Registering a business in Canada: how to set up a company
Whether you’re expanding your business into North America or wanting to capitalise on the low corporation tax rate and trade agreements, Canada is a great place to set up your business.
Nonetheless, registering for a company in Canada can be challenging for many, especially if you’re a first-timer setting up an overseas company, or simply just not familiar with the incorporation process.
First things first. Ensure you have a business bank account. It allows you to track your business expenses, and keep clear records just in case a revenue agency audits your business.
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This article at a glance
Whether you’re registering a limited company as a non-resident in Canada or a large corporation seeking to expand, there are some things you need to know before you dive into trading in Canada. In this article, we bring you through how to register a business in Canada, how long it takes, and how much it could potentially cost you.
How to register a business in Canada?
The registration process might differ depending on the province or territory in which you plan to set up your business. It’s advisable to do your research on the laws of your exact province and ensure that you meet the specific requirements. Here’s a general step-by-step guide on how to register your business in Canada.
Select your business structure
It’s best to select a business structure that best supports your business goals. Note that there might be a different tax law for each type of structure. Here are the three main types of legal structures for a business:
- Sole proprietorship
This is the easiest structure to set up, which is also why most new and smaller businesses prefer it. Put simply, you are personally liable for all debts that the business may go into. Your business’s financial details have to be listed in a separate section of the personal income tax form.
A partnership is somewhat like a proprietorship, but instead of having just one proprietor, there are two or more. This means that you have other partners who own a piece of the business together with you. Being in a partnership means that you need a contractual agreement that lists out each partner’s (in percentage) share in revenue, expenses and tasks. This percentage should be applied when filing their taxes as well.
The most complicated structure out of the three, a corporation involves the incorporation of a business, where a separate legal entity owned by its shareholders is formed. If you’re an owner of the corporation, you’re usually paid a salary like your employees.
Choose and register your company name
Your company name represents your company, and choosing the right name is a daunting yet important process. If you are operating under a sole proprietorship, you do not necessarily have to register a business name. You can operate under your name. However, if you add any words to your name (e.g., Linda Mallory Construction), you will have to register that name.
Apply for business permits and licences
What does your business need to legally operate in a country? Do you need a permit, a registration, or pay for a licence? A business licence is an official document issued by the Canadian government that allows you to run your business within Canada. There are different licensing requirements at a federal, provincial, territorial and municipal level.
If you don’t apply for the proper licences for your business, you could get into serious legal trouble. Your business may face a fine or even be forced to close. Below are five types of licences, permits and registrations you might come across.
- Municipal licensing: when your business has its office or performs an activity that might disrupt residents living in that area.
- Environmental and zoning permits: you need this licence if your business affects the environment or contains hazardous materials.
- Business name registration: no matter the type of company you choose to set up, having a business name registration is beneficial in potential name conflicts.
- Provincial registration: you’re required to register in provinces where you conduct business, and you may be liable for provincial sales tax (GST/HST).
- Federal registration: most businesses are required to register with the Canada Revenue Agency (CRA). If your business earns less than $ 30,000 a year, you may not need to register for federal and provincial sales taxes. You must also register with the CRA if you have employees and obtain a business number from the CRA.
As mentioned earlier, there might be different permits depending on your territory. A foolproof way to ensure you have all the required permits is to check with the government directly.
Create articles of incorporation
If you’re incorporating a small business, basic incorporation may be sufficient. Basic incorporation includes:
- Pre-determined articles of incorporation (you can amend them later, as needed)
- One or two classes of shares
- A maximum of 10 directors
- An assigned, numbered corporate name
You can also choose to customise your articles of incorporation. Most merchants who choose to customise will specify the following:
- Your corporate name
- Your share structure and any restrictions on share transfers
- Your corporation’s number of directors
- Any restrictions you might want to set for your business or business activities
- Any other provisions
Articles of incorporation can be in English, French, or both or use both English and French equally.
Get a registered business address for your main office
Your business must have a registered office address and a board of directors. It’s important to ensure that you provide an address that is real, as official documents will be sent to that address.
Furthermore, if there is a board of directors in your company, you must disclose every director’s first name, last name, and address, and indicate if they are a resident Canadian.
Open a business bank account
It’s essential to open a separate corporate bank account to track business expenses and transactions. International merchants benefit greatly from multi-currency accounts that allow you to hold different currencies in one place.
Pay the registration fees
There’s a fee to register your company, and also for certain permits and licences. The fees vary. View them here.
How much does it cost to register a company in Canada?
There’s no fixed number. It largely depends on how you plan to run your company, how you’re registering it, and where you plan to incorporate it.
Firstly, registering as a corporation federally is $ 200 (if filed online) and $ 250 in other places. For a rough gauge, here are the registration costs estimated for a selection of different provinces.
- Ontario: $ 360 in person or by mail is $ 300 online. For just registering (not incorporating), the cost is $ 60.
- Alberta: $ 450
- Newfoundland: $ 300 for incorporation and $ 70 for non-profit organisations.
How long does it take to register a business in Canada?
If you incorporate your business or not-for-profit business online, it will take one business day, provided you have all the required documents ready beforehand. If you need the service urgently, you can choose to top up $ 100 for express service in four hours.
How to register a business in Canada as a non-resident?
Firstly, decide whether you want to run the business while being in Canada as a foreign entrepreneur. If so, you will have to go through the business immigration process. This process may take time depending on your country of origin.
International merchants can start any type of business in Canada, and there are generally no strict rules on what kind of company you can run.
The steps are generally the same as registering as a resident Canadian, although you must be aware of the different laws, permits, and taxes that apply to different territories and governments. Here’s a guide on whether you’re liable for sales tax for non-residents.
Do I need to register a small business in Canada?
The simple answer is yes, depending on your province or territory. Small businesses form the backbone of Canada’s economy and many overseas businesses choose to start up in Canada as well. A small business is defined as one that has one to 99 paid employees. A medium-sized business has 100 to 499 paid employees, whereas a large business has 500 or more paid employees.
How do I register my business name?
You must register a corporate or trade name with the Canadian government if you’re starting a partnership or corporation. Generally, your company name must be approved by Corporations Canada — it must abide by language rules, be distinguishable, be not too similar to existing names, and not be named after a place, government body or financial institution.
For more rules on naming your company, refer to this article on how to name a company.
Can I start a business without registering?
Most businesses must register with the provinces and territories where they plan to run their business. In certain cases, if you open a sole proprietorship and operate under your name, you might not need to register your company.
To be safe, always refer to the rules of your provincial or territorial business registrar. Here’s a list of the common territories in Canada.
Benefits of company registration in Canada
Canada is attractive for businessmen globally to start and run their businesses.
- The incorporation process is fast and simple
- The cost of incorporation and maintenance is relatively low
- Canada boasts a well-developed infrastructure
- There’s a diversity of industries in Canada
- Tax advantages for small businesses and lower tax rate
- Corporate legislation, including one that states a corporation has an unlimited life span even if you sell your business
- One of the least corrupt countries in the world
Different types of companies in Canada
There are five types of companies in Canada:
- Sole proprietorship
- Branch operations
- Joint ventures
Choosing the right company type has a huge effect on your tax liability — so choose the right one.
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Registering a business in Canada FAQ
What is the process of company registration in Canada?
The process of registering a company in Canada is to select your business structure, choose and register your company name, apply for business permits and licences, create articles of incorporation, get a registered business address of your main office, open a business bank account, and pay the registration fees.
What types of business structures can be set up in Canada?
You can set up a sole proprietorship, partnership, or corporation in Canada.
Why should I consider going for business registration in Canada?
The incorporation process is fast and simple, the cost of incorporation is relatively low, and there are tax advantages for small businesses, including a lower tax rate.
What is the main regulatory authority for company registration in Canada?
The main authority governing company registrations in Canada is Corporations Canada.
Do I need to open a corporate bank account in Canada?
It’s not a must to open a corporate bank account, but it’s highly advisable to do so, in order to separate your personal and business expenses — this proves essential during tax season.
What are the different benefits of the Canadian Government for ease of business?
Canada’s strong economy, low corporate tax rate, and geographic accessibility make it a good place for foreign investors and businessmen.
How can a Canadian Company reduce the amount of tax exposure?
A Canadian company can reduce their tax payable by doing activities that earn them tax credits or make use of income tax deductions.
What is the important step to carry out for company registration in Canada?
The most important step is to decide on your company structure. Doing so paves the way for other steps in the registration process.