Expanding Your Business into Canada: Why a Subsidiary Is Not the Sub-Par Choice

Canada is a coveted destination for international business expansion on account of its stable economy and diverse population. From the bustling cities of Toronto and Vancouver to its vast natural resources, Canada offers an array of benefits. The country’s close proximity to the United States and highly educated workforce are other notable advantages to expanding your business north of the border.

Expanding your business into Canada presents a world of opportunity, but it also comes with critical decisions. A primary decision to consider is whether to establish a Canadian subsidiary or work with a Professional Employer Organization (“PEO”). 

A subsidiary is a distinct and separate legal entity that is owned and controlled by a parent company. In contrast, a PEO functions as an outsourced human resources firm that assists international companies with hiring and managing Canadian employees, without the need to establish a legal entity in Canada. Instead, the PEO assumes the role of the “Employer of Record” for your employees.

As summarized in this article, a subsidiary is often preferable to a PEO when considering expanding your business to Canada. A subsidiary establishes a strong Canadian presence, provides general market credibility and key tax incentives, and can be setup quickly, efficiently and remotely.