Starting a business in Canada
To start a business in Canada you need to comply with all the relevant regulations. It’s important to have a great business idea, the skills and experience to implement it, funding to start it, and the management ability to run it – though complying with regulations is equally important.
Below we discuss the major regulations that will affect your new business. There are a number of links to Government sites to explain each step in more detail.
Choose a business structure
You’ll have to decide on a business structure. The most common forms are:
- Sole proprietorship – if you run the business on your own, you’ll pay personal tax based on your business income. Learn more about tax for sole proprietors at the Canada Revenue Agency site.
- Partnership – if there’s more than one person running your business, you can form a partnership. You’ll pay personal tax (similar to a sole trader) based on the portion of profit from the partnership allocated to you. Learn more about tax for partnerships at the Canada Revenue Agency site.
- Corporation – this is a separate legal entity with shareholders that pays its own tax. As the owner, you’ll be an employee of the company. Learn more about tax for corporations at the Canada Revenue Agency site.
There are other forms of ownership such as non-profit structures, but these three are the main forms of business ownership in Canada
Keep business records
You must keep all the information about your business, such as sales, expenses, wages and salaries. It allows the Canada Revenue Agency (CRA) to audit the evidence and confirm the profit you’re reporting is accurate, if they need to.
For more information on visit the Starting a business section of the CRA site.
Register your business name
Most businesses need to register their name. It differs from region to region – for example, if you operate a business in Quebec, you have to register with the enterprise register and declare your organization's legal form.
The Canada Business Network outlines what you need to do to register.
Citizenship and Immigration Canada recently launched a Start-up Visa Program designed to attract entrepreneurs from around the world. This program is ideal for entrepreneurs with experience running a successful business elsewhere. Applicants need to have backing from a business incubator, venture capital fund, or Canadian angel investor group before applying.
Another great resource is the Immigration Business Network. It offers tools and tutorials to help immigrants who want to invest in or launch new businesses in Canada.
As a newcomer to Canada you may have a great business idea. Before you invest too much in an idea that may not be viable, sit down and do your market research.
The Canada Business Network website has tips on how to conduct market research as well as up to date information and statistics.
Review possible business licenses
While not necessary for all businesses, many new businesses will need to get business licenses before they can operate legally within their municipalities. If your city or town doesn't have a website, you can find the information in the blue pages of your phone book.
You might also need other licenses and permits depending on what kind of business you're starting. Industry Canada's BizPaL is a really useful tool for finding out what permits and licenses you'll need to do business.
Available in most provinces and territories, BizPaL will provide a personalized list of the business documents you need for all levels of Government.
Register for Goods & Services Tax/Harmonized Sales Tax (GST/HST)
GST/HST is a tax you collect on all goods and services that you provide, on behalf of the CRA. You’ll also pay GST/HST on all your expenses. However, you’ll only pay the balance – for example, if you have more expenses than sales, you’ll get a refund.
Refunds are possible when you start your business as you may have large set-up costs or low sales. Learn more about GST/HST on the Canada Revenue Agency site.
Register for Provincial Sales Tax (PST)
Some regions have provincial sales tax that you need to be aware of – on top of GST/HST tax. Here’s a list of the provincial taxes you need to know.
Intellectual Property (IP)
You may want to protect your IP, like your business name, logo, idea or process. You can learn about the different ways of protecting your IP before you start. Visit the Canadian Intellectual Property Office to understand the basics.
You’ll find that business owners like to attend events organized by their local Chamber of Commerce or Board of Trade. Contact a local office for a schedule of upcoming networking opportunities to talk to other business owners about regulations that could impact on you.