Starting a business in Canada: Key Information

Jun 14, 2023


Canada imposes certain limitations and rules on commencing a business within its borders. Nevertheless, it secured the third position globally for ideal business initiation in 2016 as per the Doing Business initiative by the World Bank. A single process and an average duration of five days are all that’s required to officially establish a company.


Not All Businesses Need to Be Registered

In Canada, if you establish a sole proprietorship and utilize solely your legal name as your business moniker, there’s no necessity to register your business with your province. Newfoundland and Labrador extend this policy even further, as business names of both sole proprietorships and partnerships don’t require registration in these areas. Regardless of the province or territory you operate in, it might still be mandatory to register your business with your municipality.


Registering a Business Name Does Not Protect Your Business Name

Registering your business name with your province or territory doesn’t guarantee exclusive usage rights. Although various forms of business ownership offer varying degrees of name protection, none of them ensure complete protection of the name.


Canada’s System of Incorporation

Incorporating a business in Canada differs significantly from the process in the United States. Unlike in the US, Canada does not have limited liability corporations (LLCs) or S-corporations. However, certain LLC options exist, primarily accessible to professional groups like doctors, lawyers, and accountants.

Moreover, incorporation can be pursued either at the federal or provincial level. Due to potential liability concerns, incorporating your business is an important ownership structure to contemplate when initiating a new venture.


Financing the New Business

The majority of new Canadian small enterprises receive initial funding from their proprietors. When embarking on business endeavors, Canadians typically rely on personal funds. According to a study by Intuit Canada on entrepreneurship, most small businesses in Canada commence with less than $5,000.

There are limited grants available for Canadian startups in the small business sector. The grants that do exist tend to be industry-specific, location-based, or targeted towards specific groups. The Canadian government seems more inclined to extend support in the form of opportunities rather than direct financial assistance. Thus, unrestricted small business grants are relatively uncommon and always come with specific conditions. These grants may aim to foster entrepreneurship within certain demographic groups, such as Indigenous communities, or in specific areas like Northern Ontario.


Sources of Small Business Loans

The Canada Small Business Loans Financing Program has been the primary initiative for funding new ventures and established Canadian enterprises for a considerable period. However, various governmental and non-profit entities extend financial assistance to small businesses, including Community Futures Development Corporations and women’s associations. Additionally, there is a growing presence of private loan providers, such as investor collectives.


Canadian Small Business Taxes

Owners have the opportunity to reclaim the amount of Goods and Services Tax (GST) and Harmonized Sales Tax (HST) they incur on the goods and services used in business operations.

It is true that most small businesses in Canada are not obligated to register for GST/HST, collect, or remit GST/HST if they qualify as Small Suppliers, meaning they generate less than $30,000 annually. However, not all small businesses are eligible for this exemption.

Even if your small business qualifies as a Small Supplier, you have the option to register for GST/HST, charge it to your customers, and remit it. This may be beneficial because if you choose not to, you will not be able to claim Input Tax Credits for the GST/HST paid on business purchases.

Small businesses, including micro-businesses, can potentially qualify for tax credits related to scientific research and experimental development (SR&ED). Your business does not need to be incorporated or associated with a specific university or program to participate in SR&ED and earn these tax credits.


Available Income Tax Deductions

Certain deductions are exclusively accessible to corporations, like the Small Business Deduction. Nevertheless, alternative deductions, such as Investment Tax Credits, are accessible to sole proprietorships and partnerships too.

Home-based businesses also have specific deductions for income tax, such as the Business-Use-Of-Home Deduction. Furthermore, every owner of a small business has the right to assert their valid business expenses and offset them against their business earnings.


Triumph springs forth from a well-crafted corporate strategy.

Numerous new enterprises emerge annually. The majority of these ventures meet an untimely demise, often due to inadequate preparation. To significantly enhance your prospects of triumph, take the proactive step of composing a comprehensive business blueprint prior to commencement. Establishing a business entails substantial commitments of both time and resources; hence, it is imperative to exhaust all measures to ensure its eventual prosperity


CBES is here to assist you; feel free to contact us for expert guidance.



Launch Your Business in Canada

Contact us right now and we will help You!

Actions to Take After Receiving Your Incorporation Certificate

This guide on steps to take after incorporating a company is aimed at individuals who have recently completed the incorporation process in Canada. It provides answers to the question: "What actions should I undertake now that I have my incorporation certificate?"...

Incorporation in Canada

When you decide to start your own business in Canada, one of the first steps you might consider is incorporation. Incorporation involves creating a legal entity that is separate from its owners. This process is recognized across Canada and comes with a host of...

Incorporate Your Business in Canada

Curious about the process of forming a corporation in Canada? We're going to break down the main stages required, ranging from deciding on the location of incorporation to selecting a name for your corporation and submitting the necessary paperwork. Keep in mind that...

Claiming Business Expenses in Canada

Canadian taxpayers have the opportunity to reduce their tax bills by deducting business expenses when filing their tax returns. Those interested in taking advantage of these deductions should know that the Canada Revenue Agency (CRA) permits the deduction of any...

Starting a Business Out of Your Home in Canada

Running a home business offers the best of both worlds. It provides all the advantages that come with owning a small business. However, by operating from your home, you also get to enjoy flexible working hours, no commute, and some tax benefits. In essence, running a...

Essential Tax Deductions for Home-Based Businesses That You Shouldn’t Overlook in Canada

Operating a business from home in Canada mirrors the tax obligations of traditional businesses with regard to income taxes. Provided you have earnings to offset and adhere to the regulations, numerous business expenditures can be subtracted, thus reducing your income...