DOING BUSINESS in British Columbia This Guide to Doing Business in British Columbia is aimed at non-Canadian companies and entrepreneurs looking for general information about laws, regulations and taxes that apply to starting and operating a business in the Province of British Columbia, Canada. Because every business situation is unique, this guide can not cover all potentially relevant legal and tax considerations. Also, it is not intended to be a substitute for legal, tax, financial or other professional advice that you will need in starting, buying, or investing in a business in British Columbia. We hope you find this guide helpful in developing your business opportunity in British Columbia. For more information and help, please contact: Michael Track Executive Director, Investor Services Government of British Columbia, Canada Ministry of Tourism, Trade and Investment 730 - 999 Canada Place Vancouver, BC V6C 3E1 Direct: 604-775-2202 [email protected] www.investbc.com Disclaimer. Every effort has been made to ensure that the information in this publication is accurate and current to October 29, 2010 (the information also includes significant proposed tax changes); however, neither the Ministry of Tourism, Trade and Investment and the Government of British Columbia, nor Fraser Milner Casgrain LLP accepts liability for actions based on this information. For more information on Fraser Milner Casgrain LLP, please visit www.fmc-law.com . ii TABLE OF CONTENTS TABLE OF CONTENTS.............................................................................III EXECUTIVE SUMMARY ............................................................................1 WELCOME TO BRITISH COLUMBIA.........................................................2 Welcome to British Columbia........................................................................................... 2 What laws affect business activities? ............................................................................. 3 INVESTING IN CANADA ............................................................................5 Minimal Regulations ......................................................................................................... 5 Canada encourages foreign investment ......................................................................... 5 Who are non-Canadians? ................................................................................ 5 Establishment of a New Business .................................................................. 6 Direct Acquisition of an Established Business............................................. 6 Indirect Acquisition of an Established Business .......................................... 6 Restrictions for specific businesses .............................................................. 7 Business investments may be reviewed ......................................................................... 7 What is the review process? ........................................................................... 8 The information in your application is confidential ...................................... 8 What if your application for investment is denied? ...................................... 8 Canada does not have exchange controls...................................................................... 8 Non-Canadians may acquire real estate.......................................................................... 9 For more information........................................................................................................ 9 ESTABLISHING OR ACQUIRING A BUSINESS ......................................10 There are many ways to set up your business ..............................................................10 Setting up a company......................................................................................................10 How do you set up a company?.................................................................... 10 How to incorporate a federal company ........................................................ 11 How to incorporate a British Columbia company ....................................... 11 The nature of a share ..................................................................................... 12 What is a shareholders’ agreement?............................................................ 12 The company must have directors ............................................................... 12 Do you have to appoint an auditor? ............................................................. 13 iii What are officers? .......................................................................................... 13 Other forms of business organization............................................................................13 Your business can be a sole proprietorship................................................ 13 You can set up a general partnership .......................................................... 13 You can set up a limited partnership............................................................ 14 What is a joint venture? ................................................................................. 14 Other ways of doing business in BC ..............................................................................14 Extraprovincial registration in British Columbia......................................... 14 You can do business with a distributor ....................................................... 15 You can do business through a franchise arrangement ............................ 15 Buying an existing business...........................................................................................16 Buying the company’s shares....................................................................... 16 Buying the company’s assets ....................................................................... 16 Things to consider when buying a business............................................... 16 What taxes do you pay if you buy shares?.................................................. 17 What taxes do you pay if you buy assets? .................................................. 17 What other issues are important? ................................................................ 17 Tax Considerations..........................................................................................................18 What are Canada’s income tax laws?........................................................... 18 What taxes do Canadian residents pay?...................................................... 18 What taxes do non-residents pay? ............................................................... 18 What are the tax rates? .................................................................................. 18 What about Canadian subsidiary corporations?......................................... 19 What about loans from the parent to the subsidiary corporation?........... 19 Transactions between a foreign parent and its Canadian subsidiary ...... 19 What about Canadian branch operations? .................................................. 20 How to choose between a subsidiary corporation and a branch operation.......................................................................................................... 20 How do joint ventures and partnerships work? .......................................... 21 Working with distributors and selling agents.............................................. 22 Is there a withholding tax? ............................................................................ 22 What about depreciable property? ............................................................... 22 Taxation of Electronic Commerce ................................................................ 23 Sales Tax ..........................................................................................................................23 Canada has a tax on goods and services .................................................... 23 Does HST apply to imported goods and services? .................................... 23 Are there any tax credits?.............................................................................. 23 What about taxes on land?............................................................................ 24 HIRING EMPLOYEES ..............................................................................25 Labour and Employment Issues .....................................................................................25 Employment Law in British Columbia ............................................................................25 iv How are wages paid? ..................................................................................... 25 Employers must pay a minimum wage ........................................................ 25 Employers must keep records ...................................................................... 26 There are restrictions on working hours...................................................... 26 What happens if employees work overtime................................................. 26 Working on statutory holidays...................................................................... 26 Employees are entitled to vacation and vacation pay ................................ 26 What benefits does the employer have to pay? .......................................... 27 Employees are entitled to pregnancy and parental leave .......................... 27 Other