Starting a Business in Canada: A Complete Guide for Newcomers

Canada consistently ranks among the best countries in the world for starting a business. The process is relatively straightforward, the regulatory environment is predictable, and the government offers numerous programs to support entrepreneurs. For newcomers, starting a business can also be a path to building financial independence and contributing to the Canadian economy.

This guide walks you through the essential steps of starting a business in Canada.

Can Newcomers Start a Business?

Yes. There are no citizenship requirements for starting a business in Canada. You can start a business if you are a:

• Permanent resident
• Temporary resident with a valid work permit that allows self-employment (including open work permits)
• Canadian citizen

Important note: If you are on an employer-specific work permit, you generally cannot run your own business on the side. You would need an open work permit or a separate authorization. Consult an immigration lawyer if you are unsure about your specific situation.

For immigration programs specifically designed for entrepreneurs, visit the Start-Up Visa Program page.

Choosing Your Business Structure

The first major decision is how your business will be legally structured. Each structure has different implications for liability, taxes, and administration.

Sole Proprietorship

A sole proprietorship is the simplest and most common structure for small businesses and freelancers.

How it works: You and the business are legally the same entity. You report business income and expenses on your personal tax return.

Advantages:

• Easiest and cheapest to set up (registration costs as low as $60-80 depending on the province)
• Full control over all business decisions
• Simple tax filing (business income goes on your personal return)
• Easy to close if needed

Disadvantages:

• Unlimited personal liability: If the business is sued or incurs debt, your personal assets are at risk
• Harder to raise capital or attract investors
• Less credibility with some clients and partners
• The business ends when you stop operating it

Best for: Freelancers, consultants, small service businesses, sole operators

Partnership

A partnership involves two or more people carrying on a business together.

Types:

• General partnership: All partners share liability and management
• Limited partnership: Some partners invest but do not manage and have limited liability
• Limited liability partnership (LLP): Available in some provinces for certain professions (lawyers, accountants)

Advantages:

• Shared resources and expertise
• Relatively easy to form
• Pass-through taxation (income taxed at partners' personal rates)

Disadvantages:

• Partners are jointly and personally liable for business debts (in a general partnership)
• Potential for disputes between partners
• Requires a partnership agreement (strongly recommended)

Incorporation

Incorporation creates a separate legal entity -- a corporation -- that is distinct from you personally.

How it works: The corporation has its own legal identity, can own property, enter contracts, and incur debt independently of its shareholders.

Advantages:

• Limited liability: Your personal assets are generally protected from business debts and lawsuits
• Tax advantages: Small business tax rate on the first $500,000 of active business income is significantly lower than personal income tax rates (approximately 9-12.2% combined federal/provincial, depending on the province)
• Easier to raise capital: Can issue shares to investors
• Credibility: Some clients and partners prefer working with incorporated businesses
• Perpetual existence: The corporation continues to exist independent of the owners

Disadvantages:

• More expensive to set up ($200-400 for federal incorporation, plus provincial registration fees; legal fees can add $1,000-3,000+)
• More administrative requirements (annual filings, corporate tax returns, maintaining minute books)
• Corporate tax returns are separate from personal returns and typically require an accountant

Best for: Businesses with significant revenue, those with liability concerns, businesses seeking investment, professionals billing over $50,000-100,000+ annually

Federal vs. Provincial Incorporation

• Federal incorporation: Done through Corporations Canada. Allows you to operate under the same name across all provinces. Costs $200 online.
• Provincial incorporation: Done through your province's business registry. Simpler and slightly cheaper, but the name is only protected in that province.

Most small businesses operating in one province choose provincial incorporation. If you plan to operate nationally, federal incorporation is recommended.

Step-by-Step: Registering Your Business

Step 1: Choose and Register Your Business Name

Your business name must be unique and not conflict with existing registered names or trademarks.

How to check:

• NUANS name search: A national database search (approximately $13) required for most incorporations
• Provincial business name registries
• Canadian Intellectual Property Office (CIPO) for trademark searches

Rules for business names:

• Cannot be identical or confusingly similar to an existing business
• Cannot contain certain restricted words (e.g., "Royal," "Bank," "University") without permission
• Must not be misleading about the nature of the business

Step 2: Register Your Business

For a sole proprietorship or partnership:

• Register with your provincial or territorial government
• In Ontario: Ontario Business Registry (approximately $60)
• In BC: BC Registry Services
• In Alberta: Alberta Corporate Registry
• Other provinces have equivalent registries

For incorporation:

• Federal: Corporations Canada online filing ($200 online)
• Provincial: Through your province's corporate registry
• You will need articles of incorporation, which specify the corporation's share structure, directors, and other details

Step 3: Get a Business Number (BN) and CRA Accounts

Every business in Canada needs a Business Number from the Canada Revenue Agency (CRA). This is a 9-digit identifier used for all tax-related matters.

With your BN, you can register for:

• GST/HST account (if required -- see below)
• Payroll account (if you have employees)
• Import/export account (if applicable)
• Corporate income tax account (if incorporated)

You can register online through CRA Business Registration Online or by phone.

Step 4: Register for GST/HST

The Goods and Services Tax (GST) is a federal tax of 5% on most goods and services. Some provinces combine it with a provincial sales tax into a Harmonized Sales Tax (HST).

When registration is required:

• You must register if your revenue exceeds $30,000 in any four consecutive calendar quarters (or in a single quarter)
• You may choose to register voluntarily even if below the threshold, which allows you to claim Input Tax Credits (ITCs) to recover GST/HST paid on business expenses

HST rates by province (as of 2026):

• Ontario: 13% HST
• New Brunswick, Newfoundland, Nova Scotia, PEI: 15% HST
• British Columbia: 5% GST + 7% PST (collected separately)
• Alberta, Yukon, NWT, Nunavut: 5% GST only
• Saskatchewan: 5% GST + 6% PST
• Manitoba: 5% GST + 7% RST
• Quebec: 5% GST + 9.975% QST (administered by Revenu Quebec)

For GST/HST registration, visit the CRA GST/HST page.

Step 5: Obtain Required Permits and Licences

Depending on your business type and location, you may need:

• Municipal business licence: Most cities require a general business licence. Check your city's website.
• Zoning permits: If operating from home, check municipal zoning bylaws
• Industry-specific licences: Food service, liquor, construction, childcare, and many other industries have specific licensing requirements
• Professional licences: If your profession is regulated (engineering, accounting, law, etc.)
• Health and safety permits: For businesses involving food preparation, healthcare, or hazardous materials

Use the BizPal tool from the Government of Canada to identify permits and licences required for your specific business.

Step 6: Open a Business Bank Account

Keep your business and personal finances separate. You will need:

• Your business registration documents
• Business Number from CRA
• Personal identification (passport, PR card)
• Articles of incorporation (if incorporated)

All major Canadian banks offer business accounts. Compare fees, transaction limits, and features. Some online banks offer lower-cost alternatives.

Step 7: Set Up Accounting

Proper bookkeeping is essential from day one. Options include:

• Accounting software: QuickBooks, Wave (free for basic features), FreshBooks, Xero
• Hiring a bookkeeper: Part-time bookkeeping services start at approximately $200-500/month
• Hiring an accountant: Essential for incorporated businesses; costs vary by complexity

Key dates to remember:

• Corporate tax return: 6 months after fiscal year-end
• Personal tax return (sole proprietor): June 15, but taxes owing are due April 30
• GST/HST remittance: Quarterly or annually depending on revenue
• Payroll remittances: Monthly or semi-monthly if you have employees

Insurance

Business insurance protects you from unexpected costs. Common types include:

• General liability insurance: Covers third-party injury or property damage claims
• Professional liability (errors and omissions): For service-based businesses
• Commercial property insurance: If you have a physical business location
• Product liability insurance: If you sell physical products
• Cyber liability insurance: For businesses handling digital data
• Workers' compensation: Provincial requirement if you have employees (varies by province)

Hiring Employees

If your business grows and you need employees:

1. Register for a payroll account with CRA
2. Register with provincial workers' compensation (e.g., WSIB in Ontario, WorkSafeBC in BC)
3. Understand employment standards: Minimum wage, overtime, vacation, statutory holidays
4. Withhold and remit deductions: CPP contributions, EI premiums, income tax
5. Provide Records of Employment when employees leave

Alternatively, you can hire independent contractors, but be careful with classification. CRA has strict rules about what constitutes an employee vs. a contractor, and misclassification can result in penalties.

Funding and Support for Newcomer Entrepreneurs

Several programs support newcomer entrepreneurs:

• BDC (Business Development Bank of Canada): Loans, advisory services, and resources for small businesses
• Futurpreneur Canada: Financing and mentoring for entrepreneurs aged 18-39
• Canada Small Business Financing Program: Government-backed loans up to $1 million
• Provincial small business centres: Free advice, workshops, and sometimes grants
• Digital Main Street: Grants and support for digitizing your business
• Settlement agency entrepreneurship programs: Many settlement agencies offer business start-up workshops and connections

Taxes for Business Owners

Sole Proprietors

• Report business income and expenses on your personal tax return (T2125)
• Business expenses reduce your taxable income (office supplies, software, marketing, professional fees, vehicle expenses, home office costs)
• You pay CPP contributions on self-employment income
• Tax rates are your marginal personal income tax rates

Incorporated Businesses

• File a separate corporate tax return (T2)
• Small Business Deduction: The first $500,000 of active business income is taxed at a combined federal/provincial rate of approximately 9-12.2%
• Income above $500,000 is taxed at the general corporate rate (approximately 26-31% combined)
• You can pay yourself a salary (deductible to the corporation, taxed as personal income) or dividends (more tax-efficient in many cases)

Your Business Launch Action Plan

1. Validate your business idea: Research the market, competition, and demand
2. Choose your business structure: Sole proprietorship for simplicity, incorporation for protection and tax benefits
3. Register your business name and entity with the appropriate government body
4. Get your Business Number from CRA and register for GST/HST if applicable
5. Obtain required permits and licences using BizPal
6. Open a business bank account and set up accounting software
7. Get business insurance appropriate for your industry
8. Build your online presence: Website, Google Business Profile, social media
9. Start selling and keep meticulous records from day one
10. Consult professionals: An accountant and a lawyer (even for a one-time consultation) can save you significant time and money

Starting a business in Canada is achievable, structured, and well-supported. The key is to plan carefully, comply with regulatory requirements, and take advantage of the many resources available to help you succeed.