Starting a business can be an exciting but challenging process, and if you’re considering incorporating a subsidiary company in Canada, there are many factors to consider. Before opening a subsidiary company in Canada, you must first decide why you’re establishing a subsidiary company, figure out the desired structure, understand the taxes and regulations associated with this type of company, and develop a plan for how you’ll operate it. In this article, we’ll provide an overview of the steps you must take to open a subsidiary company in Canada.
Deciding Whether To Open A Subsidiary Company In Canada
Opening a subsidiary company can be a great way to expand your business’s presence in Canada, but before you go ahead with this plan, you should understand what a subsidiary company entails. A subsidiary is a separate legal entity from its parent company, meaning it can enter into its own contracts, take on debt, and hire employees. Being a separate legal entity means your main business will not be responsible for the debts or liabilities of its subsidiary company.
It’s important to also consider the main differences between sole proprietorship and a subsidiary option. While sole proprietorship is a great way to start a business, it’s not very flexible in terms of growth. On the other hand, a subsidiary company can be used to expand in a more fluid and hands-off manner, while still allowing the parent company to benefit from the subsidiary’s value.
Choosing a Structure
The structure of your company is key to its success, and there are several things to consider when deciding on a structure for your subsidiary. Generally speaking, a subsidiary can be formed as a corporation, limited partnership, or a limited liability company. All of these forms come with different obligations and benefits, so it’s important to do your research and choose the right structure for your needs.
Some of the factors to take into consideration when choosing your subsidiary’s structure include whether you want to be liable or not, the size and scope of your business, how much taxation you’ll face, and what kind of control and management you’ll be able to have over the subsidiary. It’s also important to understand the documentations and filings that must be completed when setting up your subsidiary’s structure.
Understanding Taxation
Taxation is a major factor to consider when setting up a subsidiary company in Canada, it’s important to understand the rules, regulations and taxes that will apply to your business. Depending on the structure you choose, your subsidiary company may be subject to different taxes like corporate income tax, provincial sales taxes, and value-added taxes. It’s important to do your research and know what taxes you’ll need to pay, and whether you can deduct certain expenses from your taxes.
It’s also important to understand how owning and managing a subsidiary will affect your personal income. Owning a subsidiary company means that you’re treated differently when it comes to taxation, and that you’ll also be responsible for reporting the subsidiary’s profits and losses on your personal income tax return.
Setting Up Your Subsidiary Company
Once you’ve decided on a structure and researched the necessary taxation, your next step is to set up your subsidiary company. This involves registering the company with the relevant provincial or territorial government, choosing a business name and acquiring a licence to operate. You’ll also need to decide how you want to manage the subsidiary company, and if you want to hire employees.
You also need to make sure that all the necessary documents and filings are complete. This includes filing an income tax return and a GST/HST return, keeping accurate financial records, and filing the appropriate paperwork when closing down your subsidiary company.
Creating a Plan
Last but not least, once all the legal paperwork is done, it’s time to create a plan for how you’ll operate your subsidiary company. This includes setting targets and goals, making a budget, and deciding who will manage the subsidiary. It’s also important to decide on the type of products or services you’ll offer, and what kind of marketing you’ll use to reach the relevant customers.
Protecting Your Subsidiary Company
Once your subsidiary company is up and running, it’s important to protect it from any potential lawsuits or legal action. It’s essential to protect the business from both internal and external threats, whether it be fraud, cyber threats or data breaches. This can include having the right insurance coverage, making sure your premises are secure, and regularly monitoring employee and customer data.
Ensuring Compliance
As a business owner, it’s important to stay up to date with local, provincial and federal laws. This includes making sure that you understand and comply with the relevant employment standards, privacy laws, and health and safety regulations. A sound understanding of the legal system is crucial for any business, no matter its size.
Accessing Financial Support
When setting up or running a subsidiary company in Canada, there are several options for financial support. This can include loans from the Small Business Administration, grants from the provincial government, and crowdfunding. Having the right support and resources can help ensure that your subsidiary business is successful.
Managing Human Resources
Once you have all the administrative and financial aspects of running a subsidiary business taken care of, it’s time to focus on managing your human resources. This includes hiring the right team, making sure they receive the training they need, and understanding the relevant labour laws. It’s also important to have a clear and effective method of communication between the management team and employees in order to ensure the smooth running of the business.
Fostering Growth
Lastly, it’s essential to foster growth within your subsidiary business. This can include innovating in order to stay competitive in the market, taking advantage of technology and implementing strategies for scaling up the business. Fostering growth is key to a successful subsidiary business, and it should be regularly reviewed and evaluated to ensure that the business is on the right track.
