Setting Up a Canada Subsidiary – As A Corporation or as A Partnership or as an Extra-Provincial Corporation!
Karma Management has now become Karma Global which was incorporated in the year 2004, having now completed almost 18 years of its existence.
As late as April 2021, Karma Global took a very bold step of venturing into foreign shores in terms of shoving up its business prospects in countries like the US, UK, UAE, Canada, the Philippines, and South East Asia.
It has already made its mark in terms of providing excellent services in the areas of payroll, outsourcing, recruitment and talent acquisition, facility management services, and regulatory compliances including immigration, negotiations, and employment contracts in these foreign countries as well.
In fact, the CVO and MD, Pratik Vaidya of Karma Global were selected by SME Forum last year to lead a Select US Summit where he took along a delegation of over hundreds of SME Members for business discussions with the authorities in the States as well as with the entrepreneurs and Innovators of many countries who were present in this forum.
Soon thereafter, Pratik Vaidya, CVO & MD of Karma Global went on a Europe tour, participating along with Advantage Austria and brainstorming on the ecosystem of Start-ups in Salzburg, Austria
Karma Global thus entails the compliance of international clients in keeping with the global scenario, thereby undertaking a noteworthy mission of guiding clients through a spider’s web of legislation so that clients are able to stay on the right side of the ever-changing laws especially so, it keeps an update on what is happening around the world as far as people, wages, work, benefits, employment contracts, negotiation, employee representation, industrial relations, court practice and procedures, and unions are concerned.
Karma Global’s decades of experience in making sure that clients are compliant with all types of changing legislation offers unique support to mitigate risk by grasping technological solutions and a combination of expertise.
Setting Up a Canada Subsidiary – As A Corporation or as A Partnership or as an Extra-Provincial Corporation!
Building up of a business!
It is essential to ensure that your business idea has the potential to be successful by seeking answers to the following questions:
- How will your company stand out from the crowd?
- Who are your target customers?
- How much finance will you need and its source?
Start with market research
You will need to do initial market research to identify your target customers and understand their needs and desires. The objective will be to find the right product-market fit that will attract customers.
Financing Pattern and Looking for Mentors
This will also be the time to start thinking about where the finance is going to come in to start and run the business. It will be a good idea to find a mentor with deep business experience.
Choosing a Business Structure
The next step is to select a structure for your new company. In Canada, there are three common types of business structures, each with their own pros and cons.
Sole proprietorship—A sole proprietorship is quite informal and easily created, which is why it’s the most common structure chosen by new entrepreneurs. In this structure, the business and the operator are the same in the eyes of law and tax authorities. The downside is that the owner is personally liable for all functions and debts of the business.
Partnership— A partnership is similar to a sole proprietorship, but instead of one proprietor there are two or more. As with a sole proprietorship, there is no legal structure, as such, for a partnership. However, partners usually have some type of contractual agreement among themselves that governs the sharing of revenues, expenses and tasks.
Corporation—When you incorporate a business you create ownership shares, which produce a taxation and legal distance between the company and its shareholders. This has tax advantages for the owners; provides some liability protection from the corporation’s debts; and offers some measure of protection for a company’s name. The downside is that setting up a corporation involves initial and ongoing costs for legal and accounting fees.
Pros and cons of business structures
Here’s a summary of the pros and cons of the three most common business structures.
| Sole proprietorship | Partnership | Corporation | |
| Legal status | Does not exist as a separate legal entity. Proprietorship = ownership |
Does not exist as a separate legal entity. Partnership = partners as owners |
The corporation is treated as a separate legal entity from its owners. Corporation = shareholder ownership |
| Control | Owner has total control. | Partners’ agreement determines control between partners. | Directors and shareholders. |
| Profits | Profits are paid to the owner. | To partners according to a partnership agreement. | Earned by the corporation. Dividends may be paid to shareholders and/or retained in the corporation. |
| Debts | The owner is responsible (unlimited liability). | Partners are individually and collectively responsible. | Paid by the corporation. |
| Taxation | The owner is taxed as an individual on the income of the business as if he or she was employed. | Partners are taxed individually according to their share of the income. | The corporation pays corporate taxes separately from taxes paid by directors and shareholders. |
| Assets | Business assets are wholly owned by the proprietor. | Partners jointly own business assets and/or ownership is governed by the partnership agreement. | Business assets are owned by the corporation. There is no specific claim on the corporate assets by shareholders. |
Paying taxes by start-ups in Canada?
If you provide taxable property and services in Canada and your total taxable revenues exceed $30,000 in any single calendar quarter or in four consecutive calendar quarters, you will have to register for the GST/HST. More details are available on the Canada Revenue Agency’s website.
You may also need to collect income tax for the profits you earn. You will need to complete a tax return at the end of your first year of activity to determine how much tax you owe, if at all. Income tax laws vary by province and territory and at the federal level.
Choosing a business name
By law, the name can’t be the same as, or very similar, to an existing corporate name or trademark. So, it’s important to do a careful search of existing business names before selecting one. Most companies need to register their business name with the government. However, you generally do not need to register a sole proprietorship if it operates under your own legal name and personal bank account.
You may also need permits or licenses to operate your business and will need to contact your province, territory and/or local municipality.
Putting together a business plan
Your business plan should include the following elements.
- Executive summary—
- Business overview or company profile—
- Sales and marketing plan—
- Operations plan—
- Human resources plan—
- Action plan—.
- Financial plan—
Main sources of financing for start-ups
- Personal investment
- Money loan by a spouse, parents, family or friends
- Business loans
- Credit cards and lines of credit
- Angel investors I.e. wealthy individuals or retired company executives
- Venture capitalists
- Grants and subsidies
- Business incubators
Pros and cons of each source of financing for start-ups
| Pro | Con | |
| Personal investment | Shows you are committed to your business | Repayment is dependent on your business’s success. |
| Love money | Is based on your personal relationship with the lender and usually comes with a few conditions. | Often not enough money to fully finance your business. |
| Bank loan | Comes with relatively low-interest rates. | Must be repaid, usually in monthly installments. |
| Credit cards | Easy source of cash that can help you build your credit score. | High-interest rates can quickly drain your cash flow. |
| Angels | Often share knowledge and experience with you. | May require giving up ownership of your business. |
| Venture capital | Can be more tolerant of risk. | Expects a high return on investment. |
| Grant | Does not have to be repaid. | Hard to obtain. |
Choose a commercial space
For some types of businesses, such as retailers, location will obviously be a key consideration. For others, like tech start-ups, it will be less important.
Other important factors in your choice of premises include access to the property for employees and suppliers and whether you will need to make improvements to the property to run your business.
If you are renting space, you will probably have to sign a commercial lease and will need insurance to protect your assets.
Hire employees
As your company grows, you will likely need to hire employees. This could be one of your most challenging tasks as an entrepreneur, especially at a time of labour shortages in many parts of the country.
Grow your business
Getting your business up and running is only the start of your business journey.
You will have to keep your eye not only on your day-to-day operations but also planning for your company’s future growth.
Canada Subsidiary Laws
Canada subsidiary laws vary based on the province you’re working in. If you want your subsidiary to operate under certain conditions, you should find a region that has a climate conducive to your business. For example, Ontario, Alberta, Manitoba, Saskatchewan, Newfoundland, and Labrador require that at least 25% of the subsidiary’s directors be resident Canadians.
Consider exactly where you will conduct business in Canada. You need to register in every province in which you plan to do business if you are incorporated under the country’s federal laws.
When setting up your subsidiary, it’s also helpful to review certain business factors such as any existing trade agreements and the nationality of your headquarters. Although English is Canada’s national language, different provinces may have various dialects such as French.
Benefits of Setting Up a Canada Subsidiary
Although Canadian subsidiary laws can often be confusing for businesses new to the country, you’ll find numerous benefits through the Canadian subsidiary setup process. The biggest is that you can continue to grow your company while avoiding liability issues.
Subsidiaries typically operate under a parent company in the US that has control over all branch locations. If your Canada subsidiary faces any litigation, fines, or compensation issues, the parent company is responsible for dealing with them as the Employer of Record. The Canadian facility will still operate as part of the company — it will merely have decreased liability as opposed to the US location.
While parent companies shoulder liability, subsidiaries can still retain some independence. You choose how you want your Canadian subsidiary to operate — whether the same or different from your US location. You can take the country’s laws and culture into account and can even tailor operations to fit the specific province where your business is located.
CONCLUSION – Karma Global acts as a Globalization Partner in helping expansion:
Karma Global has already established itself in Canada having its office set up at 325 Front St W, Toronto, Ontario, Canada, catering to a vast clientele in these provinces it will assist in keeping up with each Canadian subsidiary law in your province who are up-to-date on all regulations.
Quite many providers will be there to assist in registering or qualifying to do business in another state (obtaining a Certificate of Authority). However, Karma Global is a reliable authentic enterprise with hundreds of experts to review your documents before submission and to avoid rejections and expensive delays.
Karma Global’s expert local and regional team’s proactive approach includes efficient hands-on review and filing with dedication and meeting the toughest deadlines with customized solutions for each business venturing client.
Whether you’re forming a new company, expanding to other states, or setting up many entities our fully trained team can time your filings perfectly and decrease your chances of rejection and delays.
Karma Global is available to assist in services like:
- Name availability and/or verification.
- Preparing your required documents (as needed).
- Reviewing the documents prepared by your attorney.
- Providing corporate book and seal for formation filings (optional).
- Submitting and filing everything in-person, in any state.
- Working with filing officers to troubleshoot issues as quickly as possible.
- Following up to address any problems.
- Sending you the evidence of filing, as soon as it’s approved.
- Make sure that your entity name is available and permissible in the new state, as well as research alternate solutions if it isn’t.
- Obtaining your Certificate of Good Standing from your home state.
Proprietary blog of Karma Global Tech Management LLC
This blog has been collated and compiled by the internal staff of Karma Global with the knowledge and expertise that they possess, for its monthly newsletter Issue 08 of February 2023 in case of specific or general information or compliance updates for that matter, kindly reach out to the Marketing Team – Kush@karmamgmt.com / yashika@karmamgmt.com