Starting a business in Canada: things to consider

This blog post will cover some of the most important aspects of starting a business in Canada and hopefully set you on the road to entrepreneurial success.

Why start a business in Canada?

Canada is a great country to live and work in. The Canadian economy continues to expand, with an impressive GDP growth rate. The population is diverse and well-educated, and the legal system is well-established, there are numerous support networks and infrastructure in place to help your business grow.

In short - Canada has everything going for it when founding a business.

However, it's also important that you're passionate about your idea for a business! If you don't love what you do every day then it will be difficult to succeed.

Sole Proprietorship vs. Incorporation in Canada

Sole Proprietorship is the perfect fit if it's just you running your business, you'd like a simpler tax system to navigate and you're not looking to raise capital or access government grants.

While you can still operate under a business name, hire staff and receive a tax number as a sole proprietorship, by incorporating you give yourself options for expanding - as it allows you to take on multiple owners, and enables you to lower your corporate tax bill.

Understanding limited liability

Another reason many businesses choose to incorporate is to benefit from the concept of limited liability.

The benefits of limited liability cannot be overstated. By incorporating, you can divide your personal and business obligations. If your company goes bankrupt, you will not be responsible for the debt of the company. But if you do not incorporate, then you would be responsible for the debts of the company, which could put all of your personal property at risk.

Federal versus provincial incorporation

In Canada, you can choose to incorporate either provincially or federally. If you choose federal, and your business is located in one province, then you will need to register your company in that province.

Both types of incorporation allow the company to operate across Canada and service customers from anywhere in the world.

If you choose federal incorporation, a benefit is that it provides increased name protection for your business. Your company's name would be registered throughout all of Canada (rather than just one province).

Another thing to consider - if you are in Ontario, Alberta, Manitoba, Saskatchewan or Newfoundland then at least 25% of the directors must be resident Canadians. For the rest of Canada, there are no residency requirements for directors.

After incorporation: ongoing obligations

After you form a corporation, there are two main things that are required of your company: Keeping documents and records up-to-date, keeping legal and tax obligations fulfilled.

Every time you want to change something about your company (like adding a new director or changing the address), you have to file forms with the government and write a corporate resolution that says that you are changing things.

Similarly, there is an annual requirement to file a tax return. There are different fees depending on where your business is based. For example, if your company is in Alberta, it will cost $50 to file the annual return and prepare annual resolutions for shareholders and directors. If you don't do this, the government can dissolve your company.

Want help with this? Turn to Ownr

If any of the above seems daunting - don't worry because that's a normal feeling. Luckily the team of experts over at Ownr can help.

As experts in incorporation in Canada, they can help you register your company and provide tools to help you manage it and stay ahead on your legal and tax obligations.

With packages for sole proprietors, as well as provincial and federal corporations, they can help you get started in less than 15 mins - go check them out!