Starting a business in Canada can be thrilling but also overwhelming. How do you meet all compliance and legal requirements? Below, you’ll find a step-by-step guide detailing everything you need to know about how to start a business in Canada.
Whether you’re a first-time business owner or looking to expand your business to Canada, it’s important to consider the unique Canadian markets and develop a business plan that can effectively meet customers’ needs. You’ll find the details here to create an effective business strategy and grow your Canadian business.
Why Consider Starting a Business in Canada?
There are many reasons to start a business in Canada. From wanting to create financial stability or offer a product or service not yet available in the market to taking advantage of Canada’s favorable business climate, entrepreneurs can benefit from building their Canadian businesses. Key reasons to consider starting a business in Canada include:
- Economic stability: Canada has a diversified and strong economy that has proven to be resilient to various global economic challenges. The Canadian economy is arguably stronger than the US economy, with lower inflation than the US or the UK. Also, the Canadian dollar is one of the strongest currencies in the world.
- Low corporate tax rates: With tax savings, you can re-invest more into the company and have enough to pay yourself a fair amount. Canada’s favorable taxation structure makes it a strong choice for business owners.
- Geography: Canada’s border with three oceans, several bustling major ports, 18 major airports, and diverse geographic regions make it well-connected for global trade and offer diverse environments for different businesses to thrive.
- Skilled workforce: With low higher education costs, Canada boasts a highly educated population. In fact, 62% of Canada’s 25-34-year-olds have completed higher education. Businesses can tap into a highly skilled workforce for specialized skills and business advancement.
- Simplified income tax: An income tax treaty between the US and Canada prevents double taxation, reducing the tax burden for expats. It also allows businesses to benefit from reduced withholding of taxes on certain types of income and other payments made between the two countries.
- Visa program: Canada offers special visa programs for startup founders to make moving to Canada easier.
12 Steps to Start a Business in Canada
Here’s how to start a business in Canada, from market research to expanding your reach:
1. Conduct Market Research and Identify Your Target Audience
Once you’ve identified a business niche, you’ll need to conduct market research and identify your target audience. Create a detailed profile of your ideal customer, and look at how your business can solve a pain or worry in their lives.
Look at existing businesses in your industry or niche, including any information you can find on total revenue and specific product or service offerings. Look also at recent newcomers into the market and their performance.
Finally, create a SWOT analysis of the Strengths, Weaknesses, Opportunities, and Threats of your business idea realted to existing businesses and your target audience. This will give you an idea of ideal positioning to capture greater market share.
2. Develop a Business Plan
Once you’ve identified positioning, it’s time to create a business plan with target customers, total costs, projected income, and cash flow analysis. When investing in a business, it’s important to look at the breakeven point and highlight for lenders or investors how your business will generate revenue even with modest performance projections.
Elements to include in the business plan include:
- Business mission and vision
- An executive summary
- A detailed description of the company
- Short and long-term business goals
- A description of products and services
- Relevant information from your market research, including a SWOT analysis and competitor research
- Marketing and sales plans
- Business financial analysis with financial projections and a balance sheet
- Supporting information on business licenses, business registration, and any other requirements
3. Choose a Business Name
Choosing a business name can be fun! Consider a name that is easy to remember and pronounce, and that signifies or is related to your products or services. When choosing a business name, check the registry with the Secretary of State to ensure another business doesn’t already have the name. Then, look for web domains related to that name to ensure you can secure a business website that is easy for clients to remember.
4. Decide on a Business Structure
A business structure establishes your business as a separate entity and builds credibility. Canada has three basic business structures: a sole proprietorship, a partnership, and a corporation.
You can choose a sole proprietorship, which is the simplest structure to set up but it offers unlimited liability for business owners. This structure means you’ll be taxed at your individual income tax rate.
If you’re establishing a business with another person, you might opt for a partnership. Canadian partnerships function like sole proprietorships but with two owners. You are both responsible for reporting income on your income tax return. You’re also both responsible for all business debts and liabilities.
You can establish a Canadian corporation to gain significant benefits, including legal protection of your personal assets and a possible lower corporate tax rate. However, you must maintain detailed records and accounting and file an annual report for the corporation, which can be time-consuming and expensive.
Finally, you can open a US LLC for your Canadian business. Doola Canada can help you to form and register your Canadian business.
5. Register Your Business
To register your business in Canada, you’ll need to set up a legal structure, register with the province, and then register for a GST/HST number, which you can apply for online, through fax or mail, or by telephone. Most Canadian provinces allow you to register your business online, in person, or through the mail.
6. Obtain Business Permits and Licenses
Depending on the business objectives, you may need to obtain permits or licenses. You can search for required permits or licenses for your business here.
7. Open a Business Bank Account
Once you have a GST/HST number, it’s simple to open a business bank account. Consider monthly fees, transfer fees, minimum balance, availability of a debit card or checks, and any ATM fees when choosing a business bank account to meet your company’s needs. And, of course, double-check that the bank is covered by the Canada Deposit Insurance Corporation (CDIC) to protect your business assets.
8. Get Business Insurance
Business insurance will protect your company in the event of inventory damage or losses to lawsuits. Types of business insurance to consider, based on your business type, number of employees, and assets, can include:
- Commercial property insurance
- General liability insurance
- Professional liability insurance
- Commercial auto insurance
- Cybersecurity insurance
- Directors and officers (D&O) liability insurance
- Crime insurance
- Business-owned life insurance
- Business-owned disability insurance
- Business-owned critical illness insurance
- Key person insurance
- Insurance for succession planning
- Buy-sell agreement insurance
- Business interruption insurance
- Vehicle insurance
- Employee benefits
9. Consider Business Support and Financing
Business support and financing can include small business loans, investments, or personal loans. Whether you require funding will depend on your business structure and initial startup needs. In addition, you can consider support from networking and government-sponsored support for small business owners, including grants and financing.
10. Choose Your Location
For many businesses, location is key. Unless you only offer online services or virtual events, you’ll want to choose a central location that is easy for potential customers to reach and is in an area that receives significant traffic from your target market.
Even if you’re starting an online retail or drop-shipping business, location can affect shipping costs and the cost of hiring employees. Carefully weigh total costs, exposure, ease of reach, and employee costs for the regions you’re considering.
11. Hire Your Employees
When hiring employees, you can ask for referrals from colleagues, business contacts, friends, and family. You can also make online listings or listings on local message boards. You’ll want to check potential employees’ experience, credentials, and passion for the business. Hiring employees who are excited to work for your company can help cultivate a strong culture of excellence and dedication while building your business.
12. Market and Advertise Your Business
You’ll want to get the word out once the business is set up and running. Consider posting regularly on social media and holding events or educational seminars online or for local customers. You can also consider advertising through social media, Google ads, local newspapers, trade magazines, or anywhere else your target customers spend time.
Building Your Canadian Business
With so many steps to follow and details to oversee, professional help can make starting and building a business in Canada easier. With business formation services, for example, you’ll have your business set up and registered so you can focus on your business plan and building the best offerings.
Doola can help with its formation and compliance services. Whether you want to register an LLC for your Canadian business or create a Canadian business entity, doola offers reliable services and customized solutions to help your business grow.
What are the legal requirements for starting a business in Canada?
To start a business in Canada, you must choose a business name and structure, register the business with the government, and apply for relevant permits or licenses. You may also want to apply for grants or funding. And in Canada, you can get free tax advice for your business!
How long does it take to register a business in Canada?
It usually takes up to 35 days to register a business in Canada. In most provinces, you can register the business online, in person, or by mail. Processing times vary by province and your application method.
Can a non-Canadian start a business in Canada?
Yes, non-Canadians or non-residents can start businesses in Canada.
Do I need a registered office address in Canada to start a business?
Canada requires a registered office document with every business filing, so you will need a registered office address to form a business in Canada.
What permits or licenses do I need to operate a business in Canada?
Required business permits or licenses will depend on the business structure, services, or offerings. You might need municipal licensing, environmental permits, and business-specific licenses. See recommendations for business licenses here.