You can start a small business in Canada and make thousands in profit before you ever have to register. Such a business is usually a sole proprietorship. But as your company grows, your obligations also increase.
Registering your business could include registering your business name, subscribing to a GST/HST number, or incorporating your business. When you take these steps, you receive a unique business identification number from the federal or your provincial government.
There could also be licenses and permits that your business requires. For example, if you start a restaurant, you must obtain the proper health permits to serve food.
This article details how to register your business in Canada. It specifically explains
- The steps in setting a business up
- How to register your business name, corporation, and GST/HST number
- How to start a business without registering
How do I set up a business in Canada?
Starting a business in Canada requires more than registration. You also need to consider your corporate structure and business name.
1. Decide on your corporate structure
Businesses generally choose to run as a sole proprietorship, partnership, or corporation in Canada. There are other structures such as a co-operative or limited partnership, but these pertain to very specific circumstances.
Sole proprietorship: This is the simplest way to run your business. Sole proprietorships are owned and run by yourself without a legal distinction between you and the business. Due to the lack of legal distinction, you receive all the profits personally and report these profits on your personal income tax return. You’re also personally liable for any risks you assume in your business.
Partnership: A partnership is run by two or more people. Each partner contributes money, labour, property, and other assets and is entitled to a share of the profits. You and your partner might draft a partnership agreement that dictates how profits are shared, responsibilities are divided, and more. You should inquire with a lawyer to draft such a document.
Corporation: This structure requires you to register or incorporate your business. It creates a separate legal entity, meaning that the company can take risks without affecting you personally. The corporation would also have its own legal contracts and tax returns distinct from yours. If you incorporate your business, you become the business’ shareholder.
2. Choose a name
Your business’ name is its identity. It’s an important marketing asset and determines how people find your company through search engines.
Using a common word as a name could create issues when people try to find you online. Other businesses, unrelated news articles, or memes might turn up instead. Before deciding on a name, you should also check whether website domains and social media handles are available.
How do I register my business’ name?
Essentially all businesses in Canada must complete a business name registration unless it’s a sole proprietorship. A sole proprietorship allows you to use your own name as the business name without registration.
The registration process is different in every province. However, you can start by doing a business name search through the Canadian corporate names and trademarks database. This database tells you whether a specific name is available. Afterward, you would register the name with your province’s business registry — you can usually do this online.
The cost to register a name varies with the province. If you register in a business in Ontario, for example, the fee is $60-$80. There’s also a fee to search for names through the corporate names database, which ranges between $8 and $26.
How do I incorporate my business?
You can incorporate your business either on the federal or provincial levels. The process is referred to as filing your articles of incorporation.
Federal incorporation provides better name protection and the ability to do business across the country without additional registrations. However, it also includes more paperwork. In contrast, provincial incorporation is more straightforward but provides fewer protections and requires you to register in each province that you want to do business in.
Incorporating your business is similar to registering a business name. You can incorporate federally online through the Government of Canada website. Each province also has their own incorporation portal.
These systems generally do a good job guiding entrepreneurs through the process. However, more complex business structures might require the help of a corporate lawyer. These complex scenarios involve cases where there are different types of shareholders or where multiple corporations and partnerships sit in a corporate group.
Incorporation provides many benefits, including business legitimacy and protecting your personal assets. If a client sues your business, your personal properties are protected from the lawsuit. A lawsuit against your company can only claim as much as your business owns and not what you personally own. In contrast, if you decide not to incorporate, you could be personally liable for any lawsuits against your business.
Many entrepreneurs use a corporation to mitigate their risks to lawsuits. However, if you choose not to register, you can retain similar protections with the right business insurance plan. The proper insurance can pay for legal fees and damage awards if you or your business faces a lawsuit. Even after incorporation, the right business insurance is vital.
How do I register a GST/HST number?
You can register for a GST/HST number online, by fax or mail, or by telephone. Any business that makes over $30,000 a year has to register for a GST/HST number and collect the affiliated sales taxes, depending on the province. If your business is under $30,000 of revenue, you can still register for a GST/HST number, but it’s not mandatory.
As a GST/HST registrant, you’ll also have to complete and regularly file a GST/HST return and remit your collected sales tax to the government. On the brighter side, you can usually claim back the GST/HST you’ve paid on business purchases.
Can I start a business without registering?
It’s entirely possible to start a business in Canada without any form of registration. However, it comes with severe limitations. You would have to do the following:
- Use your own name as your business name: This means only your first and last name. Even if you add “…and company” or “….’s baking company,” it requires you to register a business name.
- Maintain revenues under $30,000: As long as your revenues are under $30,000 per year, you remain a small supplier and are not required to collect GST/HST unless you register to do so.
- Run as a sole proprietorship: A sole proprietorship means you won’t have to incorporate. Although partnerships don’t require incorporation, the structure still forces you to register a business name.
There are many ways you can “register” a business as a Canadian enterprise. It could include registering your business name, incorporating, or obtaining a GST/HST number. In some situations, these registrations are mandatory, but it’s still possible to run a terrific business without doing so.