People often dream of being their own boss and running their own business. These days, it’s more doable than ever.
If you’re starting a sole proprietorship, partnership, or corporation, understand that each has different registration requirements.
As someone that’s built my own business, I know the importance of determining my business type for tax purposes, as well as liability protection.
But I’m not the only one. Even through a pandemic, more than 2 million Canadians launched their own businesses. That figure is so important because many of those novice owners probably weren’t too familiar with business registration.
That’s why I want to help and clarify what an owner should do if they want to register their small business. Here’s what you should know.
As a sole proprietor or partnership, you’ll need to do the following to register a business in Ontario.
- Choose an available business name.
- Register your business.
- Register additional licenses and certificates.
If you choose to incorporate your business, the paperwork is more tedious. Here’s what you’ll need to do.
- Consider a business name.
- Complete and file your Articles of Incorporation.
- Complete other documentation and prepare to keep corporate records.
As the sole proprietor, you are the only owner of the business. You have sole control and responsibility, including receiving all the profits.
However, on the flip side, there isn’t a distinction between you and your business in terms of legal or financial liabilities.
This means you could potentially be responsible for any business debt or liabilities.
Sole proprietorships are the easiest to set up, and once you register, there are few legal responsibilities beyond that.
Here’s what you’ll need to do to start the registration process.
1. Choose an Available Business Name
A good business name is the first step in building your brand. However, before you decide on a name, consider this.
First up, you can’t have a misleading name. Adding incorporated or limited at the end won’t fly. Instead, it could imply you’re a corporation.
Next up, you want to make sure your business name is unique. For starters, it’s the way customers will identify you and your brand. You don’t want to be confused with another business. Instead, you want yours to stand out.
You also want to do a name search, so you don’t inadvertently take another business’s name.
That could cause the other company to take legal action against you, especially if their name is trademarked. Not the way you want to start your business life.
So, how do you go about doing a business name search? There are two ways to find out.
Neither of these steps is obligatory, but you want to ensure you have a distinct business name for legal and marketing purposes.
This search, provided by the Ministry of Consumer and Commercial Relations, lets you search its database for exact name matches.
It won’t show similar name matches or flag trademarked business names within Ontario or surrounding provinces.
The NUANS search is much more in-depth than the Ontario business one. Not only will it provide exact name results, but it’ll also list similar corporate names and trademarks. The report is valid for 90 days, meaning your business name isn’t automatically approved, just reserved until all your paperwork is in and accepted.
You can register your business online for a small fee. As a sole proprietor, you’ll need to enter the following information:
- Business name
- Business mailing address
- Principal place of business
- A description of the activity or service carried out by the business.
The online fee is $60, and after payment, you’ll obtain a Masters Business License within a few days.
This license is proof of a valid business and may be necessary if you seek financial assistance in the future. Your registration is valid for five years, at which time you’ll need to renew.
Registering your business might not be the final step before you get started. Depending on the products or services of your operation, you may need added licenses or certificates.
For example, certain construction businesses need special zoning and building permits. Others that deal with hazardous materials may need environmental permits.
Each business is different, and as the owner, it’s up to you to comply with all federal and local laws.
Some businesses with more employees engaged in certain business activities also need to register with the federal Canada Revenue Agency (CRA) for programs like The Goods and Services and Harmonized Sales Taxes.
Corporations are different from sole proprietorships and partnerships, and in some ways, more beneficial. For example, a corporation is a separate legal entity, which gives its shareholders some protection against liabilities.
Incorporating a business could also mean lower taxes, saving you money. In addition to lower tax rates, you could also experience income tax deferral and capital gains exemption.
However, you might see higher administrative costs for initial setup, along with professional fees for legal, accounting, etc.
You may need to evaluate your business plan and needs with your professional team to see if incorporating your business is the best move. If it is, here’s how you should proceed.
Just like I mentioned above, when registering a sole proprietorship, a unique business name gives customers their first glimpse into what your business is all about.
It’s the initial way you can get your brand out there.
As a corporation, you can use either a numbered name like 87654321 Mounties or stick with the usual word names made up of letters and symbols.
Numbered names are easier because the Canadian government will automatically assign you one. However, during the course of your business dealings, you can use another name.
The articles of incorporation establish your business as a legal entity and describe the corporate structure.
While this step can be time-consuming and stressful, Canada’s government website tries to simplify the process by providing a basic prepackaged incorporation option.
According to the site, the package includes:
- Pre-determined articles of incorporation that can be amended in the future.
- 10 directors max
- A numbered corporate name
- One or two share classes
Of course, your business can choose to prepare its own articles of incorporation, but they must include the following:
- Corporation name
- Business address
- The number of corporate directors
- The name and address of the directors
- Class of shares and amount issued
- Any restrictions on business activity
- Share transfer restrictions
- Other necessary provisions
You can file all necessary paperwork online with an affiliate of the Canadian Ministry of Government and Consumer Services. The fee is $300, plus any additional costs per the service provider.
You can also file in person or through the mail for a cost of $360.
As an incorporated business, you will need a board of directors. The board must meet certain requirements, such as age and residency concerns. For more information, check out the board of director requirements.
In addition, your new business can create an account with the Canadian Revenue Agency (CRA) to obtain a federal business number and register for other programs like:
- Excise taxes
- Savings and pension plans
- Charities and giving
- Payroll deductions and contributions
- Payroll information returns
- Payments to CRA
Your business may also need additional permits or certifications depending on the goods and services provided. Now is the time to apply for any of these added licensures.
Also, keep in mind that all incorporated businesses within Ontario need to keep corporate records.
These records describe all the business activity, like resignations and hirings, minutes of board meetings, as well as a basic overview of cash inflows and outflows.
Registering your business probably isn’t as confusing as you thought it was. While it’s easier for sole proprietors and partnerships, corporations might have more tax benefits and protection against liabilities.
However, no matter which route you go down, there’s a set process to complete before you get up and running.
While you’re working on registering your business, don’t forget to consider business bank accounts. Check out my list for the top 12 here.