Starting a business in Canada can be an exciting step for entrepreneurs. Business opportunities vary depending on the region, industry and market. It’s important for new business owners to research and understand the legal and regulatory requirements. Seeking professional advice from a lawyer or accountant can also be helpful during the planning stage. Overall, to start a business in Canada you should have careful planning, attention to detail and a willingness to adapt to the country’s unique business environment.
Key takeaways:
- Starting a business in Canada requires thorough research, legal understanding, and professional advice which are crucial for starting a business in Canada.
- Open to citizens, residents, and foreign nationals with work permits; steps include idea, plan, name, and permits.
- Business licensing is essential, federal and provincial compliance is crucial to avoid fines and closure.
- Visa options: Start-up Visa, Investor Visa, and Owner/Operator LMIA for foreign entrepreneurs in Canada.
Table of Contents
Who is eligible to start a business in Canada?
The process of starting a business in Canada is open to anyone who is legally eligible to work in the country. This means that Canadian citizens, permanent residents, and foreign nationals with valid work permits can all start a business in Canada. However, the process of starting a business can be different depending on the type of business and the location.
What are the legal requirements to start a business in Canada?
Here are some basic legal steps to start a business in Canada:
- Find a business idea:
Starting a business in Canada, needs a plan and to determine what products or services you will provide and who your target audience is. Experts suggest making sure your business offers a solution to a problem and that you have a deep understanding of the industry you will operate in before proceeding. - Create a business plan:
Spend time researching and make a solid business plan. It doesn’t have to be super long, but include important numbers and info about your money flow. The better and more real your plan is, the more chance you have of getting money help from the bank or others. - Choose a name for your business:
When choosing a business name, consider whether it conveys what you sell, has a positive connotation, is easy to pronounce and remember, and whether it’s unique enough to prevent legal issues. It’s important to consider these factors before committing to a name for your business. - Register your new business with the government:
Whether or not you need to register your startup’s name depends on how it’s structured. As a sole proprietor, you don’t need to register, but for a partnership or corporation, it’s mandatory, and trademark registration may be necessary. - Apply for any required permits and licenses:
Permits and licenses required for starting a business in Canada vary according to the type of business and location, but they may be necessary in all levels of the government. - Apply for a CRA business number:
In addition to permits and licenses, you need to apply for a business number from the Canada Revenue Agency (CRA) for income tax purposes, which can be done online or by phone. - Open a business bank account:
To separate personal and business finances, a business account is the best option since it works similarly to other bank accounts, and its features vary to accommodate businesses’ varying size and needs. - Apply for a business credit card:
A business credit card is a great way to separate personal and business expenses, with its features like a personal credit card. It comes in handy when purchasing supplies, meals for clients, company vehicle fuel, and other business expenses. - Get financing to fund your business:
To fund a small business, ask friends/family, borrow from lenders, and ensure to have a good business plan. The Canadian government offers grants, including First Nations businesses, new immigrants, and military members. Check out the Business Benefits Finder tool.
How can I start a business in Canada?
To start a business in Canada, familiarize yourself with local regulations and requirements, then create a detailed business plan outlining your venture’s goals and strategies. Additionally, consider seeking guidance from local business resources for a smoother startup process.
How much does it cost to open a new business in Canada?
The cost of Starting a business in Canada depends on business size and type, location of business operation, the offered product or service, operating it locally or through a website, and the number of employees. Registration fees for starting a business in Canada usually range from $200 to $1000, depending on the jurisdiction. Additional costs such as legal fees for corporate records, appointing directors, preparing bylaws or articles of association, and registering with Canadian Revenue Agency may also apply.
Some best reasons to why start a business in Canada
Canada has the ninth-largest economy globally and is home to a highly skilled workforce. Its strong economy, low corporate taxes, and geographic accessibility make it an ideal place for businesses to invest and grow. Here are some reasons to why start a business in Canada:
- Excellent Business Opportunities:
- Canada offers ideal conditions for startup success, boasting a high number of startups, particularly in Waterloo.
- Entrepreneurs benefit from economic freedom, low setup costs, government funding, top-tier talent, and convenient access to the US market.
- Highly Developed Economy:
- Canada’s stable and rapidly growing economy, marked by lower tax rates and efficient bureaucracy, makes it the ninth-largest economy globally with a GDP of 1.88 trillion dollars.
- High Standard of Living:
- Recognized as one of the world’s most developed countries, Canada offers a superior quality of life, modern cities, a clean environment, and high scores on the Better Life Index, for those who want to start a business in Canada.
- Start-up Visa Program:
- Canada’s Start-up Visa Program provides a pathway to permanent residency for immigrant entrepreneurs, emphasizing innovation, job creation, and global competitiveness.
- Eligibility criteria include a qualifying business, support from a designated organization, language proficiency, and sufficient funds.
- No Previous Management Experience Required:
- Canada’s Start-up Visa Program allows individuals without prior management experience to start a business in Canada, providing quick access to a work permit and eventual permanent residency.
- Lower Corporate Taxes:
With one of the lowest corporate tax rates globally (28%), Canada stands out as an attractive destination for foreign investors and entrepreneurs, fostering increased profitability.
- Rich in Equality and Cultures:
- Canada celebrates diversity with Multiculturalism Day, welcoming immigrants from various backgrounds through programs like the Skilled Worker and Start-up Visa, ensuring equal opportunities for all.
- The Right Business Tools:
- Tools like the Start-up Assessment and BizPaL aid entrepreneurs in evaluating readiness and obtaining permits.
Salesforce, a business tool, assists companies in sales growth, improved customer service, and marketing solutions.
- Tools like the Start-up Assessment and BizPaL aid entrepreneurs in evaluating readiness and obtaining permits.
What do I need to know about licensing a business in Canada?
In Canada, a business licence, issued by the government, is essential for legal operation. Compliance with federal, provincial, territorial, and municipal permits and regulations, tailored to your industry and business structure, is crucial. Failure to secure proper licensing may result in fines, business closure, and damage to your professional reputation.
Advantages and disadvantages of starting a new business in Canada
To start a business in Canada you should consider the advantages and disadvantages. We collected some of them for you:
How can foreigners start a new business in Canada?
Foreigners looking to start a business in Canada can follow certain steps to do so. First, they need to choose a business type and research the market. Then, they should obtain necessary permits and licenses. Finally, they can set up their business by registering it with the government and opening a business bank account.
How can I get PR if I start a new business in Canada?
These are the steps you can get PR through which:
- Invest in Buying or Setting up a Business in Canada
- Four ways for foreign investors: start a business, buy an operational business, buy shares in an active business (at least 33%), or buy a franchise.
- Apply for a work permit as a business immigrant after creating or purchasing a Canadian business.
- Operate your business for a specific period upon arriving in Canada before transitioning to permanent residence.
- Length of operation depends on business type (established or new) and work permit type.
- Permanent Residency Application
- Apply for permanent residency as the manager of your active Canadian business.
- Meet additional criteria, including a CLB 7 language skills score, post-secondary education, and no criminal record or serious medical issues.
How to start a new business as a newcomer in Canada
Before you decide to start a business in Canada as a newcomer, it’s crucial to address three key questions: legality of business ownership, regulatory requirements and licensing, and assessment of skills and qualifications. Once these considerations are addressed, businesses in Canada typically follow three fundamental steps: understanding applicable licences and regulations, selecting a business structure and registering or incorporating, and determining the need for tax collections and remittance. It’s important to note that businesses may require licences and permits from federal, provincial, and municipal levels of government, and tools like BizPaL can provide additional guidance alongside the information in this guide.
Can an international student start a new business in Canada?
In case you are a student and wish to start a business in Canada while pursuing your studies, you would need to apply for a modified study permit from CIC that allows you to work on your business. Note that a work permit itself doesn’t grant you Canadian citizenship. If you aspire to gain Canadian citizenship, you’ll have to apply for citizenship status with CIC.
Tax facts about starting a business in Canada?
Since you are your own boss, you’ll need to pay self-employment tax, which is Social Security and Medicare taxes. The total self-employment tax rate, when you are starting a business in Canada, is 15.3% of your income.
Introducing some ways to finance your new business in Canada
- Personal savings: Business owners can use their own savings to cover expenses, but this approach has limitations.
- Local investors/associates: Business owners can also get financing from local investors and associates, but this can be risky and requires professional treatment.
- Business loan: Bank loans are good for buying assets, but qualifying for them is tough and they may require securities.
- Supply chain financing: Used for buying materials, it requires a few years of history, credit-insurance, good management, and profitability.
- Inventory financing: Allows owners to get working capital from excess inventory, but it’s expensive.
Canadian visas for new businesses
Canadian visas for new businesses include the Start-up Visa program, Investor Visa, and Owner/Operator LMIA. These visa programs are designed for foreign entrepreneurs and investors who want to start a business in Canada or invest in a Canadian company.
Canada start up visa
The Start-up Visa program is a Canadian immigration pathway that allows foreign entrepreneurs to move to Canada and launch a new business. Candidates must obtain a letter of support from a designated Canadian venture capital fund, angel investor group, or business incubator. The amount of investment required depends on the startup funding program chosen. Eligibility criteria require applicants to have a qualifying business with the ability to scale, an adequate proficiency in English/French and others.
Canada investor visa
Canada Investor Visa is a provincial program designed to attract foreign investors to move to a specific province in Canada by investing in designated businesses. Eligibility and investment requirements vary based on the province selected. These visas offer Canadian permanent residency with the prospect of citizenship to those who invest the required funds.
Owner/Operator LMIA
The Owner/Operator LMIA (Labour Market Impact Assessment) program is a Canadian immigration pathway for foreign business owners to apply for a work permit and start a business in Canada. Eligibility criteria require the foreign business owner to hold at least 50% equity in the Canadian company and provide managerial experience and qualifications.
Sole proprietorship or corporation? Which one is suitable for you?
Sole proprietorship is a business model where there are no shareholders or partners, and the owner is personally responsible for all financial profits and losses. It is relatively easy and less costly to set up, and the owner has control over all business decisions. However, the owner is fully liable for debts and losses, paying personal tax rates, and may face difficulties raising capital. As a proprietorship model, there must be a succession plan to ensure business continuity.
A corporation is a legal entity separate from its owners. The owners are known as shareholders and the corporation pays corporate tax instead of personal tax. To incorporate, one needs to provide articles of incorporation to the Government of Canada. The benefits include asset protection, capital raising, and tax advantages, but there are drawbacks such as complex setup, high cost, no write-offs of business losses, admin work, and expense.
Can a person on a work permit start a new business in Canada?
If you have an open work permit in Canada, you are allowed to start and operate your own business venture. However, it is important to note that using this method to start a business in Canada can make it more challenging to obtain Permanent Resident status.
Some of the best businesses to open in Canada
Here are some of the best businesses to open in Canada:
- E-commerce store: Starting an e-commerce store allows you to sell products online and reach customers all over the world.
- Dropshipping business: Similar to an e-commerce store, a dropshipping business allows you to sell products online without holding any inventory.
- Food truck business: A food truck business is a great option for anyone who loves cooking and wants to start a business in Canada with low overhead costs.
- Cleaning service: Starting a cleaning service is an ideal opportunity for anyone who enjoys helping others keep their homes clean.
- Translation services: In a country like Canada where two official languages exist – English and French, translation services are in high demand.
These are just a few of the many businesses that would be perfect to open in Canada.
Last words about starting a business in Canada
For starting a business in Canada you should have careful planning, research, and compliance with all legal and regulatory requirements. Seek the advice of experienced professionals, including lawyers and business consultants. Explore all available options for obtaining the necessary permits and licenses, and always strive for continuous improvement. With dedication and perseverance, starting a new business in Canada can be a rewarding experience.
- Starting a business - Canada.ca
- Business guide for newcomers to Canada
- How to Start a Business in Canada - Step by Step Guide | BDC.ca
- Registering a sole proprietorship or partnership - Canada.ca
- Business guide for newcomers to Canada
- Do I Have to be Canadian to Start a Business in BC?
- Start-up Visa Program - Canada.ca
- Should you operate as a Sole Proprietor or Corporation?
