How To Set Up an LLC in Canada? (2024 Updated Guide)

Published by Jon Morgan | Co-Founder & Chief Editor

Last updated: February 8, 2024

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In Canada, you have the option to register various business forms, including the LLC.

The LLC is a unique hybrid company type that combines elements of corporations and partnerships.

With over ten years of experience as a legal advisor and attorney in business formation, I confidently assert that establishing an LLC in Canada is a smart decision.

Based on my extensive experience, I can assure you that setting up a Canada-based LLC is quick and hassle-free.

Quick Summary

• To set up an LLC in Canada, you must file articles of incorporation with the provincial government, register with the Revenue Agency, and open a dedicated bank account.
• An LLC in Canada offers a hybrid structure combining elements of corporations and partnerships, providing liability protection and flexibility in ownership.
• Over 75% of Canadian LLCs are now registered online, showcasing digital efficiency.
• In my opinion, establishing an LLC in Canada is a strategic decision offering a blend of liability protection and operational flexibility, making it an attractive option for both local and international entrepreneurs.

Setting Up an LLC in Canada

The process of setting up an LLC in Canada is relatively straightforward.

1. File Articles Of Incorporation

The first step is to file articles of incorporation with the relevant provincial government authority.

The articles of incorporation must include the following information:

• The name of the LLC
• Its principal place of business structure
• The date on which it will commence operations
• The names and addresses of its initial directors and officers

2. Register With the Revenue Agency

The second step is to register with the Revenue Agency. This can be done online at www.cra-arc.gc.ca.

3. Open a Bank Account

The final step is to open a bank account in the name of the limited liability company and obtain a business number from the CRA.

Registration options for LLCs in Canada

There are a few different ways to register an LLC in Canada. The most common method is to file articles of incorporation with the relevant provincial government authority. This can be done online or by mail.

Another option is to register the limited liability company with the Canada Revenue Agency. This can be done online at www.cra-arc.gc.ca.

The final option is to register the limited liability company with the Trade Register office. This can be done online or by mail [1]. Currently, over 75% of new LLC registrations in Canada are completed online, reflecting the convenience and efficiency of digital filing processes, according to Canada's Business Registries.

Income Taxes for Canadian LLCs

The Canada Revenue Agency (CRA) does not have a specific tax regime for limited liability companies. However, the CRA permits a foreign tax credit for US taxes.

Such entities are, however, subject to the same rules and regulations as corporations.

This means that Canadian Limited Liability Companies are subject to income taxes on their profits at the federal and provincial levels.

Requirements for Opening an LLC in Canada

There are several criteria that must be met when establishing an LLC in Canada. These include:

• The company will operate out of a location (province) where it has a business address.
• The Articles of Association are a document that must be prepared and approved by the shareholders.
• Following that, you must hire company executives.
• The company must open a banking account and transfer the share capital.
• Articles of Association must be submitted to the Trade Registers office.
• Obtaining the tax identification code and GST number [2].
• Before you do anything else, you'll need to acquire the necessary licenses.

Foreign investors with LLCs have the option of amending their firms by submitting Articles of Amendments to the Companies Register.

What are the Advantages of an LLC?

The advantages of an LLC are best described as personal liability for possible business debts and various business actions.

There are several advantages to establishing a Limited Liability Company. The major advantage, as you may well already know, is limited liability.

You are considered a partner in a limited liability partnership or a proprietor with your business structure when you own limited liability partnerships or sole proprietorships.

That implies any financial problems in your company become personal debt for you personally.

When you operate a limited liability partnership or company, your personal assets, such as your house and banking account, are not at risk.

This implies that if you run up debt in your business, your personal assets—especially your home and bank account—are still secure.

LLCs function similarly to corporations in this manner. It's a significant advantage to have if you plan to use your company to raise funds or take out loans.

We mentioned earlier that Limited Liability Companies are also more flexible when it comes to ownership. Corporations can’t have more than 100 shareholders.

But LLCs have zero restrictions on how many owners or the type of owners that a company can have. In this sense, LLCs are more like partnerships or sole proprietorships.

LLCs also have a limited life. The company ceases to exist when it winds up or dissolves. This is different from corporations, which can exist in perpetuity unless they are wound up or dissolved by their shareholders.

"LLCs get the best of all worlds when it comes to taxation. LLCs don't have their own federal tax classification, but instead adopt the tax status of sole proprietorships, partnerships, S corporations or C corporations."

- Jane Haskins, Esq., Freelance Writer

What Are the Conditions for Forming an LLC in Canada?

In order to form an LLC in Canada, you must meet the following conditions:

• The company must have at least two LLC members
• The company must have a designated manager
• The company must have a written LLC operating agreement to avoid future ownership disputes.
• The company must file Articles of Incorporation and the Initial Registered Office Address with the Revenue Agency

If you would like help incorporating an LLC in Canada, please contact our team of business incorporation experts. We would be happy to assist you with this process.

FAQs

References:

1. https://beta.canadasbusinessregistries.ca/search
2. https://www.canada.ca/en/revenue-agency/services/e-services/digital-services-businesses/confirming-a-gst-hst-account-number.html