Q. Why would anyone be motivated to opt for a Government assigned numbered company in preference to a company of their own name?

 

Differences

 

Company Name

 

Numbered Company

Name Search Fee

$45

N/A

Name Search Process

30 minutes

N/A

Government Fees to Incorporate

$200 Federal/

$360 Provincial

$200 Federal/

$360 Provincial

Government Fees to Register an Operating Name (Valid for 5 Years)

N/A

$60

Government Fees to Amend Corporation Name

N/A

$150 + $45 (Name Search Fee)

CRA PSB Risk

Low

High

Overall Cost

Less Costly Long term

More Costly Long term

A: It’s cheaper: Not really much cheaper

  • The name search fee is only $45.

A: It’s expedient (time is money)

  • The $45 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.
  • Stress the reality that, if the client wants to process articles of amendment to change the name of the company, the cost is $45 for the name search and $150 in government fees to process the amendment.
  • 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

$45

$45

Name Search Process

30 minutes

30 minutes

Government Fees to Incorporate

$360

$200

Annual Fees

$0

$20

Additional Registration

No

Yes – In Province where you reside (cost varies by province)

Failure to Pay Annual Fees

N/A

Corporation will be closed

after 2 years

Able to work across Canada

Yes

Yes

Overall Cost

Less Costly Long tern

More Costly Long term

The only major difference between a federal and a provincial incorporation is the cost.

There is a onetime government fee of $360 to set up an Ontario corporation; however there is a lesser fee of only $200 for the federal corporation. There is also an annual fee of $20 to maintain a federal corporation. 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. To then revive a federal company, the government cost is another $200, 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.