Deciding to start a business in Canada is a massive step towards creating financial independence for you and your family. Rather than have your income ceiling dictated by your employer, you can choose your rates, the time you work, and the types of services you offer. With perks like these, it is no wonder that in 2021 Statistics Canada reported 1.21 million employer businesses in the country.
Though the benefits are large, registering a business in Canada also comes with many administrative obligations that every entrepreneur needs to be aware of. That’s exactly what this guide is for. If you’re hoping to start your business in Canada in 2023, read on for all the information you need to know.
Choosing a business structure in Canada
The first step to beginning any venture is deciding its legal structure. In Canada, there is a myriad of ways to run your business. The most common are Sole Proprietorship, Corporation, or Partnership. While there are other structures such as Limited Liability Partnerships or Co-Operatives, these are specific entities not available to everyone. Here is a breakdown of the three most common.
Registering a sole proprietorship in Canada
In terms of structure and governance, a sole proprietorship (SP) is the simplest structure. To put it simply, you are the business. There is no legal difference between you and the business you are running. In turn, that means that although it is easy to run and maintain, it confers fewer tax benefits for the owner. Because the owner is identical to the business, they are fully liable for any damages incurred on the job.
Under Canadian regulations, an SP is created as soon as an individual performs services or sells goods to profit. No legal documentation is required. This structure is most suitable for individuals starting their business, as there are little to no costs involved. However, this structure is also flexible enough to allow you to change to a different business format as you see fit.
Registering as a partnership in Canada
A partnership is any joint venture between two or more persons, established verbally or in writing. Each partner contributes funds, assets, and other contributions as per a verbal or written agreement. This type of business structure does not necessarily have to be registered or legally documented, but there are some cases where it is required. Each partner will own a percentage of the business dependent on how much capital they have contributed.
In terms of liability, both partners are legally responsible for any losses or damages to how much of the business they own. For example, if you and your partner were sued for $100,000 and you each owned 50% of the business, you would be personally liable for paying $50,000.
Registering as a corporation in Canada
The most complex legal structure is a corporation. After incorporating, you create a separate legal entity or “person” that can enter into contracts, pay employees, be taxed at a separate rate, and issue shares. A corporation is governed by a board of directors who are elected by the shareholders upon its creation. The directors may appoint officers (e.g. President, Secretary) to perform specific duties within the business.
Regarding liability, this structure allows the owners to be entirely separate from the corporation, thus giving them legal protection in the case of a lawsuit or other matter. There are matters where directors are personally liable regardless of them being separate from the business, such as GST remittance, or if any personal guarantees were put in place.
It is salient to point out that a business can incorporate either provincially or federally, depending on where you operate. If you are operating within Alberta, for example, you would incorporate your business there. If you choose to incorporate it at the federal level, you may still need to register your business in each province it is operating in, even if it is only to hold property. A prime example of this is British Columbia’s recent Landowner Transparency Act. This Act required all beneficial owners of land that were corporations to register in the province.
How do I register my business in Canada?
In the case of sole proprietorships and some partnerships, you won’t need to register your business either federally or provincially, unless you want to operate under a name other than your personal name. For corporations, things are a bit more complex.
Incorporating provincially
To incorporate in any province or territory in Canada, you will need the following information:
- List of Directors and Officers
- List of Shareholders and the percentage of the business they own
- Contact information for all the above parties
- Location of your Registered Office and Agent for Service (who will receive correspondence for the business for legal matters)
With this in hand, you can register your business in the province you wish to operate in. Each province has its registry system that is intuitive for entrepreneurs to navigate, but some provinces, like Alberta, require you to register your business at a registry office or with a company like Ownr.
Incorporating federally
Generally speaking, the process for creating a corporation federally is the same as registering your business on a provincial level. You can head to Corporations Canada to get started on the process. As with registering provincially, you will need the same information listed above to get started.
Remember, choosing to incorporate federally does mean you can operate in all of Canada, but there may be stipulations to this rule as we noted above. Moreover, federally created corporations have more rigorous name protection as compared to provincial corporations.
How much does it cost to incorporate my business?
While the cost varies greatly depending on whether you choose to hire a lawyer to incorporate your business, there are some common fees if you choose to incorporate your business on your own.
Incorporation Fees in Canada
Note that these fees are the initial one-time startup fees and do not include annual maintenance fees which vary by jurisdiction.
Registering a name for your business
Now that you have decided on a structure for your business, you can choose how you want to be recognized by customers and other businesses. A name is one of the most crucial aspects of your business as it outlines your services and provides a first impression for clients and competitors.
According to NUANS Canada, a business name needs to have the following characteristics:
- Be distinct
- Contain a legal element (Ltd., Inc., Corp., etc.) if a corporation
- Not suggest governmental sponsorship or control
- Not confused with any existing legal names
An example of an appropriate corporate name would be Tom’s Trucking Services Inc. It is distinctive in that it outlines what the business is offering (trucking services), contains a proper legal element, and does not indicate any type of public control.
How do I register my business name in Canada?
If you are operating as a sole proprietorship in Canada under your legal name (e.g. Jane Doe), you do not need to register for a business name. However, if you wish to add any terms to your legal name, or operate a business under a separate name, you will need to register this name in the jurisdiction you wish to operate. Sole proprietorships electing to have a name obtain a trade name.
To propose your desired name, you will need to search online to see if it is currently in use, and search business records to ensure no one else has rights to it. The best way to ensure a name is available in Canada is by ordering a Newly Upgrade Automated Name Search (NUANS) Report. This report will hold the proposed name for 90 days until you register it.
To register the name at the provincial level, you will need to head to the online registry for the jurisdiction you are seeking to operate in. If you are running a corporation, you would have had the option to select a named company upon incorporation. The registry staff/system will file the trade name for you and you’re all set.
How much does it cost to register a name?
We indicated the rough costs to register a name for corporations in the table above. For sole proprietorships or other business models that use trade names, the costs will vary per jurisdiction. To give you a general idea, a NUANS Report costs approximately $14. A provincial registry usually will have fees on top of that charge. In Alberta, for example, it costs $10 to register a trade name.
Trade names vs. Corporate names
Before moving on, it is important to note that trade names generally carry less authority if an issue arises between a corporation and a sole proprietorship operating under similar names. If a company was incorporated federally, it has the strongest name protection in Canada. It’s important to remember factors such as these into account when choosing both your business structure and your naming registration process.
Registering a GST/HST number
The next step in registering your business in Canada is to register your GST/HST number with the Canada Revenue Agency (CRA). A GST number is required if you sell taxable goods or services and if your revenue for any given quarter exceeds $30,000.00. Once you begin charging GST/HST for your goods or services, you will also need to remit payment to the CRA either annually or quarterly; it’s up to you.
How do I register a GST/HST number?
For many businesses that have a trade name, you will have also been issued a business number. This number identifies your business and allows you to open up various accounts such as payroll accounts, GST accounts, and Canadian Pension Plan (CPP) accounts. To register a business that already has a nine-digit business number, simply head to the CRA’s GST Registration Page and input your business information.
If you’ve incorporated in Canada, you will likely already have a business number issued that you can use to register for a GST/HST number. If you are a non-registered sole proprietorship that meets the requirements to have a GST/HST number, you probably will need to register for a business number before proceeding. Luckily, the CRA makes this quite simple with their Business Registration Online platform. You’ll need your address/contact information, Social Insurance Number (SIN), and date of birth to register.
Obtaining proper business licenses and permits
Though many provinces and territories do not require special licensing to operate a business in their jurisdiction, municipalities, such as cities or towns, are a different story. Even if you’re choosing to operate a fully-online business out of your home, it’s wise to contact your local town/city office to inquire about what is required of business owners in your area.
If your business owns property or will be acquiring some to offer services (e.g. cafe), there is a chance you will need a business permit as well. Depending on the type of work you do, you may also need to acquire zoning and building permits from your municipality or province. If your business affects the environment, there is a chance federal and provincial environmental permits will be required. For a robust list of permits and licenses in your jurisdiction, check out your locale’s BizPal.
Opening a business bank account
Here comes the enjoyable part: money. Opening a bank account as a business owner can be simple or a bit more time-consuming depending on your structure.
If you’re operating an entity that is not separate from you personally, such as a sole proprietorship, opening a business account won’t be necessary. But, it is probably a prudent idea, considering you will need to track how much your business is earning. Having two different accounts will make your life that much more simple.
If you run a corporation, a business bank account is a necessity, given that the business is a separate entity with its own income. Most banks in Canada will require certain documents to open a business bank account such as proof of incorporation, a business number, official documentation showing the directors of the corporation, and the directors’ personal information (e.g. SIN numbers). So long as you have this crucial documentation, setting up the account with a banking professional is relatively seamless.
Do I need a business credit card?
Though a business credit card is not always needed for entrepreneurs, they do come with many advantages. For one, it makes tracking expenses for your books much easier. Rather than sorting through receipts that include personal and business purchases, you can rest assured any purchases made on your corporate card are indeed for the business.
Secondly, a business credit card can show a level of professionalism to other businesses you work with. It shows that you are thinking strategically about claiming the various benefits that come with being a business owner.
Considering the above perks, a solid case can be made to have a company credit card, even if you are a small business. Two credit cards that we recommend are the Business American Express Gold Rewards card and the Caary Business Mastercard.
Staying in the loop
Now that you’ve got your business registered in Canada, the real work begins: staying abreast of your competition. But, the business world doesn’t have to be a dog-eat-dog environment. Collaborating with other business owners for product ideas, or brainstorming ways to save money during an economic downturn, will pay large dividends in the long run. Besides, making meaningful connections in business typically leads to acquiring more customers as you become more familiar with different areas of your market.
One great way to keep up to date with all things business is by joining your local professional group or by attending Business Improvement Area (BIA) meetings. These types of cohorts allow you to extract insights into how to properly run a business in your province or on a federal level.
In the meantime, Hardbacon has you covered by offering all the investing, financing, and business information you could need; all in one convenient place. Look around – you might be surprised at the nuggets you find.
FAQs About Registering a Business in Canada
How to register a business in Canada?
The first step to registering a business in Canada is to decide on your structure. If you are operating as a sole proprietorship or partnership, you won’t necessarily need to register your business. If you choose to open a corporation for your business affairs, you will need to register. To do so, simply head to your local registries office, or their website, and have a business name handy. Alternatively, you can use a service like Ownr to register your business provincially or federally – all at the click of a button.
Do I need a registered business to sign up for a PayPal business account?
No. You can choose to sign up for a PayPal business account as a sole proprietor and have the account linked to your personal bank account. Keep in mind, however, that PayPal does report any income made through their application as business income.
Do I need to register a business to freelance?
No, depending on how you wish to operate. If you are a sole proprietor, you do not need to register your freelance business in Canada – unless your revenue exceeds $30,000 in a quarter. But, you can voluntarily choose to register your business.
If you operate as a corporation, your business will be de facto registered in Canada.
Do you have to register a business from day one in Canada?
Nope! You can choose to run your business as a part of your personal income (sole proprietor) without registering it.
Is it free to register a business in Canada?
No, there are various costs associated when you register a business in Canada. If you are creating a corporation, for example, the average fee in Canada is $350, not including name registration fees.
Can a non-resident register a business in Canada?
Yes, but there are some stipulations. If you are operating a partnership, you will need to have one or more of the partners be a resident Canadian. If you are operating a corporation, the registered office will need to be a location within Canada. Furthermore, at least 25% of the directors will need to be resident Canadians. If there are fewer than four directors, one of them must be a Canadian resident.
Should I incorporate federally or provincially?
Choosing which jurisdiction to incorporate in will turn on where you wish to operate your business. If you expect to operate your business in multiple locations within Canada, incorporating federally is likely the better option. If you only expect to operate within one province, simply registering in that jurisdiction makes the most sense.
Incorporating federally allows for more protection regarding the name you choose, as the name is owned by you throughout all of Canada, not just in a single province.
