How to Start Small Business in Canada

Narendra Kumar

04 Mar, 2025

Canada is ranked 2 by World Bank, in terms of ease of starting a business. One can register their business via Online Filing Centre in short span of time & reduced costs. Canada’s open for business and welcomes foreign investment and business immigrants. Doing business in Canada is much cheap, it is second lowest according to studies & 5% lower than the USA. It remains one of the most welcoming and profitable places in the world for international business and foreign direct investment.

Significant features:

• Stability of doing business in Canada & its versatility.
• The soundest banking system to thrive upon
• Highly educated workforce
• Industrial specialization; it is also a world leader in fields as diverse as medical devices, digital gaming, and agro-food.
• High standard of living & good lifestyle
• Strategic Location for expansion & diversification
• Favorable taxation regime
• Protection of Intellectual Property rights

Why it is internationally acclaimed, is due to its policies encompassing business investment as FDI by non-residents. Pacts such as NAFTA & G-20 gives Canada all the more boost – up to incentivize it for foreign investments.

What Sort of Entity?

Once you have decided to establish a company in Canada, another important thing is to decide what type of entity one must establish in order to flourish –

• Sole Proprietorships
• Partnerships
• Cooperatives
• Franchises, Joint Ventures
• Subsidiary Companies
• Corporations (Private, Public)
• Branch Office

The next decision is whether to incorporate your company federally or provincially. If you incorporate federally, your business will be empowered to conduct business throughout Canada. The company must be incorporated according to Canada Business Corporation Act. Both sorts of registrations have their pros & cons.

 The Process of Set – Up?

After selection of the entity, one must have to go for a selection of name & create a name search via NUANS Report. The name should be apt & simple which should indicate the activity or business about to be taken up.

For E.g.: In Ontario, your business name can be registered via the public office of the Companies Branch by mail or in person. The charge for business name registration by mail or in person at the Companies Office is $80. Business name registration can also be completed through any of the Service Providers under contract with the Ministry of Government and Consumer Services.

• Hereafter name allotment, one is required to conduct their business operation via Provincial or Federal manner. So, if it is Ontario then one must obtain a provincial license apart from the incorporation certificate of the company in order to operate the business in a legible manner.

1. Federal Business

Federal Incorporation creates a new legal entity called a corporation, commonly referred to as a “company.” A corporation has the same rights and obligations under Canadian law as a natural person.

Here one must apply for the following to have a federal Registration in Canadian Territory:

• Articles of Incorporation
• Federal Business Number
• Federal corporate income tax program account
• Option to register for other federal income tax accounts, such as GST/HST, payroll, import/export from Canada Revenue Agency.
• Option for extra-provincial or extra-territorial corporation registration.

1. Provincial / Territorial Incorporation

In this sort of incorporation after getting the Articles of incorporation registered along with the generation of Certificate evidencing the same, one must obtain the provincial certificate & license of the province it wants to set up the business in.

Here must have to proceed to the following Gov. of either territory for a license to conduct:

E.g.: Alberta, British Columbia, Ontario, Quebec, Yukon, etc.

If one is planning to operate in other provinces or territories, one must also need to register as an extra-provincial or extra-territorial corporation in those jurisdictions.

Henceforth one will eventually receive the business registration number along with the Corporation Income Tax Program account.

 Taxation Regime?

If the business does $30,000 or more in total revenue per year, it needs to be registered for a GST/HST account. Many merchants with less revenue volunteer to register because once you have a GST/HST account you can get the taxes you pay as a company refunded by the government. However, if it is registered provincially then, it has to pay according to the rule of the relevant provincial laws & guidelines. (It generally consists of higher & lower tax rates).

The basic rate for Part I Tax is 38% of taxable income, 28% after federal tax abatement & after general tax reduction; the final rate is 15%. For Canadian controlled private corporations, claiming petty business deductions, the rate is 10.5%.

 Fees?

While filing the application physically for federal incorporation, the fees chargeable is 250$ & for the online application, it takes 200$. But for the rates in the case of provincial application varies from province to province.