Starting a Business in Canada in 2023

Do you envision starting a business in Canada? If you're a foreign businessperson looking to expand your business in the Great White North, you're in the right place.

With comprehensive and market-oriented laws that support innovation, a varied and talented workforce, and access to international markets, entrepreneurs are drawn to the country. 

Canada’s Startup Visa Program has been a big hit, welcoming people to the country. As per research, its startup visa falls in the top 25% funnel of work-related visas for foreigners. This reflects Canada's open-armed approach to global talent and entrepreneurship, making it a destination of choice for those seeking to expand their economic horizons.

In this article, we'll take you through the essential steps to turn your business dream into a reality, whether you're a Canadian resident or a foreigner looking to register a company in Canada. Let's dive right in.

Types of Businesses to Start in Canada

Prior to getting down to the finer points of establishing a business in Canada, deciding on the kind of business you intend to establish is critical.

There are many possibilities, and you should select the one that fits your interests, talents, and market requirements. Consider some of the well-known business types listed below.

Sole Proprietorship

A sole proprietorship is a type of business structure in which an individual operates a business as the sole owner and is personally responsible for all business aspects. You are responsible for your taxes, profits (or losses), and compliance with local employment laws applicable to your place of business.

Also Read: Difference Between Sole Proprietorship and Self-Employed

Partnership

A legal business structure is one in which two or more individuals or entities collaborate to operate and manage a business together. 

Think of a partnership as a dynamic duet. Here, you join a business with one or more partners, pooling your expertise and resources. You share responsibilities and profits, making it ideal for professional services firms or small businesses where collaboration is key to hitting the high notes of success.

Corporation 

A corporation is a separate legal entity from its owners, offering limited liability protection. It's like building a solid castle—the walls protect you and your assets, making it suitable for larger businesses and startups with dreams of substantial growth and expansion.

Franchise 

A franchise is a business arrangement in which one party, known as the franchisor, grants another party, known as the franchisee, the right to operate a business using the franchisor's established brand, business model, and support systems. With a franchise, you invest in a recognized and proven business model, enjoying the spotlight of brand recognition. 

Advantages of Starting a Business in Canada

Canada offers several advantages, making it a prominent country for starting a business.

Stable Economy

Canada's economy is renowned for its stability.Canada's GDP is expected to reached USD $2,175.43 in 2024, reflecting its resilience even during global economic downturns.

Access to Global Markets

Situated next to the United States, Canada enjoys easy access to the vast North American market, which includes over 370 million consumers. This proximity makes it an ideal base for international trade.

Skilled Workforce

Canada boasts a highly educated and diverse workforce. Approximately 58% of Canadians aged 25 to 64 have post-secondary education, ensuring a well-educated talent pool. This educated workforce is crucial for businesses, particularly those in knowledge-intensive industries.

Government Support

The Canadian government actively supports entrepreneurship and innovation. Programs such as the Canada Small Business Financing Program and various provincial grants provide financial incentives for business development. 

Quality of Life

Canada is celebrated for its high quality of life. It offers universal healthcare, a robust education system, and a safe living environment. In the 2021 World Happiness Report, Canada ranked 14th out of 149 countries, reflecting its residents' overall well-being and satisfaction.

Steps to Start a Business in Canada

Starting a business in Canada involves a series of clear-cut steps, ensuring your venture's smooth and legal launch.

Here's a concise roadmap to guide you.

Devise a Business Idea and Plan

Your business idea is the foundation of your venture. Conduct market research to validate the potential of your idea. Create a detailed business plan that includes your mission, vision, target audience, competition analysis, financial projections, and a roadmap for growth.

Search for a Business Name 

Your business name is critical to your branding. Ensure it is unique and not already in use by conducting a name search through the appropriate government agency. Once confirmed, register your business name to secure its legal use.

Decide on a Business Structure 

The chosen structure affects the legal and financial aspects of your business. Sole proprietorship, partnership, and corporation are standard options. Consider factors like liability, taxation, and ownership when making this decision. You may also need to decide on a legal business location.

Register Your Business

Register your business with the appropriate provincial or territorial government authority. You may also need to register for a Business Number (BN) with the Canada Revenue Agency (CRA).

Get Necessary Permits and Licenses

You may require specific permits or licenses to operate legally, depending on your industry and location. Research and get the necessary approvals.

Know Your Taxes

Complying with tax obligations is crucial. Register for the Goods and Services Tax (GST) or Harmonized Sales Tax (HST) if your annual revenue exceeds the threshold. Familiarize yourself with payroll taxes if you have employees, and ensure proper income tax reporting for your business.

Open a Business Bank Account

Separating personal and business finances is essential for clarity and compliance. Open a dedicated business bank account to manage your income, expenses, and transactions separately.

Get Insurance

Consider various types of business insurance based on your industry and potential risks. Common types include liability, property, and worker's compensation insurance. Insurance helps protect your assets and mitigate financial losses in unexpected circumstances.

Processes Involved in Registering a Business in Canada

Registering a business in Canada can vary slightly from province to province, but the core processes remain consistent. Here's an overview of the standard steps involved.

Name Reservation

Begin by choosing a unique business name and conducting a name search. Once you've confirmed its availability, reserve the name.

Register with the Government

Register your business with the appropriate provincial or territorial government agency. You'll need to provide details about your business structure and ownership.

Obtain a Business Number (BN)

If your business is going to have employees, you'll need to register for a Business Number (BN) with the Canada Revenue Agency (CRA). This number is used for various tax purposes. 

Register for GST/HST

Depending on your sales revenue, you may need to register for the Goods and Services Tax/Harmonized Sales Tax (GST/HST). This is a federal tax applicable to most goods and services in Canada.

Business Permits and Licenses

Determine whether your business requires specific permits or licenses. Depending on your industry, this can include health permits, liquor licenses, or professional certifications.

Employer Obligations

If you plan to hire employees, familiarize yourself with your province's labor laws and employment standards. You must set up payroll, withhold taxes, and adhere to labor regulations.

Bank Account

Open a business bank account to separate your business finances from personal finances. This is essential for accurate financial tracking and tax reporting.

Document Requirements in Registering a Business in Canada:

You'll need specific documents and information when registering your business in Canada. These requirements may vary depending on your business structure and location, but here's a general list to get you started:

1. Business Name Registration: You'll need the chosen business name and your name search results.
2. Ownership Information: Provide details about the owners, partners, or shareholders of the business, including their names, addresses, and contact information.
3. Business Structure: Specify the legal structure of your business, such as sole proprietorship, partnership, or corporation.
4. Business Address: Submit the address of your business location or registered office.
5. Business Number (BN): If applicable, your Business Number obtained from the CRA.
6. GST/HST Registration: Include your GST/HST registration information if necessary.‍
7. Bank Account Information: Include the details of your business bank account, including the account number and institution.

Setting Up a Company vs. Partnering with an Employer of Record in Canada

As you gear up on your entrepreneurial journey in Canada, you'll face a crucial decision: Should you set up a company from scratch or partner with an Employer of Record (EOR)? Let's break down the key factors to consider in a side-by-side comparison:

Ultimately, the choice between setting up a company and partnering with EOR depends on your resources, risk tolerance, and the specific needs of your business. However, setting up a company is more complex, while partnering with EOR is more convenient and hassle-free.

Hire Talent in Canada Compliantly 

Starting a business in Canada in 2024 offers many opportunities in a stable and supportive business environment. Whether you're a Canadian resident or a foreign entrepreneur, following the proper steps and understanding the nuances of Canadian business regulations will set you on a path to success. However, setting up a business is a challenging and time-consuming process. 

If you want to expand your business into Canadian markets without setting up a physical entity, you can partner with Skuad, a reputed Employer of Record. Our unified platform allows you to hire, onboard, and pay employees in more than 160 countries, including Canada. Moreover, with us, you can rest assured that your business is 100% compliant with all employment and labor laws. 

Request a demo today to expand globally with Skuad.

FAQs

How much does it cost to start a business in Canada?

The cost of starting a business in Canada can vary widely depending on your business structure, location, and industry. On average, you can expect to spend anywhere from a few hundred dollars for sole proprietorship registration to several thousand dollars for incorporating a company.

Can I run a US business in Canada?

Yes, you can run a US-based business in Canada. However, it's essential to understand the legal and tax implications of doing so.

Do American companies pay taxes in Canada?

American companies operating in Canada may be subject to Canadian taxes, depending on their activities and presence there. To navigate this complex issue, it's advisable to consult with a tax professional or legal expert well-versed in international tax law.

Do I have to report my US income in Canada?

If you are a Canadian resident, you must report your worldwide income, including income earned in the US, to the Canada Revenue Agency (CRA). The Canada-US tax treaty may provide certain tax credits and exemptions to prevent double taxation.