Starting a small business in Canada is less a single leap than a series of practical steps. You might register a sole proprietorship this week, open a bank account next month, and hire your first employee a year from now. The order matters, and so does getting the basics right. What follows is a plain-language guide to the registration, tax, permit, banking, and hiring decisions most new Canadian owners face.
Choose a business structure before you register
The structure you pick affects your taxes, paperwork, and personal risk. In Canada, most small businesses start as one of three types:
- Sole proprietorship: You are the business. Setup is simple, and business income goes on your personal tax return. You are personally responsible for debts and lawsuits.
- Partnership: Two or more people share ownership. A written partnership agreement is strongly recommended, even among friends or family.
- Corporation: A separate legal entity. It can offer liability protection and tax planning options, but comes with more accounting, filing, and record-keeping duties.
If you are testing an idea on the side, a sole proprietorship may be enough. If you will sign contracts, carry inventory, or take on employees, speak with an accountant or lawyer before deciding. Incorporation is not a magic shield; it has costs and rules. The right choice depends on your revenue, risk, and long-term plans.
Register your name and get a Business Number
If you operate under your own legal name as a sole proprietor, you may not need to register the name itself. If you use a different name, such as “Maple Street Bakery,” you generally must register it in your province or territory. Corporations must incorporate either federally or provincially. Federal incorporation can protect your name across Canada, but you may still need to register in each province where you do business.
Once registered, the Canada Revenue Agency (CRA) issues a nine-digit Business Number (BN). Think of it as your root ID. The BN can have program accounts attached to it for GST/HST, payroll, corporate income tax, and import/export. You can register for a BN online, by mail, or through a service provider. Keep your registration certificate and BN in a safe place. Banks, suppliers, and accountants will ask for them.
Know when GST/HST applies
GST and HST are not the same as income tax. They are sales taxes you collect from customers and remit to the CRA. Most businesses must register once revenue from taxable supplies exceeds the small supplier threshold, generally $30,000 over four consecutive calendar quarters. Some businesses, such as taxi and ride-sharing drivers, must register sooner. If you register voluntarily before hitting the threshold, you can claim input tax credits on business purchases, but you also take on filing duties.
Provincial sales tax and online sales
Depending on where you sell, you may also need to collect provincial sales tax (PST) in British Columbia, Saskatchewan, or Manitoba, or Quebec sales tax (QST). Selling online or shipping across Canada can complicate the rules. If you sell physical goods, digital products, or services in multiple provinces, talk to an accountant. Once registered, you file GST/HST returns based on your assigned reporting period—monthly, quarterly, or annually. Keep every invoice and receipt.
Check permits, licences, and zoning first
Registration does not mean you can open your doors. Most municipalities require a business licence, and zoning rules decide whether you can run a business from a specific location. If you plan to work from home, check rules about parking, signage, clients visiting, and storage. Some businesses need extra permits:
- Food premises and health permits for restaurants, cafés, and food trucks.
- Sign permits for storefronts and sandwich boards.
- Provincial licences for trades, childcare, insurance, real estate, and liquor sales.
- Fire and building inspections before occupancy.
Start with your city hall or municipal licensing office, then check provincial regulators. Do not sign a commercial lease until you confirm the space is zoned for your business. A landlord may not know the permit details. A little homework now can save thousands in renovations or fines later.
Separate your banking and bookkeeping
Open a business bank account as soon as your registration and BN are ready. Even if you are a sole proprietor, a separate account keeps personal and business spending clear. It makes tax time faster and helps you see whether the business is actually profitable. Apply for a business credit card only if you can pay it off monthly. Interest charges can quietly eat your margin.
Bookkeeping habits that pay off
Use accounting software or a simple spreadsheet from day one. Record sales, expenses, HST collected, and mileage. Keep receipts for at least six years, as the CRA can review them. Set aside a percentage of every payment for taxes; money collected for GST/HST is not yours to spend. A bookkeeper or accountant can set up your chart of accounts and filing calendar. For tax or legal questions specific to your situation, professional advice is worth the cost.
Understand payroll and hiring rules
Hiring your first employee is a major compliance step. Before the first payday, register for a payroll account with the CRA. You will need to deduct Canada Pension Plan (CPP) and Employment Insurance (EI) premiums, plus income tax, and remit them by the due date. Employees receive a pay stub and a T4 slip each year. Independent contractors are different, but misclassifying a worker to avoid payroll can lead to penalties. If you are unsure, get advice.
- Confirm employment standards for your province or territory: minimum wage, overtime, breaks, vacation pay, and termination notice.
- Register for workers’ compensation coverage if your industry requires it.
- Follow occupational health and safety rules and provide required training.
- Use a written employment contract that covers duties, pay, hours, and probation.
You will also need each employee’s Social Insurance Number and a completed TD1 form. Payroll software can calculate deductions, but you remain responsible for remitting on time. Late remittances can trigger interest and penalties.
Your first 90 days: keep it simple and compliant
In your first three months, focus on three things: keeping clean records, making required filings, and asking for help when a rule is unclear. Revisit your business structure once you know your revenue and risk. Set a monthly routine for bookkeeping and tax remittances. Review your insurance coverage, from commercial liability to home-based business insurance. Join a local chamber or business association if you want practical referrals. And remember that rules vary by province, territory, and municipality. A good accountant, lawyer, or bookkeeper can save you time and prevent expensive mistakes. Start with the steps you can control, and build from there.
Photo: cocoparisienne / Pixabay
