Starting a Business in Canada
Many Canadians enjoy being business owners. In 2004, 2.4 million people were self-employed in Canada† and that number is growing.
Whether you owned a own business in your home country or feel that it’s the right time to start your first business, you will be happy to know that there are many government agencies that offer programs, services and support to help you become a successful business owner here in Canada. As a matter of fact, many of these programs and services are also of help if you already own your own business in Canada and would like to see it grow.
The Benefits of Being a Business Owner
People start businesses for many reasons. You may want to:
- Be your own boss.
- Develop and use your own ideas.
- Be independent and work as much or as little as you choose.
- Build your financial independence.
While there are many benefits to owning your own business, every new business owner muse become familiar with rules and regulations set out by the Canadian government, and be prepared to overcome the challenges these may represent. These rules, however, are in place to help you run your business and set you on the road to success. These include:
- Rules and regulations from both the federal and your provincial government.
- Federal and provincial licensing for certain types of businesses.
- Health and safety regulations.
- Rules to protect the environment.
- Rules to protect your employees (if you have any) including wage and labour standards.
Types of Business Structures
One decision you’ll need to make is how your business will be structured. There are three main types of business structures in Canada:
Sole proprietorship — This is the simplest way to set up a business in Canada. As a sole proprietor, you are the only owner and take full responsibility for all of your company’s obligations and debts. With this type of business structure, you will have to register the name of your business with the appropriate agency in your province. What your business earns is claimed on your personal income tax return.
Partnership — A partnership is a business where two or more people own the company and share the profits and debt responsibility. Income of the partnership is generally included in the personal income tax returns of the partners. There are two types of partnership agreements:
- In a general partnership, the partners have equal responsibility for all debts and obligations.
- In a limited partnership, one or some of the partners control the business and share the responsibility for all debts and obligations; the other partner or partners have limited or no control but share the responsibility for all debts and obligations only to the extent of their original investments.
Corporation — In this case, the company is a separate, legal entity from its owners (also known as “shareholders”). These companies are incorporated at the federal or provincial level and will have the word Limited (Ltd.), Incorporated (Inc.), or Corporation (Corp.) in their name. Corporations file a corporate income tax return that is separate from a personal tax return.
Each of these structures has advantages and disadvantages. Speak with a lawyer, account or your bank for expert advice.
Your Business Number
In Canada, the federal government assigns each company with a unique, nine-digit Business Number (BN). You will need a BN if you want to register for one or more of these business accounts with the Canada Revenue Agency (CRA):
- A GST/HST account
- A payroll account (if you have employees and will be making deductions)
- A corporate income tax account
- An import/export business account
In order to apply for a BN, you will need your:
- Social Insurance Number (SIN)
- Business name, location and activity
- Business structure
- Account periods and company’s year end
To get a Business Number, contact the CRA:
 |
Phone: 1-800-959-5525 |
 |
|
Visit: www.cra-arc.gc.ca/menu_e.html |
Your GST/HST Account
Your business must have a Goods and Services Tax (GST) or Harmonized Sales Tax (HST) account with the CRA if your company earns more than $30,000 a year in sales. This includes the sale of both goods (such as merchandise) and services (any work you do for people such as home painting, construction or business services such as bookkeeping).
Once you have your GST/HST account set up, you are expected to collect 5% GST or 14% HST and report how much you collect and how much you pay to the CRA on an annual basis. This is separate from your personal or corporate income tax return.
You must have a BN in order to open a GST/HST account.
To open a GST/HST account, contact the CRA:
|
Phone: 1-800-959-5525 |
|
|
Visit: www.cra-arc.gc.ca/menu_e.html |
In Quebec, you should contact the Ministère du Revenu du Québec:
|
Phone: 1-800-567-4692 |
|
|
Website: www.revenu.gouv.qc.ca |
A Business Plan Will Help You Succeed
Successful business owners will tell you that they didn’t become successful accidentally — they planned it step by step. A business plan will help you:
- Pinpoint the focus of your business.
- Identify the current market (such as who are your customers and what prices are typically charged for the goods or services you are offering).
- Plan how you are going to market your business.
- Explain how you will operate your business.
- Determine your current and projected finances.
- Identify any known risks.
Once you write your business plan (and you should write it yourself), then revisit it often and make changes as your business grows.
Writing a business plan may sound difficult to do, but with these step-by-step instructions and examples, you will find it to be rewarding and valuable.
You’ll Need the Advice of Experts
As exciting as it may be, getting your business up and running properly is no easy task. You want to make sure you have filled out all the correct forms and are following the rules and regulations that apply to you. What you need is a team of experts to help you get started on the right foot — and stay there.
- A lawyer will help you incorporate your business and assist you with legal documents and contracts.
- An accountant will prepare your company’s books or financial records including payables and receivables, help you determine how much financial help you need to start your business, prepare and/or file your personal or corporate income tax return and prepare any financial statements.
- A mentor or mentors will provide advice and information on the industry you are part of and help you build contacts. A mentor could be a retired person with lots of experience, another business owner or even a supplier that you have a professional relationship with.
- Your bank will advise you on how and/or where to go to get the funds you need to start your business, provide you with the right business accounts, advise you on what loans, credit and insurance best suits your needs, help you with your business plan and even help you manage your cash flow.
To get the best advice, speak to an RBC Business Advisor:
† Canadian Bankers Association, “Getting Started in Small Business” brochure, p2
National links:
Provincial links:
For more information on starting a business in your province, use these links:
The content of this website is provided for the general guidance and benefit of our clients. This website is for informational purposes only and is not intended to provide specific advice. See full disclaimer.
|
