- Ontario (OBCA): No residency requirement As of 2021, the OBCA was amended to remove the Canadian residency requirement for directors.
- Name rights A federally incorporated company has the right to use its corporate name across all provinces and territories, subject to any provincial extra-provincial registration…
- You need your name protected nationally — you're building a brand you plan to use across multiple provinces from the start 2.
When an Ontario founder incorporates, they face a choice that looks minor but has real ongoing implications: incorporate provincially under the Ontario Business Corporations Act (OBCA) or federally under the Canada Business Corporations Act (CBCA)? Both create a fully legitimate Canadian corporation, but the rules — and the ongoing obligations — differ in ways that matter.
One of the most practically important differences right now is the director residency requirement, which the OBCA and CBCA treat very differently.
The Director Residency Rules: OBCA vs. CBCA
Ontario (OBCA): No residency requirement
As of 2021, the OBCA was amended to remove the Canadian residency requirement for directors. Before that change, at least 25% of directors of an Ontario corporation had to be Canadian residents. That requirement no longer exists.
An Ontario corporation under the OBCA can now have all non-resident directors — every member of the board can be a citizen or resident of another country. This is a significant change that makes Ontario incorporation more accessible to international founders and companies with no Canadian director available.
As of writing — verify the current rule applies to your situation, as legislation can change.
Federal (CBCA): 25% Canadian residency requirement
The CBCA still requires that at least 25% of a corporation's directors be Canadian residents — citizens or permanent residents of Canada who are also ordinarily resident in Canada. For a corporation with fewer than four directors, at least one director must be a Canadian resident.
As of writing — verify the current rule and whether legislative changes have occurred, as federal corporate law amendments are periodically proposed.
This residency requirement is a meaningful operational constraint. If you have a small board of two or three directors and none are Canadian residents, you cannot comply with the CBCA without recruiting a Canadian director. For international founders or companies establishing a Canadian presence without Canadian team members, this can be a real obstacle.
Other Key Differences Between OBCA and CBCA
Name rights
A federally incorporated company has the right to use its corporate name across all provinces and territories, subject to any provincial extra-provincial registration requirements. A provincially incorporated Ontario corporation's name is protected in Ontario, but if it operates in another province, a business with the same name in that province might not be forced to change.
If operating nationally under a consistent name matters for your business, federal incorporation offers stronger name protection across Canada.
Extra-provincial registration
If a federally incorporated company carries on business in Ontario, it must register as an extra-provincial corporation with the Ontario Business Registry. Conversely, an Ontario corporation that expands to operate in another province (say, British Columbia) must register in BC as an extra-provincial corporation.
There's no free pass on provincial registration just because you chose federal incorporation — you still need to register in each province where you have a significant presence.
Cost and complexity
Federal incorporation involves filing with Corporations Canada (federal), plus Ontario extra-provincial registration to operate in Ontario. Two filings, two fees, two sets of ongoing obligations (federal annual return + Ontario annual return).
Provincial Ontario incorporation involves one filing with the Ontario Business Registry, one annual return.
For a purely Ontario-based business, the OBCA is typically simpler and less expensive to maintain (verify current fees with ServiceOntario and Corporations Canada, as these change).
Ongoing obligations
Both OBCA and CBCA corporations must:
- File an annual return
- Maintain a registered office
- Keep corporate records (minute book)
- File corporate tax returns with CRA
Federal corporations have the added obligation of filing with Corporations Canada, while Ontario corporations file with the Ontario Business Registry.
When Federal (CBCA) Incorporation Makes Sense
Consider federal incorporation when:
- You need your name protected nationally — you're building a brand you plan to use across multiple provinces from the start
- You have investors or a structure requiring federal status — some institutional investors, government programs, or specific industry licences have preferences or requirements for federal incorporation
- You plan to expand interprovincially quickly — while extra-provincial registration is required either way, starting federal can make the expansion process feel cleaner
- Your legal or accounting advisors recommend it for your specific structure
When federal incorporation is probably not worth it
For most Ontario-based small businesses, owner-operated corporations, holding companies, and professional corporations, the OBCA is the cleaner, simpler, and less expensive choice. The CBCA's director residency requirement is an active obstacle if your directors aren't Canadian residents, and the dual annual filing obligation is ongoing overhead with no real offsetting benefit for an Ontario-only operation.
The International Founder: OBCA Is Almost Always the Answer
If you're an international founder setting up a Canadian entity — with no Canadian directors available — the OBCA is effectively the only viable option under current law (as of writing). The CBCA's 25% residency requirement means a two-director board without a Canadian resident director cannot comply.
Ontario's 2021 change to remove the residency requirement was specifically intended to make Ontario more attractive to international businesses. It has achieved that aim.
Changing Your Mind Later
If you incorporate provincially and later decide you need federal status (or vice versa), a corporate continuance allows you to re-register under the other statute. This is not a new incorporation — it's the same corporation, continued under a new governing law. Continuances are possible but involve legal and administrative work. Getting the choice right at the start is easier.
Frequently asked questions
Can an OBCA corporation open a bank account outside Ontario?
Yes. Where your bank accounts are held is not determined by where you're incorporated. An Ontario corporation can bank anywhere.
If I incorporate federally, do I have to register in Ontario separately?
Yes. A federal corporation that carries on business in Ontario must register with the Ontario Business Registry as an extra-provincial corporation. There is a registration fee (verify the current amount with ServiceOntario).
Does the type of incorporation affect corporate taxes?
No. Both OBCA and CBCA corporations file T2 returns with CRA and are subject to identical federal and Ontario corporate tax rates. The governing corporate statute does not affect your tax treatment.
Are professional corporations (for lawyers, doctors, accountants) provincial or federal?
Professional corporations in Ontario are governed by the relevant professional regulatory body's rules, which typically require incorporation under the OBCA (not the CBCA) to hold a professional corporation designation. Verify the requirements with your regulatory college.
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