HOW TO START A BUSINESS IN CANADA
If you're thinking of selling goods to earn some extra income or taking it to the next level, which is to register a business, there are a few things to take into consideration.
First off, anyone in Canada who wants to sell goods or provide a service can do so without getting a business and tax numbers as long as their gross income (total sales and not total profit) are under $30,000 (for GST registration) and $10,000 (for PST registration).
This is a useful guide from Small Business Canada that shows the pros and cons of doing commerce using a business license vs. registering your business. And this is their guide on how best to choose your business structure.
A business license can be purchased from your local municipality. If you choose to go this route, you will need to fill out a T2125 to declare the extra income you've earned on top of your regular job. This form will also let you give a breakdown of the expenses that were incurred to earn this extra income. Remember that you will have to put aside money to pay tax on your net (after you deduct your expenses) sales. Also check the government website here to see if your earnings carry you over into the next tax bracket. It's always a good idea to check with the CRA to make sure you are following Canadian Laws. They can be reached at 1-800-959-5525.
If you decide that registering a business is the way you want to go, a good place to start is here. This website outlines all the things you will need to grow your business.
First, you will need to decide whether you want to sell your goods and services only in the province where you're starting your business or if you plan on expanding your company across the country. If you want to keep it provincial, you will only have to register in the province you want to do business in but if you want to operate nationally or protect your name across the country, you will have to first incorporate on a federal level and then apply for an extra-provincial license.
Please keep in mind that we are aiming to work with businesses in British Columbia, so this guide will mainly be focusing on this province until our platform starts serving other areas in the country.
Disclaimer: This is only a general guide we've put together using information we found on the internet. You should always contact a local small business center, an accountant or a lawyer to get specific advice on your business.
WHAT KIND OF BUSINESS TO REGISTER
Before you pick your name, visit the Business Canada page here to decide whether you want to register your company as a Sole Proprietorship, a Partnership, a Corporation or a Co-operative. Here's another good article to read from The Balance which gives some useful information on how to make your choice. And like they mention at the beginning of the article, you can always incorporate at a later date if you choose one of the first two options. Keep in mind that doing taxes for a corporation will set you back at least $1000 a year plus the costs of doing your own personal taxes. Registration costs are higher for a corporation as well.
Before you can register your company, you must first find out if the company name you want to use is available. Your company name doesn't necessarily have to be the name you want to operate your business under. For instance, you might want to start a company that will hold many other small companies beneath it so, in this instance, your name might not match the name of the business you use to sell your goods or services. Below are the steps to check whether you can use your name on the provincial and federal level. You will need to do this to register your company.
FEDERAL INCORPORATION GUIDE
Choose this option to protect your name across all of Canada. You will then have to apply for an extra-provincial license in the province you want to operate.
Note: In British Columbia, along with Articles of Incorporation (the form to sign up for a corporation), an incorporation agreement must also be entered into and signed by each person forming the corporation. This is a document that shows what the owners of the corporation have agreed to before incorporating their company. Download the template to do this here.
1. Register your name with the Federal Government of Canada:
To do this, you must put through a NUAN name search here. It will cost you $21.47.
If you have any questions, they can be contacted here 1-888-816-8267. They are open from 7:00 am to 8:00 pm (Eastern Time)
2. Once you have your NUAN report, get your name pre-approved by the Federal Government:
Go to the Federal Government website here. This is free and you will have to attach your NUAN report as this will help them decide if there are any other companies that are too similar in name to the one you've picked. This is free and they will send you a confirmation number via email which then lets you incorporate your company.
3. Incorporate your business:
Go to the Government of Canada website here. Unfortunately, British Columbia doesn't have an agreement with the government to apply for extra-provincial incorporation so businesses must register separately afterward. Filing the online application will cost $200 while sending in a hard copy costs $250.
Here is the Government guide to fill out the form.
Here is the Government FAQ on registering a corporation.
Below are the "tricky" areas of the incorporation form:
Taking decisions on the below can be intimidating, especially when you are just starting out and are not really sure where your company is going. You can always get advice from one of the organizations listed at the end of this page but remember, government employees will only tell you the laws and will not give any advice. Small Business BC might be able to offer help if you cannot yet afford to get advice from an accountant or lawyer. Also, keep in mind that you can pay a $200 fee at a later date to make any amendments. Here are all the fees for Government services and changes you can make.
In a nutshell, the below area is asking you how you plan to grow your corporation (by taking investments or selling shares) and how you will pay yourself or others who will be allowed to take money out of your corporate entity.
Here is the Government guide to the below.
And here is the Law Societies' Guide to Corporations. This is written for lawyers but is extremely detailed and explains it well.
Visit the Legal Line website for more detailed information on the below and registering your company.
1. Description of Classes of Shares
The choices for this are Single, Multiple or Preferred. When you set up a corporation, shareholders (you and your partners) get votes to make decisions on behalf of your corporate entity. This section of the form helps you decide how you will want to proceed to do this. The Balance summarizes it quite simply in this article. The class you pick will let you decide if you want to accept investment from outside groups and if you do, whether they will have a say in how you run the corporation. Which one you choose will also let you set shares aside for possible future investment opportunities.
2. Restriction on Share Transfers
"Restrictions on share transfer are used so that shareholders can control who will become a shareholder in their corporation. By placing such restrictions in a shareholder agreement instead of in your articles, shareholders can remove or alter them without the corporation having to file articles of amendment. Note that these restrictions are separate from the restrictions placed in your articles of incorporation as part of the non-distribution corporation restrictions." - excerpt from the Government website.
If you want to have restrictions with regards to Share Transfers at the start of your corporation, you will have to write these yourself. If you do not have these, any shareholder will be able to move shares around without having to answer to anyone.
The Government guide has several examples of how to word a restriction:
Share Transfer Restriction: The directors of the Corporation expressed by resolution can only be passed by the votes and cast by a majority of the directors of the Corporation at a meeting of the board of directors or signed by all of the directors of the Corporation.
No shares of the capital of the corporation shall be transferred without either (a) that sanction of a majority of the directors of the corporation or alternatively (b) the sanction of the majority of the shareholders of the corporation.
If you are alone in your Corporation, you might not need this at the start, but you should consider doing it later if your corporation takes on more shareholders. It also leaves your corporation vulnerable to not have these if you have to step down for any reason.
3. Restriction on Business
This is where you would write if there are any restrictions on the activities your corporation will undertake. If you don't have any simply write none.
4. Other Provisions
Here, you would write any other articles that you might want to add to your incorporation documents. Often, these would be written to satisfy the requirements of certain laws.
5. Registering your federal corporation on a provincial level Once you have received your confirmation email or documents from the Federal Government, you will need to apply for an extra-provincial license from the British Columbia Government. This can be done here and select the "Register an Extra Provincial Company" option. This will cost $351.50 and you will need your corporate federal number.
Lastly, remember to talk with your partners so you all have a clear understanding of where you want to go and who is going to do what work and share what responsibilities. Doing this is critical to prevent future conflict between partners. Write it down and each a keep copy if you cannot yet afford a lawyer to do it for you and as soon as you can afford it, get these legal documents drafted.
PROVINCIAL INCORPORATION GUIDE
Incorporating on the provincial level will let you do business in that province and in the rest of the country but you might have to sign up for extra-provincial licenses depending on what activities your business carries out.
1. Register your name in British Columbia here.
2. Register your corporation on the provincial level in British Columbia here .
Choose the "File an incorporation application" option.
Below are the "tricky" areas on the incorporation form. This is pretty much the same as what was explained before, it is just worded slightly differently.
1. Number of Shares in the Class
2. Name of Share Class
3. Value of Shares
4. Special Rights Restriction
Incorporation Canada explains the above here quite simply.
You only need a business number if your company needs a program account. Program accounts are what help you deal with the government, whether it be to pay taxes on goods you sell or to make the proper payroll deductions from your employees when you pay them. When a company registers for any of these, the government issues a program account and a business number so they can recognize you in their system. While a company may have several program account numbers, it will always only have one business number. The program accounts simply add numbers after your business number.
Learn more here.
If you incorporate your company, you will automatically receive a letter from Canada Revenue Agency with the "Business Number Request for Information" form. You can fill this out and send it back to them or call them on 1-800-959-5525 to give them the information. This phone number will also let you register for a business number.
Another way to get your business number is to register through the RC1 form found here but it's probably best to register your company first or set up your program account (ex: get a GST number) as often the government officials will automatically set this up for you at the same time. This form also lets you sign up for different program accounts such as GST and Payroll deductions program.
REGISTERING A SOLE PROPRIETORSHIP OR PARTNERSHIP
Registering your business as a Sole Proprietorship or Partnership can only be done on the Provincial level and not the Federal. This will let you operate your business in the province you register in and you may be able to sell your goods and services in other provinces depending on the laws of the other province you wish to do business in. Some provinces may require you to additionally register your company in that province but the rules vary in each province.
Follow the steps below to register your business in this manner.
1. Go to the Government of British Columbia website.
2. Performing and online name request:
The online name requests service can be accessed here from 6:00 am to 10:00 pm Monday through Saturday. They can be reached at 1-877-370-1033 from 7:00 am to 7:00 pm Monday through Friday.
It costs $31.50 to have a name approved online and it doesn't mean that your company registration will be approved if your name sounds too familiar to a company that's already registered. You have 56 days to register your company after the name as has been approved. You will receive an NR number to then register your business.
3. Scroll down and download the correct form:
Fill out the Sole Proprietor or Partnership Form or you can use the One Stop BC Registry page here. This will let you register for the other aspects of your business that we speak about in the next section below. Registering for the form will cost you $41.50.
REGISTERING FOR GST & PST
As mentioned before, you only need to do this if your gross earnings are at least $30,000 (for GST) and $10,000 (for PST). Whether you wait to see if you earn above this in your first year of business is up to you but if you think you will eventually get there, it might be good practice to start operating your business in this manner as it will put the practices in place once your business gets busier. Also, if your business incurs a large number of expenses, this will enable you to claim the tax back if you pay more tax than you claim when you sell goods to your customers.
GST: Call 1-800-959-5526 and press *. An agent will help you do this over the phone.
PST: You can register online for a PST number here. If you have problems, you can contact or call 1-877-388-4400.
You will need the following information handy to do the above:
- Business Number
- Your company registration certificate and number
- Your federal business number (BN), if you have one yet, this process will create one for you
- If you have a BN, a recent copy of a GST return to verify information about your business
- Your driver's license number or BC ID number, if you are a sole proprietor, or for all partners in a partnership
- The addresses of all your business location
- The amount of your total annual national (Canadian) sales, or the estimated amount if you have been in business less than 12 months
- The amount of your anticipated monthly taxable sales/leases
- Your social security number
There is a "one-stop" shop for registering a business in BC here.
You can register for all of the above and the below:
Virtually all employers in British Columbia are required to register with Work Safe BC - Workers Compensation Board of B.C. as soon as they hire workers. Individuals who are not automatically covered by Work Safe BC (a partner in a business, a proprietor, or the spouse of a proprietor) can apply for optional coverage through Personal Optional Protection.
Most municipalities require the licensing of business premises. You may also be required to contact municipalities in which you conduct business but do not maintain premises to determine whether or not a business license is required. Some municipalities have an inter-municipal licensing agreement allowing mobile businesses (those businesses based in one municipality and providing services in multiple municipalities such as general contractors and landscapers) to operate in all participating municipalities. Check with your municipality here to see if you are required to get one.
You will need a Business BCeID if you:
- Would like to apply for a Restaurant or License or Transfer the Ownership of a Restaurant Liquor License
- Would like to renew any Liquor License
- Would like to submit a catered event
- Plan to access other government e-Services regularly
Industry Canada: Industry Canada's Canadian Company Capabilities Database is a centrally maintained current searchable database of 60,000 Canadian businesses. It includes hundreds of specialized manufacturing, service and product specific business directories.
Foodsafe: Anyone wanting to prepare food must take the Level 1 of this call. If you have employees, you will be required to take the Level 2. Visit their site here for more information.
Food License: To sell food, your municipality might require you to get a specific license to produce food depending on what outlets you plan on selling to . When registering for your business licence, double-check with them to see if you are required to get one of these.
Provincial Government: www.gov.bc.ca
Corporations Canada: http://corporationscanada.ic.gi.ca
Canada Business Network: http://canadabusiness.ca
Business Number Registration: http://businesstregistration.cgc.ca
Industry Canada: http://ic.gc.ca
Canada Revenue Agency Business Inquiries: http://cra-arc.gc.ca
Small Business Canada: http://smallbusinessbc.ca
If you're interested in starting a business, fill out the following form and we can help you get started.