Facts About Starting a Business in Canada

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Canada places some restrictions and regulations on starting a business in the country. However, it was ranked as the third best place to start a business in the world in 2016 according to the World Bank's Doing Business project. It takes only one procedure and an average of five days to register a firm.

Canadian Resident Requirements

You Need to Be a Canadian Citizen or a Landed Immigrant to Start a Business in Canada. You can't start a business while you're in Canada on a visitor or student visa or while you're here on a work permit. You may be able to partner with one or more Canadians to start a business here but that doesn't mean that you will be able to reside in Canada. To do that, you need to immigrate to Canada.

Not All Businesses Need to Be Registered

If you start a sole proprietorship in Canada and use only your legal name as the name of your business, you don’t need to register your business with your province. Newfoundland and Labrador take this even further. In those locations, no sole proprietorships or partnerships need to register their business names.

Whatever province or territory you’re in, you may still need to register your business with your municipality.

Registering a Business Name Does Not Protect Your Business Name

It would be nice if registering your business name with your province or territory meant that no one else was allowed to use it, but generally, it doesn't. Different forms of business ownership provide different levels of business name protection, but none of them provide full name protection. 

Canada’s System of Incorporation

The Canadian system of business incorporation is very different than it is for businesses in the United States. Generally, Canada has no limited liability corporations (LLCs) or S-corporation structures. There are some LLC options available, but they are usually only available to groups of professionals such as doctors, lawyers, and accountants.

Also, incorporation can be established on a federal or provincial level. Because of potential liability incorporation is always a form of business ownership you should consider when you're starting a business.

Financing the New Business

Most new Canadian small businesses are bankrolled by their owners. Canadians starting businesses tend to dig into their own pockets first when they’re looking for the money to get started. Most Canadian small businesses started with less than $5,000, according to an Intuit Canada study of entrepreneurship.

There are very few grants for Canadian small business startups. Those that do exist are usually specific to particular industries, locations, and sometimes groups of people. The Canadian government appears to be more interested in offering businesses a hand up rather than a handout. So, no-strings-attached out and out small business grants are relatively rare and are always attached to particular conditions. They may focus on encouraging entrepreneurship among a particular group of people, such as aboriginals, or in a particular place, such as Northern Ontario. 

Sources of Small Business Loans

The Canada Small Business Loans Financing Program has long been the flagship program for financing both startups and established Canadian businesses, but there are many other government-sponsored and non-profit agencies that provide small business loans, from Community Futures Development Corporations through women's organizations. There is also an increasing number of private loan sources, such as investor groups.

Canadian Small Business Taxes

Owners can get back the amount of goods and services tax (GST)and harmonized sales tax (HST) that they pay on the goods and services consumed in the course of doing business

Yes, it's true that most Canadian small businesses do not have to become GST/HST registrants and charge and remit GST/HST if their small business qualifies as a Small Supplier—essentially makes less than $30,000 in a year. Of course, not all small businesses will have this option.

You can register for, charge, and remit GST/HST even if your small business does qualify for Small Supplier status, and you might want to do this because if you don't, you can't get any of the GST/HST you pay out on business purchases back through Input Tax Credits.

Small businesses—even micro-businesses—can qualify for scientific research and experimental development (SR&ED) tax credits. Your business does not have to be incorporated or affiliated with a particular university or program to participate in SR&ED and earn SR&ED tax credits.

Available Income Tax Deductions

Some of these deductions are available only to corporations such as the Small Business Deduction. However, others, such as Investment Tax Credits are open to sole proprietorships and partnerships as well.

There are also special income tax deductions for home-based businesses such as The Business-Use-Of-Home Deduction. And every small business owner can claim their legitimate business expenses and write these off against their business income.

Success Comes From a Sound Business Plan

Many small businesses are started each year. Many small businesses fail. In most cases, they fail because of poor planning. So give yourself and your chances of success a big leg up by writing a business plan before you start. Starting a business is such a huge investment of your time and resources that you need to do everything possible to be sure that it's a successful venture.