In this blog post, I’m going to walk you through how to register your business in Canada.
To give you some context about where I’m coming from, I started my business almost a decade ago. It started as a hobby, then evolved into a side hustle I did on nights and weekends on top of my full-time job, and then in 2017 I decided to quit my day job to run my business full-time. At that point, I ran my business as a sole proprietorship, but in 2021 it made more financial sense to incorporate my into what’s now MoorMoney Media Inc. To learn more about switching from a sole proprietorship to a corporation, check out this video all about what you should consider before making this big decision.
But before you decide whether you should stay a sole proprietor or incorporate, it’s important to understand the different business structures you can choose from in Canada.
In Canada, you can be a sole proprietor, partnership, or corporation.
Let’s start with the simplest business structure: sole proprietor.
So you may not know this but you can start a sole proprietorship business right now without doing anything if you choose to run it under your personal legal name. In other words, if your legal name is Jane Smith, you can start your own graphic design business under your name right now. You don’t have to register anything, you’re good to go find clients and get paid. This was what I did when I first started my business. I just used my legal name, which is actually Jessica Bowman.
But, my brand name is Jessica Moorhouse (also my maiden name) and eventually I wanted to be able to invoice clients with the name Jessica Moorhouse so everything matched. This meant I had to register my business under the trade name Jessica Moorhouse. Another example could be if your name is Jane Smith but you want your business name to be Smith Graphic Designs, you’d have to register that business name with your province’s business registry first.
But before registering your business name, you need to make sure there’s no other business using that name already. To find out if the name you chose is free to use, visit this page on the government’s website about choosing a business name.
Once you’ve secured a trade name for your business, then you need to register it with your province. You can do this a few difference ways.
First, you can register directly through your province’s registry portal or can go to a physical registration office. On this page of the government’s website, it directs you to each province’s website for how to do this. In general, the cost of doing it this way can range from $60-$80, but it depends on each province.
Another way to do it is through a platform called Ownr. Not only is the process a lot smoother in my opinion but they also include up to 30 business name searches too. Looking at the pricing, it looks to be comparable to doing it directly through the provinces’ portals.
But what if you want to run your business with a partner? Then it may make more sense to register as a partnership. A partnership is almost identical to a sole proprietorship. I also have experience with this as I ran a partnership with a friend a number of years ago. The first thing you need to decide is if it’s going to be a general partnership, in which all partners split everything equally. Or a limited partnership in which there is an uneven split between all partners. For our business, we did a general partnership so we split everything 50/50 and all we had to do was register it with the province of Ontario, where we were based, and then we were good to start making money. Which we didn’t. It failed miserably. But that’s a story for another time.
Although sole proprietorships and partnerships can be great and they are very simple to set up, the downside is they provide no real liability protection and all business income is taxed at your personal marginal tax rate, not including any business expenses you can use as tax deductions. For more info about tax write-offs for small businesses and how your business income gets taxed, make sure to watch this video about the top 10 tax write-offs for small businesses.
If a sole proprietorship or partnership doesn’t make sense for the type of business you want to run, a corporation may be a better fit for you. When you set up a corporation, your business becomes its own legal entity. So, if someone sues your business, they are suing the separate legal entity that is your corporation, not you personally. Moreover, business income is taxed at the federal and provincial corporate tax rate, not your marginal tax rate. You can also choose to keep the money your business earns inside your corporation or pay it out to yourself in the form of a salary, bonus, or dividends whenever you like. With that said, when you do pay it out to yourself, that money will be taxed at your personal marginal tax rate.
To register a corporation, as you may guess because it is a more complex business structure, it’s also a bit more complicated too. You of course can do it yourself through the government’s website, but honestly, I see so many people jump the gun, register themselves, and then realize after the fact they made a mistake or really should have sought out some advice from an accountant or lawyer.
In fact, that’s why I chose to hire a lawyer to help me incorporate my business because I wanted the peace of mind of knowing that everything was going to be set up properly. Not only, besides incorporating my business and doing a business name search for me, my lawyer also handled my S.85 rollover, which is rolling over my current business assets into the ownership of my corporation, such as any trademarks I owned. Altogether, it cost me about $2,600 to incorporate with a lawyer.
If you’re looking for a cheaper option, you can also do so through Ownr. It costs between $500-$700 depending on if you want to incorporate federally or provincially.
If you incorporate federally, that means you can conduct your business in all provinces and territories. If you incorporate provincially, you can only conduct your business in your own province. You can still serve clients outside of your province, but let’s say you incorporated your business in Ontario and have an office there and then want to set up a second office in British Columbia. You’d have to incorporate your business in BC too. For me, I just registered federally to make it simple and give me more flexibility in case I ever wanted to move outside of Ontario and conduct my business in a different province.
If you have any questions, let me know in the comments!