Ontario or Federal Incorporation? | Agile Legal Solutions

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Two statutes, one kind of company

A business in Ontario can incorporate under either of two laws. The Business Corporations Act (the OBCA) creates an Ontario corporation, filed through the Ontario Business Registry. The Canada Business Corporations Act (the CBCA) creates a federal corporation, filed with Corporations Canada. For most small and medium-sized businesses the result looks much the same: a separate legal person with shareholders, directors and officers, articles that set out its share classes, and a minute book to keep up.

The choice matters less than many owners fear, and more than some assume. Neither statute is better in general. The question is which one fits where the business will operate, who will sit on the board and how much ongoing paperwork you are prepared to keep. The wider picture of incorporating is on the incorporation section of our corporate law page. The filing steps for an Ontario company are in how to incorporate a business in Ontario.

The differences, side by side

Ontario (OBCA) and federal (CBCA) incorporation compared
Point	Ontario corporation (OBCA)	Federal corporation (CBCA)
Who may incorporate	One or more individuals or corporations; an individual must be 18 or older, not incapable, not bankrupt (s. 4)	The same basic rule (s. 5)
Minimum directors	One individual for a private corporation (s. 115(2))	One or more for a corporation that is not distributing (s. 102(2))
Resident Canadian directors	No requirement; Ontario says the 25 percent rule has been eliminated, and s. 118(3) is repealed	At least 25 percent; if fewer than four directors, at least one (s. 105(3))
Registered office	In Ontario, at a physical location (s. 14)	In the province named in the articles (s. 19)
Where records may be kept	Registered office or another place in Ontario (s. 140)	Registered office or another place in Canada (s. 20)
Name	Ontario-biased Nuans report unless numbered; legal element such as Inc. or Ltd. (s. 10)	Corporations Canada says a federal corporation has the right to use its name across Canada
Government fee to incorporate online	$300, processed immediately	$200, within one business day, says Corporations Canada
Annual return	Filed with the Ontario Business Registry within six months of fiscal year-end	Filed with Corporations Canada within 60 days after the anniversary date, $12 online
Significant control register	Kept at the registered office; not filed with a registry	Kept, and the information is also sent to Corporations Canada with the annual return
Doing business in Ontario	No extra registration	Must register in Ontario as an extra-provincial corporation

What stays the same either way

Much of what owners care about day to day is the same under both statutes, which is why the choice rarely turns on the company’s internal rules.

A separate legal person. Section 15 of each Act gives the corporation the capacity and the rights, powers and privileges of a natural person.
Shares without par value. Both require shares in registered form, without nominal or par value (OBCA s. 22(1), CBCA s. 24(1)). How classes of shares are designed is covered in the share structure section of our corporate law page.
Directors’ duties. Directors and officers owe the same core duties of honesty, good faith and care under OBCA section 134(1) and CBCA section 122(1). We look at them in directors’ duties under the OBCA.
Unanimous shareholder agreements. Both Acts let all the shareholders restrict the directors’ powers by agreement (OBCA s. 108(2), CBCA s. 146), as explained in what is a unanimous shareholder agreement.
A minute book. Both require the articles, by-laws, minutes, resolutions and registers to be kept (OBCA s. 140, CBCA s. 20). What goes in it is set out in what goes in an Ontario corporation’s minute book.

A holding company can also be set up under either statute, and an Ontario holding company can own shares of a federal operating company or the other way round. The legal side of that structure is in what is a holding company.

How to decide, step by step

Map where you will operate. Corporations Canada says provincial laws require a federal corporation to register in each province or territory where it carries on business, which typically includes having an address or phone number there or offering products or services there. An Ontario corporation that expands elsewhere faces the same kind of registration in those provinces, because section 16 of the OBCA lets it act outside Ontario only to the extent that the laws there permit.
Check who will sit on the board. If none of your intended directors is a resident Canadian, the CBCA’s section 105(3) is a real obstacle and an Ontario corporation avoids it.
Weigh the name. If a national brand matters, the federal right to use the name across Canada is the main draw. If you plan to operate as a numbered company with a trading name, it matters less. We compare those options in numbered company or named company in Ontario.
Count the filings. A federal corporation operating in Ontario keeps two sets of records in good standing: its federal annual return and significant control filing, and its Ontario extra-provincial filings. An Ontario corporation files only in Ontario while it stays here.
Talk to your accountant. Anything about tax, including whether your plans affect the choice, is a question for your accountant, not this page.

What changes the answer

Director residency

This is the clearest legal difference today. Section 105(3) of the CBCA still requires at least 25 percent of a federal corporation’s directors to be resident Canadians, and at least one if there are fewer than four. A stricter majority rule applies in certain regulated sectors under section 105(3.1). Ontario took the opposite path: the OBCA now shows section 118(3), the old residency rule, as “Repealed: 2020, c. 34, Sched. 1, s. 5“, and Ontario’s incorporation notice says the requirement for at least 25 percent of directors to be resident Canadians has been eliminated.

Name protection

Corporations Canada describes the federal advantage as the right to use the name across Canada. Ontario’s own notice is candid about the other side: the Ministry does not review proposed names for similarity, and a federal corporation with an identical name may be entitled to start activities in Ontario at any time, so an Ontario company with the same or a similar name accepts the risk of an objection and a name hearing under section 12 of the OBCA. Neither route replaces trademark advice if the brand is valuable.

Significant control information

Both statutes require a register of individuals with significant control, broadly anyone holding 25 percent or more of the votes or value of the shares. Ontario’s guidance says Ontario corporations keep it on file at the registered office and do not submit it to a registry. Under section 21.21 of the CBCA, a federal corporation also sends the information to Corporations Canada every year, and changes within 15 days after it records them. We cover the register itself in what is the register of individuals with significant control.

Registering a federal company in Ontario

A federal corporation that begins to carry on business in Ontario files an initial return as an extra-provincial corporation within 60 days, under section 3 of the Corporations Information Act, and Ontario’s fee table shows no fee for it. Corporations Canada says Ontario is one of the provinces where the provincial forms can be completed during the federal incorporation itself, and that a business may already have been registered in Ontario that way.

Changing your mind later

A corporation is not locked in forever. Ontario’s registry lists both continuing into Ontario from another jurisdiction and continuing out of Ontario as available filings. It is a formal process with its own fees, so it is better to choose carefully at the start.

Example

For example, imagine Hamid, who lives in Richmond Hill and is starting an online furniture business, and his business partner Elena, who lives in Portugal. They want both of themselves on the board, plan to sell mostly to Ontario customers for the first few years, and will trade under a brand name.

A federal corporation would need at least one resident Canadian on a two-person board. Hamid would qualify if he is a Canadian citizen or permanent resident ordinarily resident in Canada, but if he later stepped down, the company would breach section 105(3). An Ontario corporation has no residency rule, costs $300 rather than $200 to file, and keeps its filings in one place. They choose Ontario, register their brand under the Business Names Act, and speak to a trademark professional about protecting it more widely. If they later open a warehouse in another province, they will register there as an extra-provincial corporation.

Common mistakes

Choosing federal only for the name, then forgetting the provincial registration. A federal corporation doing business in Ontario still has Ontario filings to keep up.
Missing the federal residency rule. A board of non-residents does not meet section 105(3) of the CBCA.
Choosing the statute for tax reasons without advice. Ask your accountant before you decide on that basis.
Treating a Nuans report as name protection. It is a search, not a right, and Ontario does not check names for similarity.
Forgetting the significant control filing. Federal corporations file it with their annual return every year.
Letting annual returns lapse. Corporations Canada says filing the annual return avoids the potential dissolution of the corporation, and Ontario requires its own return each year.

What to do this week

List the provinces and countries where you expect to sell, hire or keep an address in the next three years.
List your intended directors and whether each is a resident Canadian.
Decide how much the corporate name itself matters, or whether you will trade under a registered business name.
Ask your accountant whether anything about your plans affects the choice.
Gather the items in what to bring when you incorporate or review a company.
If you would like a lawyer to set up the company either way, a first consultation takes 30 minutes, by video or in person, and you can request one here.

Frequently asked questions

Is a federal corporation better than an Ontario one?

Neither is better in general. A federal corporation offers the right to use its name across Canada, but it has a director residency rule and filings in every province where it does business. An Ontario corporation is often simpler for a business that operates mainly in Ontario.

Can an Ontario corporation do business in other provinces?

Yes. Section 16 of the OBCA gives it the capacity to carry on business outside Ontario to the extent the laws there permit, which usually means registering in that province.

Do Ontario directors need to be Canadian?

No. Ontario’s incorporation notice says the requirement for at least 25 percent of directors to be resident Canadians has been eliminated. Directors must still be individuals, at least 18, not found incapable and not bankrupt (section 118).

Who counts as a resident Canadian under the CBCA?

Section 2 of the CBCA defines it mainly as a Canadian citizen ordinarily resident in Canada, or a permanent resident ordinarily resident in Canada, with limited exceptions for some citizens living abroad and some long-term permanent residents.

Can I switch from Ontario to federal later?

It is possible through a formal continuance, which Ontario’s registry lists among its filings, but it involves fees and paperwork in both jurisdictions. Choosing well at the start is simpler.

Does it matter for my shareholders’ agreement?

The agreement works under either statute, but some provisions refer to the governing act, so it should be drafted for the one you choose. Our page on shareholders’ agreements explains what it covers.

Sources

This page is general information about Ontario law, not legal advice for your situation. It reflects the law as of October 26, 2026.

Ontario or federal incorporation: what is the difference?