Starting a business in Canada may seem overwhelming at first. There are quite a few steps to the process, so it helps to take it step by step. This guide is designed to help you make your dream of becoming an entrepreneur a reality.
Each step of this guide links to detailed information that will go into greater detail. The steps are roughly in order, but there is some flexibility. It really doesn't matter if you complete step three, for instance, before you complete step two.
1. Come Up With a Good Business Idea
It doesn't matter whether you're in Canada or anywhere else—a successful business starts with a good idea. Study your skills, watch current trends, and look for ways to improve upon existing concepts or contribute something new to the market. And test your idea thoroughly before you invest serious time and money into it.
2. Write a Business Plan
The best way to test your idea is by turning it into a business plan. This will allow you to thoroughly examine everything about the industry, products, and market for your business. It will also give you something to present to investors and lenders—the ultimate testing ground for your business idea.
Before you launch your business, you should have a thorough, complete business plan to guide you. Early in the process, though, it's possible to put together a quick-start plan that will show you whether your business idea is viable.
3. Choose a Winning Name for Your Business
Choosing a business name comes with both legal and marketing considerations. In Canada, the government places more name restrictions on corporations than on sole proprietorships, but every business owner will have to consider legal issues when naming their business. Most businesses will at least have to register their name with the Canadian government. In terms of marketing, your business name should communicate what the business does in a way that's visually interesting, memorable, and positive.
4. Choose a Form of Business Ownership
When starting a business in Canada, there are only three basic forms of business ownership that you can choose from for a business structure: the sole proprietorship, the partnership, and the corporation. There are a few options within those, such as a cooperative corporation or the limited partnership, but they all fall under these three umbrellas. Deciding which structure is right for your business will depend on several factors, from your comfort level with liability to the tax deductions you want for your business.
5. Find Small Business Financing
While some owners can finance their new small businesses out of their own pockets, many others need an infusion of funds from other sources to get off the ground. There are many options to consider, from debt financing to sharing equity to government grants. Understand the differences between each kind of financing, and be sure you're prepared to deal with the obligations of whichever ones you choose.
6. Get a Business License
While not necessary for all businesses, many new businesses will need to get business licenses before they can operate legally within their municipalities. If your city or town doesn't have a website, you can find contact information for government agencies online.
Depending on what kind of business you're starting, you may also need other licenses and permits. Industry Canada's BizPaL is a useful tool for finding out what permits and licenses you'll need to do business. Available in most provinces and territories, BizPaL will provide a personalized list of the business documents you need for all levels of government.
7. Register for the GST/HST
In most cases, unless your new small business's gross income stays under $30,000 for four consecutive quarters, you will have to register for the goods and services tax (GST) and harmonized sales tax (HST). That threshold for the small supplier exemption doesn't apply to all businesses, either. Taxi and limousine services, for instance, always have to register for GST/HST.
Even if you're not making much money to start, you may want to register for GST/HST immediately because of Input Tax Credits, which are basically your way of getting back the GST/HST your business has paid out on purchases for business use.
8. Register for Provincial Sales Tax (If Needed)
Some provinces have not harmonized their sales taxes with the federal GST, and in those provinces, you will also have to register to collect and remit the appropriate provincial tax. If you are starting a business in Alberta, British Columbia, Manitoba, or Saskatchewan, you will need to register as a collector of provincial sales tax (PST). In Quebec, you will need to register for Quebec Sales Tax (QST).
9. Prepare to Have Employees
When you're starting a business, hiring employees may be the furthest thing from your mind. But it's amazing how quickly that time can come. Prepare ahead for everything you'll need to set up to ensure you're legally covered to hire employees in Canada. This includes handling payroll deductions, worker's compensation insurance, and employment insurance.
10. Buy Additional Business Insurance
Beyond the legally required employment insurance, your business may need additional protection. There are a variety of policies covering property, general liability, business interruption, key people, and disability. Be sure you discuss these options with an insurance agent and lawyer to determine which ones suit your business.
11. Set Your Records Straight Early
If you keep good records from the first moment you open your business, things such as accounting and paying taxes become much easier. Start by opening a separate business bank account and keeping and organizing your business receipts. Using a basic accounting software will help you stay organized early and scale your business as it grows.
12. Market Your Business
After all the work you've put into organizing and launching your businss, don't forget one of the most important steps: promoting your business. You should have already planned your marketing strategy when you made your business plan, but now is the time to put it into action. Start translating those plans into goals and specific marketing initiatives so you can get your business off to a great start.