 * | $200 * |
Annual Fees | $0 | $20 |
Additional Registration | No | Yes – In Province where you reside (cost varies by province) |
Failure to Pay Annual Fees | Corporation may be closed for Non-compliance | Corporation will be closed after 2 years |
Able to work across Canada | Yes | Yes |
Overall Cost | Less Costly Long term | More Costly Long term |
* The Government offers an expedited Express Service at an additional cost of $100 (1 Business Day vs 5 Business Days).
A: The only major difference between a federal and a provincial incorporation is the cost.
There is a one-time government fee of $362 to set up an Ontario corporation; however, there is a lesser fee of only $200 for the federal corporation. Both Corporations, Federal and Provincial, are required to File Annual Returns within the jurisdiction where they incorporated. Ontario does NOT charge for this service if you have a ONEKey Account; however, for Federal Incorporations, there is also an annual fee of $20 to file an Annual Return. If you decide to file the annual returns for your company with a service provider, administrative cost will be charged. So long term, it is more costly and aggravating to have a federal corporation.
Commonly people who federally incorporate on their own fail to realize that they are still required to register that federal company in the province in which they are operating, and most provinces have a charge for this registration. Clients also often fail to process the $20 annual registration fee and Annual Return with Industry Canada. If this is delinquent for 2 years, then the government will arbitrarily dissolve the corporation for non-compliance. In this case, the corporation will be required to File Articles of Revival which, there will be Government Cost Associated to $250, a name search fee of $60, plus Administrative Fees, so lack of knowledge about these factors can be very costly to the client.
The biggest misconception that clients have in regards to choosing a federal corporation is they assume that with a provincial incorporation you are restricted to generating income only in the province they incorporated in which is actually not the case. As a federal or provincial corporation, you can generate income in Ontario, across Canada, in the US or worldwide as long as you declare your worldwide income when filing the corporate tax return.
The only benefit that a federal company provides to a client is that it allows them to set up multiple offices registered in various provinces which is usually not required for individual contractors. Note that there is usually a government fee associated with setting up an office in any individual province and that provincially incorporated companies can apply to continue into another province should they want to set up an office in a province other than the one in which they were incorporated.
