Starting a Business in Canada

Aug 25, 2023

In Canada, there are certain limitations and rules that need to be followed when initiating a business. Nevertheless, it was recognized as the third most favorable location globally to begin a business in 2016, as reported by the World Bank’s Doing Business initiative. Registering a company can be accomplished within a short timeframe of approximately five days, involving a single procedure.


Required status to start a business in Canada

To start a business in Canada, you must hold Canadian citizenship or have a landed immigrant status. It is not permissible to initiate a business if you are in Canada on a visitor or student visa, or on a work permit. Although you may collaborate with one or more Canadians to establish a business, this does not guarantee your ability to live in Canada. To accomplish that, you must undertake the process of immigrating to Canada.


Not All Businesses in Canada need to be Registered

When beginning a sole proprietorship in Canada and using just your legal name for your business, there’s no requirement to register your business with your province. Newfoundland and Labrador go a step further by not requiring registration of business names for any sole proprietorships or partnerships in those areas.


Registering your business name does not guarantee the protection of your business name

When you register your business name with your province or territory, it doesn’t guarantee exclusive rights to it. The level of protection for business names varies depending on the type of business ownership, but none of them offer complete name protection.


Incorporation in Canada

In Canada, the process of setting up a business differs significantly from that of the United States. Unlike the US, Canada does not have limited liability corporations (LLCs) or S-corporations. While there are a few options for forming an LLC, they are typically limited to certain professional groups, such as doctors, lawyers, and accountants.

Moreover, businesses can choose to incorporate at either the federal or provincial level. It’s important to take into account the potential liability associated with incorporation when starting a business, as it is a form of ownership that should be considered.


Financing the New Business in Canada

The majority of newly established small businesses in Canada are funded by their owners. When Canadians decide to start their businesses, they typically rely on their personal funds as the primary source of capital. According to a study conducted by Intuit Canada on entrepreneurship, most Canadian small businesses commence with an initial investment of less than $5,000.

In Canada, there is a limited availability of grants specifically intended for small business startups. These grants, if available, are usually tailored to particular industries, locations, or sometimes specific groups of individuals. It seems that the Canadian government is more inclined to provide support and assistance to businesses rather than giving them free monetary aid. Consequently, grants with no obligations and unconditional financial support for small businesses are relatively uncommon and always subject to specific terms and conditions. These conditions may target the promotion of entrepreneurship among specific demographic groups, such as indigenous people, or in specific regions, such as Northern Ontario.


Small Business Loans in Canada

The Canada Small Business Loans Financing Program has been the primary program for funding new and existing Canadian businesses for a considerable time. However, numerous other government-backed and non-profit organizations provide small business loans as well, ranging from Community Futures Development Corporations to women’s groups. Moreover, there is a growing availability of private loan options, including investor groups.


Canadian Small Business Taxes

Business owners have the opportunity to reclaim the funds they spend on goods and services tax (GST) and harmonized sales tax (HST) used during business operations.

While it’s true that many small Canadian businesses are not required to register for GST/HST, charge it, or submit payments if they qualify as Small Suppliers and earn less than $30,000 annually, not all small businesses have this exemption.

Even if your small business qualifies for Small Supplier status, you can still choose to register for, charge, and submit GST/HST. This might be advantageous, as failing to do so would prevent you from recovering any GST/HST paid on business purchases through Input Tax Credits.

Even micro-businesses can be eligible for tax credits related to scientific research and experimental development (SR&ED). Your business doesn’t need to be incorporated or connected to a specific university or program to participate in SR&ED and benefit from SR&ED tax credits.


Income Tax Deductions in Canada

Certain deductions are exclusively accessible to corporations, such as the Small Business Deduction. Nonetheless, other deductions, such as Investment Tax Credits, are also accessible to sole proprietorships and partnerships.

Additionally, there exist specific income tax deductions for home-based businesses, like The Business-Use-Of-Home Deduction. Moreover, every small business owner has the right to claim legitimate business expenses and offset them against their business income.


Business Plan in Canada

Every year, numerous small enterprises are established, but unfortunately, many of them do not thrive. The primary reason for their failure is often linked to inadequate preparation. Therefore, to greatly enhance your prospects of success, it is crucial to create a comprehensive business plan prior to commencing your venture. The process of starting a business demands significant investments in terms of both time and resources, necessitating utmost diligence in order to ensure its 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!

Capital Cost Allowance (CCA)

Capital cost allowance (CCA) is one of several methods to lower your business's taxable income in Canada. The Canada Revenue Agency (CRA) describes it as "a tax deduction that Canadian tax laws allow a business to claim for the loss in value of capital assets due to...

Motor Vehicle Expense Claims on Income Tax in Canada

Did you use a vehicle for your business last tax year? This article outlines the motor vehicle expenses you can claim on your income tax in Canada and details the necessary documentation to support your expense claims. The examples provided here illustrate how to...

Canada Pension Plan (CPP)

The CPP, also known as the Canada Pension Plan, is a national program that aims to assist Canadians in securing income for their retirement or in the event of disability. It was instituted by Lester B. Pearson's Liberal government in 1965, except in Quebec where a...

Independent Contractor vs Employee in Canada

Understanding whether you are classified as an independent contractor or an employee is crucial for your Canadian income tax, especially if you believe you are a contractor but the Canada Revenue Agency (CRA) later decides otherwise after you have filed multiple tax...

Red Flags That Will Get Your Small Business a CRA Audit

Receiving a letter from the Canada Revenue Agency (CRA) announcing an audit is something every business or individual fears. Tax experts say about 35,000 such letters were issued in 2023. Business tax returns undergo intense scrutiny, and although there is no...

How to Manage Business Expense Records in Canada

Imagine if you were to create a comprehensive list of all the responsibilities necessary for running your business, and then arranged them according to your personal preference. Where would managing business expense records fall within that hierarchy? Would it be...