How to set up a business in Canada
If you have the itch to be an entrepreneur, here's some info to guide you in getting your business up and running in Canada.
To start a business in Canada as an expatriate, you need to determine whether you are authorized to own and operate a business in the country. You should also check your immigration status with Canada's Department of Immigration and Citizenship.
You also need to know to what extent your qualifications and skills will be recognized in Canada and what regulations apply to your sector of activity. In fact, you may need to obtain a license or certification before you can get started.
Several organizations offer programs and services to support entrepreneurs. The Atlantic Canada Opportunities Agency (ACOA) can help you start or grow your business. You can also contact them at 1 (888) 576 4444.
Different types of businesses in Canada
You need to choose the type of structure you want for your business. There are three main types of business in Canada: sole proprietorship, partnership, and corporation. The structure you choose will determine how you report your income and many other aspects, so it's important to make the right choice.
The sole proprietorship is the least complex structure, as it is an unincorporated business owned by an individual or a married couple. This option is ideal for the self-employed. A sole proprietor makes and assumes sole responsibility for all business decisions. He or she has no legal status separate from that of the company. As such, he retains all profits and deducts all losses at his own risk. As a sole proprietor, you must pay personal income tax on all net income generated by your business. You can register your business under a trade name, operate it under your own name, or both.
A partnership is a collaboration between two or more individuals, companies, or partnerships who join together to operate a trade or business. Each partner contributes (money, labor, property, etc.), and each is entitled to a share of the profits or assumes a share of the losses of the partnership. The distribution of profits or losses depends on the agreement between the partners. Most partnerships are governed by a written agreement setting out this and other rules.
The purpose of a joint-stock company, also known as a "company", is to operate a business in order to make a profit. This structure is more complex and more expensive. It is the structure of choice for companies with significant sales.
Good to know:
There are other less common types of corporation in Canada, such as the not-for-profit corporation or the certified B Corp. You can find more information here.
Good to know:
Almost all businesses in Canada must file a T2 return for each tax year, even if they have no tax to pay. This is also the case for not-for-profit organizations, tax-exempt corporations and inactive corporations. Find out if your company is affected here, and read our article Taxes in Canada.
Growth sectors in Canada
If you want to start your own business in Canada, it's important to understand the economic realities of the country and the province in which you want to settle. On a national scale, Canada has developed remarkable expertise in a number of sectors, including aerospace, bioproducts, renewable energies, information technology, and international trade (imports and exports). You should also consider promising sectors at the provincial and territorial levels. For example, Montreal is known for its video game production. In Vancouver, the film and television sector is flourishing. Finally, in the Prairies, notably Saskatchewan, the agricultural and agri-food sectors are the province's strength.
Setting up a business in Canada: What are the formalities?
Setting up a business in Canada is quick and easy, but you'll probably need to familiarize yourself with the following terms and data: business licenses, occupational health and safety regulations, environmental regulations, employee protection regulations, and wage and working conditions standards.
First and foremost, you'll need to plan your business by drawing up a business plan, describing your project, objectives, target sector, marketing strategy, chosen business structure, location and other important points. You need to choose a relevant name for your business and check whether this name is not already in use, starting with an internet search.
Register your business with provincial and federal authorities, including the Canada Revenue Agency (CRA). Depending on your province of registration, you may have to pay fees. Procedures vary from region to region, so it's a good idea to consult the website of your provincial or territorial authorities, or contact them directly for more information on the documents you'll need to provide.
You can also access regional support for assistance in registering your company with the relevant province.
You may also need a Business Number and an associated corporate income tax account. When registering in British Columbia, Manitoba, Nova Scotia, Ontario and Saskatchewan, you will automatically obtain a Federal Business Number (BN). If your company operates elsewhere in Canada, you'll need to apply for a business number from the CRA. Note that not all new businesses require a BN and CRA program accounts.
Check this page to see if you do.
To apply for a business number online, you'll need to provide your last name, social insurance number (SIN), date of birth, personal postal code, company name, business number (if you already have one), company structure, address and business description. You can register by clicking on this link, or by mail, fax or telephone.
You can then open a GST/HST or GST and QST tax account if you're in Quebec, an employer account if you have employees, a corporate tax account or an import/export account. To open a corporate income tax program account, you'll need to provide the company name, certificate number, incorporation date and administration. For a GST/HST program account, you'll need to know the amount of your annual worldwide and domestic GST/HST taxable supplies, your fiscal year-end, the effective date of registration and the reporting period.
There are a number of business permits and licenses that may be required. You can use this tool to determine which ones you may need, depending on your location and industry.
Here is a list of sites that will give you an overview of the steps you need to take as a new entrepreneur in your province of residence:
- Ontario, Business and Economy section;
- Quebec;
- Saskatchewan, contractor services;
- British Columbia, managing a business;
- New Brunswick, Enterprise Department;
- Alberta, start a business or Alberta small business resources.
Good to know:
There is national and regional support and financing available to businesses, including funding for immigrant and aboriginal entrepreneurs. Self-employed people and small businesses can also receive free tax assistance. Visit the Canadian government website for more information.
GST/HST for businesses in Canada
The BDC site defines GST/HST as "a sales tax imposed on most supplies of goods and services in Canada, as well as on many supplies of real property and intangible personal property". If you set up your business in Canada, you will be responsible for collecting and remitting the GST/HST charged to customers.
Federal sales tax (GST) is a flat 5% tax. It applies everywhere in Canada. Some products and services are exempt, but this tax is due most of the time. This tax is equivalent to VAT in France.
Provincial sales tax (PST) varies from province to province. The provincial government decides on the PST rate and the products concerned.
The Harmonized Sales Tax (HST) is simply the amalgamation of the two federal and provincial taxes. It applies in five provinces: Prince Edward Island, New Brunswick, Nova Scotia, Ontario and Newfoundland & Labrador. You can view the current rates that apply to your province on this page.
In general, you cannot register for a GST/HST account if you only make exempt supplies. Find out here when to register and start charging GST/HST. When you register, you'll need to know your effective date of registration, GST/HST fiscal year, total annual revenue and other basic information such as Social Insurance Number (SIN). You can file a GST/HST return electronically, by TELEFILE or on paper. Visit the Canadian government website to find out how to complete and file your return.
Visas for business start-ups in Canada
Canada was one of the first countries in the world to set up an immigration program specifically for entrepreneurs, linking them with Canadian private-sector organizations with experience in working with young entrepreneurs. Successful candidates are granted permanent residency.
To qualify for the program, however, you'll need to have already secured the commitment of a group of angel investors or a designated Canadian venture capital fund ready to invest in your future company. You'll also need to have sufficient financial resources, demonstrate a good level of English or French, and prove that you've already studied at least one year in a post-secondary institution.
What's more, some Canadian provinces have programs that allow them to select candidates for immigration who are entrepreneurs or, eventually, self-employed. To find out more, visit the following sites:
- New Brunswick;
- Quebec;
- Saskatchewan;
- British Columbia;
- Ontario (see Business category);
- Nova Scotia;
- Yukon.
Immigration programs for self-employed workers in Canada
You can apply for the Self-Employed Immigration Program if you wish to work on your own account, provided you meet these two criteria: have useful experience in cultural or sporting activities, and wish to make an active contribution to the country's cultural or sporting life. In September 2023, fees for this process start from CAD2,140. You can use this tool to view application processing times.
Your experience will be considered useful if you have participated for at least 2 years in cultural or sporting activities at an international level or if you have been self-employed in the field of culture and sport for at least 2 years. Other criteria will also be taken into account, such as your age, education, language skills, and adaptability. If you are selected by Canadian immigration authorities, you will be granted permanent residency, and it will be time to prepare for your arrival in Canada.
The province of Quebec manages its own business immigration program. If you're interested in starting a business in Quebec, see Immigrating to Quebec to do business.
Useful links:
Invest in Canada - official government site
Government of Canada - Information on starting a business
