If you’re looking to expand your business, Canada is a great place to start. Traci Houck, Head of Operations for Global Services at CT Corporation talks about why Canada is a great place for companies to expand their operations without creating a large burden on current operations.
CT Expert Insights: Doing Business in Canada
Greg: Our guest this week is Traci Houck. She is the Head of Operations for Global Corporate Services at CT Corporation. We’re going to be talking for the next few minutes about expanding your business, not just around the corner, maybe not even throughout your region, but how about across the border, specifically the border to the north. Is it time to expand your business into Canada? And if that is something that might be beneficial to you and your business, what is the best way to go about that? Traci, thanks very much for being with us.
Traci: It’s a pleasure. Thanks, Greg.
Greg: Obviously Canada is very close to us, but what are some of the reasons U.S. businesses expand into Canada?
Traci: As you said, they are geographically close, but we share a lot of cultural similarities with Canada. We generally speak the same language. Canada is the United States’ largest trading partner. In fact they spend about 60% of their consumer dollars on U.S. products and services. So from a small business trying to grow its customer base to a large, multi-national company, trying to save money on taxes, considering expansion into Canada makes sense for lots of companies.
Greg: So when this idea gets kicked around, and the more you think about it, the more you research it, the more it seems to make sense, what are some of the key facts to know when considering expansion into Canada.
Traci: The first thing to consider is to where in Canada you want to expand. Canada is made up of provinces in three territories that generally act like state or regional governments, provincial governments. The most populous province in Canada is Ontario, followed by Quebec, British Columbia, and Alberta. The territories are very sparsely populated. In fact they average less than 35,000 people per territory. So those are not the typical places for businesses to expand. It’s more likely going to be a province.
Once you decide where you want to go in Canada, you need to decide how. You would want to consider the best entity type and structure to meet your business and tax goals.
Greg: Well that’s certainly right up the alley of what we’ve been talking about in a lot of different ways over the past few weeks on this podcast. So from a business entity setup perspective, what are similarities and differences with U.S. requirements when you want to set up shop in Canada?
Traci: In the United States it’s common for a business to set up an entity in what we call their domestic state. So they would set up in one state, and they would take that business entity and qualify or register it to do business in other states. Canada is very similar with the provinces and territories. Typically a U.S. company would register their U.S. entity to do business in the provinces where they have clients or want to distribute goods or perform services. We see that Ontario or Alberta are the most popular provinces to register businesses for U.S. companies.
Canada also has business license requirements similar to the U.S. Professional activities like engineering or architecture, those are heavily regulated just as they are in the U.S. You have to go through a lot of testing and training to be licensed in a professional service. But most provinces have what we call a basic business license requirement. So any entity conducting business in the province would need a license similar to what you’d find in many cities, counties, or states.
Greg: After the entity is established there, what about ongoing requirements for an entity registered in Canada? What does that look like?
Traci: Again similar to the U.S., most Canadian provinces have an annual report requirement where you have to record vital entity information such as your address, officers, directors, and registered agent. Some provinces you just have to pay a fee annually. Quebec can be a little tricky. The official language of Quebec is French, so all of their forms and filings must be done in French. So that is an added challenge for a lot of American companies. Generally the annual reports are due in the anniversary month of the registration, so very similar to U.S. rules and regulations.
Greg: I’m going to back up just a minute here, Traci. When you talked earlier about setting up a business entity in Canada, that in many ways similar to the United States there are business license requirements, professional activities that are heavily regulated, is the regulatory burden roughly the same? Is the U.S. better, worse? How do they generally stack up?
Traci: It’s very similar. So if you have licensed engineers in the United States, you would probably have to do the same or very similar requirements to be licensed as an engineer or architect in Canada
Greg: What if I register my business in a Canadian province, and ultimately things don’t work out? Walk us through the process of winding down a business and what some of the risks are in that area.
Traci: If things didn’t work out for you, you would need to finalize your tax matters, usually file a final return of your taxes, and then for each province you would either need to dissolve or withdraw your entity. So, filing forms to let the government know you’re no longer doing business there. But honestly, Greg, whether it’s the World Bank who publishes a ranking of a country’s business ease or other scales, Canada always ranks as a very business-friendly nation. So the risk to expanding to Canada is quite low, and rewards can be great.
Greg: As a result of all these similarities, it sounds like the decision as to whether to expand to Canada is pretty similar to the decision to expand anywhere else in the U.S. for the most part.
Traci: That’s exactly right. And the regulations and rules and administrative burden is very similar as well.
Greg: In terms of everything getting increasingly global, is there a major push into the expansion into Canada that you’ve seen? Is it easier now in the digital age, and are more businesses taking advantage of that? Or is it about the same pace in previous years, and even in previous generations.
Traci: It comes and goes with various world or political events, as far as companies wanting to expand to Canada. But I would say over the past 20 years, we have seen pretty steady growth over time. Like I said, the administrative burden of it has been eased in the past 10 years or so with the advent of electronic filings and electronic signatures. So that does help businesses maintain their entities there much more easily.
Greg: Anything that makes the paperwork easier is going to make business owners happy, that is for sure.
Greg: Last question, Tracy, what kind of help can CT provide folks with this?
Traci: CT can act as registered agent in the Canadian provinces and territories. We can also help register a company, form an entity, do the annual maintenance, such as filing annual reports on behalf of our clients. And if things don’t work out, we can help you withdraw as well.
Greg: Traci, thanks so much for your time today. Really appreciate it.
Traci: Thank you, Greg.
Greg: Traci Houck is Head of Operations for Global Corporate Services at CT Corporation.