Foundations
How to Start a Small Business in Canada
Learn how to start a small business in Canada: choosing a structure, registering your name, getting a Business Number, and understanding your tax duties.
Learning how to start a small business in Canada comes down to a sequence of practical steps: choose a business structure, name and register the business, obtain a Business Number (BN) from the Canada Revenue Agency (CRA), set up the tax accounts you need, and confirm the licences your activity requires. Most Canadians begin as a sole proprietorship because registration is simple and inexpensive, but the right choice depends on liability, tax, and growth plans.
Choose a business structure first
Your structure decides how you register, how you are taxed, and how much personal risk you carry. Canada has three common options: the sole proprietorship, the partnership, and the corporation. In a sole proprietorship you and the business are the same legal entity, so net business income flows onto your personal return. A corporation is a separate legal person and can offer limited liability, but it brings higher setup and ongoing filing costs.
| Structure | Typical registration | Liability | How income is taxed |
|---|---|---|---|
| Sole proprietorship | Provincial or territorial registration when operating under a name other than your own legal name | Unlimited personal liability | Reported on your personal T1 return using form T2125 |
| Partnership | Provincial or territorial registration; a written partnership agreement is strongly recommended | Generally personal liability, often joint and several | Each partner reports their share on a T1 return |
| Corporation | Federal or provincial incorporation | Limited liability for shareholders | Corporate T2 return; owners are paid by salary or dividends |
A solo consultant with modest revenue and few risks may find a sole proprietorship sufficient, while a business that will hire staff, sign large contracts, or raise investment often incorporates. Review the types of business structures in Canada before committing.
Check and choose your business name
If you plan to operate under a name that is not your own legal name — for example, a trading name such as Maple Ridge Consulting rather than your own name — you will generally need to register that name. Name rules differ by province and territory: some require a NUANS-style search, some a provincial name search, and others simply ask that the name not be misleading or already in use. Before registering, search the relevant corporate or business registry to reduce the chance of a conflict. See how to register a business name in Canada for the province-by-province process.
Register your business
Registration happens at the provincial or territorial level for most small businesses, including sole proprietorships. You generally register with the registry in the province or territory where you operate; if you operate in more than one, you may need to register in each. Federal incorporation is a separate route, used mainly by corporations that want nationwide name protection. Costs, forms, and renewal requirements vary, so confirm the current details with your provincial or territorial registry. If you are unsure whether you need to register at all, start with whether you need to register a sole proprietorship, and compare routes in federal versus provincial business registration.
Get a Business Number and tax accounts
A Business Number is your account identifier with the CRA. It can carry separate program accounts, each with a two-letter suffix, such as:
- RT — GST/HST
- RP — payroll source deductions
- RC — corporate income tax
- RM — import/export
A sole proprietor may not need all of them. You typically need a payroll account once you hire employees, and a GST/HST account once your revenue passes the small supplier threshold — check the current threshold on the CRA website, since it can change. Registration is available through CRA My Business Account, by mail, or by phone. The steps are covered in how to get a Business Number in Canada and how to register for GST/HST.
Understand your tax and filing obligations
As a sole proprietor you report business income on your personal T1 return using form T2125, Statement of Business or Professional Activities. You generally pay CPP contributions on net self-employment income, and you may be able to opt into EI special benefits in certain cases. Depending on your revenue, you may need to remit GST/HST and pay quarterly instalments. Keep records of income and expenses — the CRA generally expects supporting documents to be kept for at least six years. When you pay another business or an individual for services, you may need to issue a T4A slip.
Licences, permits and ongoing compliance
Registration is not the same as licensing. Depending on what you do and where you do it, you may also need:
- a municipal business licence
- provincial or territorial licences for regulated trades and professions
- zoning or home-based business approval
- health, food, or environmental permits
Renewals and annual filings can apply, and some registrations must be updated when your address or ownership changes. Confirm requirements with your municipality and provincial regulator, as they vary widely across Canada.
A simple step-by-step checklist
- Decide on a structure — sole proprietorship, partnership, or corporation.
- Search the registry and choose a name.
- Register the business provincially or territorially, or incorporate if needed.
- Apply for a Business Number and any program accounts you require.
- Confirm licences, permits, and zoning approvals.
- Open a separate bank account and set up record-keeping.
- Track income, expenses, and remittance deadlines from day one.
Today the fundamentals are unchanged: register where you operate, obtain the CRA accounts you need, and keep clean records. This guide is general information, not legal or tax advice; confirm current rules with the CRA or your provincial registry, or consult a qualified accountant or lawyer for your situation.
Frequently asked questions
How much does it cost to start a small business in Canada?
Costs vary widely. A sole proprietorship registered under your own legal name in most provinces involves little or no registration cost, while registering a business name or incorporating adds fees that differ by province and territory. Licences, insurance, accounting, and software are separate expenses. Because amounts change, confirm current registration fees with your provincial or territorial registry and check CRA guidance for any tax account setup.
Do I need to register my small business in Canada?
It depends on your structure and name. A sole proprietor operating under their own legal name may not need to register in many provinces, but operating under a business name generally requires registration with the provincial or territorial registry. Corporations must incorporate. Rules differ across Canada, so confirm with your provincial registry or review whether you need to register a sole proprietorship.
Can a non-resident start a small business in Canada?
Non-residents can generally carry on business in Canada, but the rules are more involved. You may need to register or incorporate, file extraprovincially, and deal with withholding tax, treaty, and immigration considerations. Provincial registration requirements and tax treatment vary. Speak with a Canadian accountant or lawyer before proceeding, and confirm current requirements with the CRA and the relevant provincial registry.
What is the difference between a Business Number and a GST/HST number?
A Business Number (BN) is your nine-digit account identifier with the CRA. Program accounts are added to that BN with two-letter suffixes, so your GST/HST account appears as your BN followed by RT and a four-digit reference number. In practice, many people call the full GST/HST account number a GST/HST number, but it is part of the same BN.