Start a Small Business in Canada

At a Glance

Starting a small business in Canada involves choosing your business structure, registering with provincial/federal authorities, obtaining a Business Number from the CRA, and understanding your tax obligations. Most entrepreneurs can complete the registration process in 1-3 days online for $50-$500 depending on your province and structure. The most common structures are sole proprietorship (simplest, no liability protection), partnership (2+ owners sharing profits/losses), and corporation (separate legal entity, liability protection, tax benefits). GST/HST registration is mandatory once you exceed $30,000 in revenue over four consecutive quarters.

Quick Stats:

Time to incorporate: 1-3 business days online
Cost: $200 federal incorporation online; provincial incorporation ≈ $275-$400
GST/HST threshold: $30,000 revenue in 4 quarters
Small business tax rate: 9% federal on first $500,000 profit
Provincial registration: Required in all provinces within 60 days of starting

Step 1: Choose Your Business Structure

Your business structure affects your taxes, liability, and paperwork. Choose carefully.

Sole Proprietorship

What it is: You are the business. No separation between you and the business.

Pros:

Simplest to set up ($50-$100 in most provinces)
Minimal paperwork
All profits go directly to you
File taxes on personal return (no separate corporate tax return)

Cons:

Unlimited personal liability - You're personally responsible for all business debts
Hard to raise investment (no shares to sell)
Business ends if you die or become incapacitated
All income taxed at your personal rate (can be high if profitable)

Best for: Freelancers, consultants, side hustles, low-risk businesses

Tax implications:

Report business income on T1 personal return (T2125 form)
Pay personal income tax rates (up to 53.53% in highest bracket depending on province)
Pay both employee and employer CPP contributions (11.9% total on net income)

Example: Freelance graphic designer, Etsy seller, dog walker

Partnership

What it is: 2+ people own and run the business together, sharing profits and losses.

Pros:

Easy to set up (partnership agreement + registration)
Share startup costs and workload
Combined expertise and skills
Still relatively simple taxes

Cons:

Unlimited personal liability (general partnership)
Each partner liable for other partners' business decisions
Disagreements can destroy the business
Must file partnership information return (T5013)

Best for: Professional services (lawyers, accountants), small retail shops with co-owners

Types:

General Partnership: All partners equally liable
Limited Partnership: Some partners have limited liability (less common)

Tax implications:

Partnership files T5013 info return (no tax owing)
Each partner reports their share on personal T1
Partners pay personal tax rates on their share of profits

Critical: Get a written partnership agreement drafted by a lawyer ($500-$2,000). It should cover:

Ownership percentages
Profit/loss sharing
Decision-making process
Exit strategy

Example: Two friends opening a coffee shop, law firm with multiple partners

Corporation

What it is: A separate legal entity. The corporation is separate from you personally.

Pros:

Limited liability - Your personal assets protected (usually)
Lower tax rate on first $500,000 profit (9% federal + provincial)
Easier to raise investment (sell shares)
Business continues if you leave
Income splitting opportunities (pay family members dividends)
Lifetime capital gains exemption ($1.25 million+ tax-free on sale — indexed, ≈$1.27 million for 2026)

Cons:

More expensive to set up ($300-$1,000+)
More paperwork (annual filings, corporate tax returns, minute book)
Separate corporate tax return (T2) - $800-$2,000/year for accountant
More complex accounting
Can't deduct losses against personal income

Best for: Businesses with growth potential, liability concerns, employees, or plans to raise investment

Tax implications:

Corporation pays corporate tax (9% federal + 2-4% provincial on first $500,000 = ~11-13% total)
You pay yourself salary (deductible to corp, taxable to you) or dividends (tax-efficient but no RRSP room)
Must file T2 corporate tax return by 6 months after year-end

Example: Tech startup, retail store, construction company, medical practice

Comparison Table

Feature	Sole Proprietorship	Partnership	Corporation
Setup cost	$50-$100	$100-$300	$300-$1,000+
Liability	Unlimited	Unlimited	Limited
Tax rate	Personal (up to 53%)	Personal (up to 53%)	~11-13% small business
Paperwork	Minimal	Moderate	High
Raise investment	Difficult	Difficult	Easy (sell shares)
Best for	Freelancers, side hustles	Small partnerships	Growth businesses

Step 2: Choose and Register Your Business Name

Option A: Operating Under Your Own Name

Example: "Jane Smith Consulting"

Pros:

Free (no registration needed in some provinces)
Instant setup

Cons:

Not exclusive (others can use similar names)
Less professional
Hard to sell business later

When to use: Side hustle, freelancing, testing an idea

Option B: Register a Business Name (DBA)

DBA = "Doing Business As" (also called "trade name" or "operating name")

Example: "Northern Lights Design Studio"

Registration:

Cost: $60-$150 depending on province
Validity: 5 years (Ontario), 10 years (BC), varies by province
Where: Provincial business registry

Steps:

Search name availability (NUANS report in some provinces, $20-$50)
Register online through provincial registry
Receive registration certificate (usually same day)

Important: Registration does NOT give you exclusive rights Canada-wide. Only trademarks do that.

Option C: Incorporate with a Corporate Name

Example: "Maple Tech Solutions Inc."

Requirements:

Must be unique (NUANS search required, $20-$50)
Must include "Inc.", "Ltd.", "Corp.", or French equivalent
Can't be confusing with existing businesses
Must follow naming rules (no profanity, not misleading)

Protection: Exclusive rights in your jurisdiction (provincial or federal)

Name Search Tips

Before you register, check:

Provincial business registry (free)
Federal corporation database (free at ic.gc.ca)
Trademark database (CIPO, free)
Domain availability (godaddy.ca, namecheap.com)
Social media handles (Instagram, Twitter, Facebook)

Red flags:

Name already trademarked
Very similar to existing business in your industry
Domain not available (.ca or .com)

Step 3: Register Your Business

Sole Proprietorship or Partnership

Provincial registration required in all provinces.

How to register:

Ontario:

Where: ontario.ca/businessregistry
Cost: $60 online, $80 in person
Time: Instant online
Renewal: Every 5 years

BC:

Where: corporateonline.gov.bc.ca
Cost: $115 online
Time: Instant online
Renewal: Never (no renewal required)

Quebec:

Where: registreentreprises.gouv.qc.ca
Cost: $103 online
Time: Instant online
Renewal: Annual

Alberta:

Where: alberta.ca/business-registration
Cost: $67 online
Time: Instant online
Renewal: Every 5 years

What you get:

Business registration number
Certificate (proof of registration)
Legal permission to operate under that name

What you need:

Your SIN
Business name
Business address
Nature of business
Start date

Corporation

Two options: Provincial or Federal

Provincial incorporation:

When to use: Operating in one province only
Cost: ≈$275-$400 depending on province
Protection: Name protected in that province only
Where: Provincial corporate registry

Federal incorporation:

When to use: Operating in multiple provinces, want Canada-wide name protection
Cost: $200 online ($250 by mail)
Protection: Name protected across Canada
Where: Innovation, Science and Economic Development Canada (Corporations Canada)
Extra step: Must also register extra-provincially in provinces where you operate ($200-$400 per province)

What you need to incorporate:

Corporate name (with NUANS report) or numbered company
Articles of Incorporation
Registered office address (can't be PO box)
First directors (minimum 1 for federal and for Ontario private corporations)
Share structure
Filing fee ($200 federal online; ≈$275-$400 provincial)

DIY vs. lawyer:

DIY online: $200-$300 (Corporations Canada, provincial registries)
Online service (Ownr, LegalZoom): $300-$500 (includes minute book, articles)
Lawyer: $800-$2,000+ (includes custom articles, shareholder agreement, minute book)

Recommendation: Use online service for simple corps (one owner, standard shares). Use lawyer if multiple shareholders, complex share structure, or IP licensing.

After incorporation:

Hold organizational meeting (document in minute book)
Issue shares to shareholders
Get Business Number from CRA (see Step 4)
Open corporate bank account
File initial return within 60 days (Ontario)

Step 4: Get Your Business Number (BN) from CRA

Your Business Number (BN) is your single identifier for all CRA accounts.

What is a BN?

Format: 123456789 RC0001 (9 digits + 6-character program account)

Accounts you can register for:

RC - Corporate income tax
RT - GST/HST
RP - Payroll deductions
RZ - Import/export

Who needs a BN?

You must register for a BN if:

You incorporate (mandatory for all corporations)
You're a sole prop/partnership and hit $30,000 revenue in 4 consecutive quarters (GST/HST)
You hire employees (payroll account)

How to register

Option A: Online (fastest - same day)

Go to canada.ca and search "Business Registration Online"
Sign in with CRA My Business Account (or create one)
Complete BRO registration (15-20 minutes)
Select which accounts you need (GST/HST, payroll, corporate tax)
Get BN immediately

Option B: By mail (2-3 weeks)

Complete Form RC1 (Request for a Business Number)
Mail to your tax centre
Wait 2-3 weeks for BN letter

What you'll need:

Business name and address
Legal structure
Main business activity (NAICS code)
Fiscal year-end
Expected annual revenue
SIN (sole props) or incorporation docs (corps)

Pro tip: Register for GST/HST even if you're under $30,000 if you have business expenses. You can claim input tax credits (ITCs) to get back GST/HST you pay on supplies.

Step 5: Understand Your Tax Obligations

Income Tax

Sole proprietors/Partnerships:

Report business income on personal T1 (form T2125)
Pay tax at personal rates (federal 15-33% + provincial)
File by April 30 (June 15 if self-employed, but payment due April 30)
Must pay quarterly installments if you owe $3,000+ in taxes

Corporations:

File separate T2 corporate tax return
Due 6 months after fiscal year-end (e.g., June 30 if Dec 31 year-end)
Pay tax within 3 months of year-end
Small business tax rate: ~11-13% on first $500,000 profit
General rate: 15% federal on profit over $500,000 (≈26.5% combined with Ontario's provincial rate)

GST/HST (Sales Tax)

When you must register:

Your revenue exceeds $30,000 in any 4 consecutive quarters
You're a taxi/ride-share driver (mandatory from $1)
You want to claim input tax credits

When you don't need to register:

Revenue under $30,000 in last 4 quarters
You only sell GST-exempt goods/services (see below)

Rates by province:

HST (Harmonized): 15% (NB, NL, PEI), 14% (NS, since April 1, 2025), 13% (ON)
GST only: 5% (AB, SK, MB, QC**, BC*, NT, NU, YT)

*BC has GST (5%) + separate provincial PST (7%) — no HST **QC has GST + separate provincial QST (9.975%)

How it works:

Charge GST/HST on your sales
Pay GST/HST on your business purchases
File return (monthly, quarterly, or annually depending on revenue)
Remit the difference (or claim refund if you paid more than you collected)

Example:

You charged customers $5,000 + $650 GST (13% HST) = $5,650
You paid suppliers $2,000 + $260 GST = $2,260
You remit $650 - $260 = $390 to CRA

Filing frequency:

Annual revenue under $1.5M: Annual or quarterly filing
Annual revenue over $1.5M: Monthly or quarterly filing

GST-exempt goods/services (no GST/HST charged):

Basic groceries
Prescription drugs
Medical/dental services
Residential rent
Most educational services
Daycare
Music lessons

Zero-rated goods (0% GST but you can claim ITCs):

Exports
Basic groceries

Payroll Deductions (If You Have Employees)

You must deduct from employees' paycheques:

CPP: 5.95% (2026) up to max $4,230.45/year (on earnings up to the YMPE of $74,600), plus CPP2: 4% on earnings between $74,600 and $85,000 (max ≈$416)
EI: 1.63% (2026) up to max $1,123.07/year
Income tax: Based on TD1 form employee completes

You must pay as employer:

CPP: 5.95% (matching employee contribution, plus matching CPP2)
EI: 1.63% × 1.4 = 2.282% (140% of employee contribution)

Remitting:

Small employers: Quarterly remitting available if your average monthly withholding is under $3,000 and you have a clean compliance record
Medium employers: Monthly
Large employers (over $25,000/month average): Accelerated

Pro tip: Use payroll software (Wave, QuickBooks, Wagepoint) to calculate deductions automatically. Manual calculation is error-prone.

Provincial Taxes

Quebec: Separate provincial tax system. You must register with Revenu Québec and file separate returns.

Other provinces: Harmonized with federal (one registration, one remittance)

Provincial sales taxes:

BC: PST 7% (separate from GST)
SK: PST 6%
MB: PST 7%
QC: QST 9.975%

Alberta has NO provincial sales tax.

Step 6: Business Bank Account and Accounting

Business Bank Account

Why you need one:

Separates personal and business finances
Makes taxes easier
Looks professional
Required for corporations
Protects limited liability (corps)

Documents you'll need:

Business registration certificate
Business Number (BN)
Articles of Incorporation (corps)
Government-issued ID
Proof of address

Best Canadian business banks:

RBC, TD, BMO, Scotiabank: Full-service, branches everywhere, higher fees ($10-$30/month)
CIBC: Good for startups, free banking for first 12 months
Credit unions: Lower fees, local support
Online banks (EQ Bank, Simplii): Free/low fees, no branches

What to look for:

Monthly fee ($0-$30)
Transaction limits
Free e-transfers
Integration with accounting software
Credit card processing
Business credit card

Pro tip: Most banks waive fees for first 6-12 months for new businesses. Shop around.

Bookkeeping and Accounting

What you must track:

All income (sales, invoices paid)
All expenses (receipts, bills paid)
GST/HST collected and paid
Payroll (if employees)
Mileage (if using personal vehicle)

Accounting software options:

Free:

Wave: Best free option, invoicing, expense tracking, receipt scanning (free for up to 9 customers)
Zoho Books: Free for businesses under $50K revenue

Paid ($10-$70/month):

QuickBooks Online: Industry standard, $10-$70/month, integrates with everything
Xero: $13-$70/month, great for larger businesses
FreshBooks: $19-$55/month, best for service-based businesses (invoicing focus)

What they do:

Track income and expenses automatically (link bank account)
Generate invoices
Track GST/HST
Generate financial reports (P&L, balance sheet)
Prepare tax returns (with accountant export)

Recommendation: Start with Wave (free), upgrade to QuickBooks if you need payroll or inventory tracking.

Receipts and Records

Keep for 6 years:

All receipts and invoices
Bank statements
GST/HST returns
Payroll records
Corporate records (minute book, resolutions)

Digital is fine: Scan or take photos of paper receipts. CRA accepts digital records.

Apps for receipts:

Dext (formerly Receipt Bank): $10-$50/month, auto-extracts data
Hubdoc: Free with QuickBooks, auto-fetches bills
Wave: Built-in receipt scanning

Step 7: Licenses, Permits, and Insurance

Business Licenses

Municipal business license:

Required in most cities ($50-$500/year)
Apply through city/town clerk
Renewal: Annual

Industry-specific licenses:

Food service: Health permit from local health unit
Home-based business: Zoning approval (check bylaws)
Alcohol sales: Liquor license (AGCO in ON, BCLDB in BC)
Trades: Trade certification (electrician, plumber, HVAC)
Professional services: Professional designation (CPA, lawyer, engineer)

Check requirements: BizPaL tool (bizpal.ca) lists all federal, provincial, and municipal requirements for your business type and location.

Insurance

General Liability Insurance:

Covers injury to customers, property damage
Cost: $500-$2,000/year
Required for: Retail, food service, home services, events

Professional Liability (E&O):

Covers errors, negligence, missed deadlines
Cost: $500-$3,000/year
Required for: Consultants, contractors, professionals

Commercial Property Insurance:

Covers business property, equipment, inventory
Cost: $500-$2,000/year
Required for: Physical locations, expensive equipment

Workers' Compensation (WSIB/WorkSafeBC):

Covers employee injuries
Mandatory if you have employees in most provinces
Cost: % of payroll (varies by industry risk)

Home-based business riders:

If working from home, your home insurance likely doesn't cover business equipment or liability
Add a rider ($100-$300/year) or get separate policy

Step 8: Government Grants and Funding

Canada offers $15+ billion in small business funding annually. Most entrepreneurs don't know these exist.

Federal Grants and Loans

1. Canada Small Business Financing Program (CSBFP)

Loan amount: Up to $1,000,000
Use: Equipment, leasehold improvements, real estate
Rate: Prime + 3%
Who: Any small business
Where: Apply through your bank (government backs 85% of loan)

2. BDC (Business Development Bank of Canada)

Loan amount: $50,000 - $5,000,000
Use: Startup costs, expansion, equipment
Rate: Competitive (4-8%)
Bonus: Free business advisory services
Who: All stages of business

3. Futurpreneur Canada

Loan amount: Up to $75,000 (Futurpreneur portion up to $20,000 + BDC up to $55,000)
Who: Ages 18-39, new businesses (under 48 months)
Rate: Prime + 2-3%
Bonus: 2 years of free mentorship

4. CanExport (Export Development)

Grant amount: $10,000-$50,000 per project (up to 50% of costs); competitive intake
Use: Export development (market research, trade shows, marketing)
Who: Businesses looking to export

5. Industrial Research Assistance Program (IRAP)

Grant amount: $20,000 - $10,000,000+
Use: R&D, innovation, new technology
Who: Tech and manufacturing companies
Type: Non-repayable grant

Provincial Grants

Ontario:

Check ontario.ca and your local Small Business Enterprise Centre (SBEC) for current grant and loan programs

BC:

Small Business Venture Capital Act Tax Credit: 30% tax credit for investors
BC Tech Co-op Grants: $20,000 per co-op student

Quebec:

Refundable Tax Credit for Québec Expertise: 30% tax credit for hiring specialists
Fonds de solidarité FTQ: Venture capital funding

Alberta:

Alberta Innovates: Grants for tech and innovation
Community Futures: Loans up to $150,000 for rural businesses

How to find more: Check canada.ca/business-grants and your provincial small business ministry.

Common Business Scenarios

Scenario 1: Freelance Graphic Designer (Sole Prop)

Your situation:

Working from home
Revenue $35,000/year
No employees

Steps:

Register business name (optional if using your own name)
Get Business Number and register for GST/HST (over $30K)
Open business bank account
Use Wave accounting software (free)
File quarterly GST/HST returns
Report income on personal T1 (form T2125)
Pay quarterly tax installments (if you owe $3,000+)
Get professional liability insurance ($500-$1,000/year)

Annual costs: ~$1,500 (insurance + accounting software)

Scenario 2: Two Friends Opening a Coffee Shop (Partnership)

Your situation:

Renting commercial space
2 equal partners
Revenue target $250,000/year
Hiring 2 employees

Steps:

Get partnership agreement drafted by lawyer ($1,500)
Register business name
Get Business Number (GST/HST + payroll accounts)
Open business bank account
Get business license from municipality
Get health permit from local health unit
Register for WSIB (workers' comp)
Get general liability + property insurance ($2,000-$4,000/year)
Use QuickBooks for accounting ($30-$50/month)
Hire accountant for year-end ($2,000-$3,000/year)
File GST/HST quarterly
File partnership T5013 + personal T1s

Startup costs: ~$50,000-$100,000 (equipment, inventory, rent deposit, legal)

Scenario 3: Tech Startup (Corporation)

Your situation:

Building software product
Planning to raise investment
2 co-founders
Revenue year 1: $0, year 2: $80,000

Steps:

Incorporate federally ($200-$500 using Ownr or lawyer $1,500-$2,000)
Get Business Number (corporate tax + GST/HST once revenue hits $30K)
Open corporate bank account
Issue shares to founders (document in minute book)
Use QuickBooks or Xero ($30-$70/month)
Apply for SR&ED tax credits (recover R&D costs)
File T2 corporate tax return (hire accountant $1,500-$3,000/year)
Consider incorporation loan or angel investment

Tax benefits:

Small business rate: 11-13% on first $500,000 profit
SR&ED credits: Recover 35-65% of R&D expenses
Lifetime capital gains exemption: $1.25 million+ tax-free on sale (indexed; ≈$1.27 million for 2026)

Startup costs: $5,000-$15,000 (legal, accounting, software)

Provincial Business Differences

Ontario

Incorporation:

Minimum 1 director for private corporations
Annual return required within 60 days of incorporation anniversary
Cost: $300 online

Provincial sales tax: 13% HST (harmonized)

Business support: Small Business Enterprise Centres (SBECs) offer free advice

British Columbia

Incorporation:

1 director required
Annual report required
Cost: $350 online

Provincial sales tax: 5% GST + 7% PST (separate)

Unique: Must register for PST separately from GST

Quebec

Language laws:

Business names must have French version
Signage must be predominantly French
Employee communications must be available in French (if 50+ employees)

Separate provincial systems:

Revenu Québec (separate from CRA)
Must file provincial and federal tax returns

Provincial sales tax: 5% GST + 9.975% QST

Cost to incorporate: $397 online (2026 tariff)

Alberta

Lowest tax province:

No provincial sales tax
Progressive provincial income tax from 8% (on roughly the first $61,200 in 2026) up to 15%

Cost to incorporate: $275 online

Business support: Community Futures in rural areas, Alberta Business Link

Tools, Calculators, and Templates

Essential Tools

Accounting software:

Wave (free)
QuickBooks Online ($10-$70/month)
Xero ($13-$70/month)
FreshBooks ($19-$55/month)

Invoicing:

Wave (free)
FreshBooks (best for service businesses)
QuickBooks (best for product businesses)

Receipt tracking:

Dext ($10-$50/month)
Hubdoc (free with QuickBooks)
Wave (built-in)

Payroll:

Wagepoint ($20+/month)
QuickBooks Payroll ($40-$100/month)
Rise ($25+/month)

Project management:

Trello (free)
Asana (free for small teams)
Monday.com ($8-$16/user/month)

Government Calculators

CRA Payroll Deductions Calculator

Calculate CPP, EI, income tax for employees
canada.ca/payroll-calculator

GST/HST Calculator

Calculate GST/HST to charge and remit
Built into most accounting software

Corporate tax calculator

TaxTips.ca has excellent calculators

Business Templates

BDC offers free templates:

Business plan template
Cash flow forecast
Startup costs calculator
Financial projections

Download at: bdc.ca/templates

Frequently Asked Questions

Do I need to register my business if I'm just testing an idea?

Technically, yes. If you're earning income, you should register. However, many people test ideas for a few months before registering.

Safe approach:

If revenue under $1,000 and you're testing, you can likely wait
Once you hit $5,000 revenue, definitely register
If you're advertising publicly or have clients, register

Why register early:

Legal protection of business name
Can open business bank account
Looks professional to clients
Can deduct startup expenses

Should I incorporate right away or start as a sole proprietor?

Start as sole proprietor if:

Side hustle or testing idea
Low revenue (under $50,000)
No employees
Low liability risk
Want to keep costs low

Incorporate right away if:

Liability concerns (contracting, physical products, services with injury risk)
Planning to raise investment
Multiple founders
Revenue expected over $100,000
Want small business tax rate (11-13%)

You can always incorporate later - Most businesses start as sole props and incorporate when revenue hits $60,000-$100,000.

How much should I set aside for taxes?

Rule of thumb:

Sole proprietor: Save 30-35% of net profit
Corporation: Save 15-20% of net profit (lower rate, but you pay personal tax when you take money out)

Why 30-35%?

Income tax: 20-35% depending on bracket
CPP contributions: 11.9% (both employee + employer portions)
Minus: Business expense deductions reduce taxable income

Pro tip: Transfer 30% of every payment you receive to a separate "tax savings" account. Don't touch it until tax time.

When do I need to register for GST/HST?

You must register when:

Your revenue exceeds $30,000 in any 4 consecutive quarters
You're a taxi/ride-share driver (mandatory from dollar one)

Example:

Q1: $5,000
Q2: $8,000
Q3: $10,000
Q4: $9,000
Total: $32,000 → Must register

You can voluntarily register before $30,000 if you want to claim input tax credits (recover GST/HST on expenses).

What expenses can I deduct?

Deductible business expenses:

Office rent or home office % (if you work from home)
Supplies and materials
Software and subscriptions
Professional fees (lawyer, accountant)
Advertising and marketing
Vehicle expenses (if used for business)
Business meals and entertainment (50% deductible)
Travel
Insurance
Bank fees
Phone and internet (business portion)

What you can't deduct:

Personal expenses
Meals with no business purpose
Clothing (unless uniform/safety gear)
Club memberships (unless clear business purpose)
Commuting to regular workplace

Home office deduction:

Calculate % of home used exclusively for business
Claim that % of rent, utilities, insurance, property tax, internet

Example:

Home: 1,500 sq ft
Office: 150 sq ft
Office %: 10%
Annual home costs: $24,000
Deduction: $2,400

Can I use my personal vehicle for business?

Yes, two methods:

1. Actual expenses:

Track all vehicle costs (gas, insurance, repairs, depreciation)
Claim business % based on km driven

2. Per-km rate (simpler):

CRA allows $0.73/km for first 5,000 km, $0.67/km after (2026 rates)
Keep mileage log

Example (per-km method):

Total km driven: 20,000
Business km: 8,000
Claim: 5,000 km × $0.73 + 3,000 km × $0.67 = $3,650 + $2,010 = $5,660

What you need:

Mileage log (date, destination, purpose, km)
Start/end odometer readings for year

Apps: MileIQ ($6/month), Everlance ($8/month), QuickBooks (built-in)

Do I need a business credit card?

Not required, but highly recommended.

Benefits:

Separates business and personal expenses
Makes taxes easier (clear paper trail)
Builds business credit score
Rewards on business spending
Some offer free employee cards

Best Canadian business credit cards:

RBC Business Cash Back Mastercard: 2% cash back on everything (first $3,500/month), no annual fee
Scotiabank Business Momentum Visa: 3% cash back on categories, $149 annual fee
TD Business Travel Visa: 1.5% back, converts to TD points, $149 annual fee
American Express Business Gold: 2X points, $250 annual fee

Start with: RBC or TD no-fee card, upgrade when revenue hits $50,000+.

How do I pay myself as a corporation?

Two options:

1. Salary:

Deductible to corporation (reduces corporate tax)
Builds RRSP room (18% of salary)
Builds CPP credits (retirement benefits)
Taxed at personal rates
Must remit payroll deductions

2. Dividends:

Not deductible to corporation
Doesn't build RRSP room
Tax-efficient (dividend tax credit)
No payroll deductions (simpler)

Which is better? It depends on your situation. Most accountants recommend a mix: salary for RRSP room + CPP, dividends for tax efficiency.

Consult an accountant - This is complex and a good accountant will save you thousands.

Can I hire family members?

Yes, but CRA watches this closely.

Rules:

Must pay reasonable wages for work actually performed
Must have job description and track hours
Must remit CPP, EI, income tax like any employee
Can't just put spouse on payroll to split income if they don't work

Benefits:

Income splitting (reduce family tax burden)
Build CPP for spouse
Deduct salary from business income

Red flag: Paying spouse $50,000 when they only work 5 hours/week. CRA will disallow this.

What if I lose money in year one?

Sole proprietor:

Claim the loss on your personal T1
Loss reduces other income (e.g., employment income)
May get tax refund

Corporation:

Loss stays in corporation
Can carry loss back 3 years or forward 20 years
Use loss to offset future corporate profits

Do I need a lawyer or accountant?

Lawyer ($1,500-$3,000):

Need for: Incorporation (if complex), partnership agreement, contracts, IP protection
Don't need for: Simple sole prop, basic incorporation (use online service)

Accountant ($1,500-$5,000/year):

Need for: Corporation (T2 filing), complex taxes, payroll, growing business
Don't need for: Simple sole prop under $50,000 (use software)

Start simple, scale up:

Year 1: DIY with software (Wave, TurboTax)
Year 2-3: Bookkeeper for monthly reconciliation ($200-$500/month)
Year 4+: Full accountant for tax planning and filings

Can I start a business while employed full-time?

Yes, but check your employment contract:

Non-compete clause: Can't compete directly with employer
Ownership of work: Work created on company time/equipment may belong to employer
Conflict of interest: Can't solicit employer's clients

Best practice: Be transparent with employer if there's any overlap. Most employers are fine with side businesses if they're unrelated to your day job.

When to Get Professional Help

Consider hiring professionals if:

Lawyer: Multiple founders (shareholder agreement), complex IP (patent, licensing), commercial lease, contracts over $50,000
Accountant: Incorporating, revenue over $100,000, employees, complex taxes (rental income, capital gains), CRA audit
Bookkeeper: You hate numbers, revenue over $200,000/year, multiple income streams, inventory tracking
Business consultant: Need help with business plan, marketing strategy, operational efficiency, growth planning
Insurance broker: Complex insurance needs (multiple locations, high-risk industry, employees, professional liability)

Cost:

Lawyer: $200-$500/hour
Accountant: $150-$300/hour or fixed annual fee ($2,000-$5,000)
Bookkeeper: $40-$80/hour or monthly retainer ($200-$800)
Business consultant: $100-$300/hour

ROI: A good accountant saves you 3-5× their fee in taxes and avoided mistakes.

Your Business Launch Checklist

Before you launch:

First 90 days:

File Your Personal Taxes in Canada - Understanding tax filing when self-employed
Buy Home Canada - Mortgage qualification when self-employed
Car Insurance Canada - Commercial auto insurance for business vehicles
Student Loans Canada - Repayment options while building a business

Corrections Policy

Refdesk.ca is committed to accuracy. Business information on this page is verified against official Government of Canada sources including the Canada Business Network, CRA, ISED, and BDC. Content is updated quarterly to reflect regulatory changes. If you find an error, outdated information, or broken links, please report it to [email protected] with the subject line "Start Business Topic - Correction Request." We review all submissions within 48 hours and update content as needed, posting a dated correction notice for significant errors. This guide was last reviewed on July 9, 2026.

At a Glance

Step 1: Choose Your Business Structure

Sole Proprietorship

Partnership

Corporation

Comparison Table

Step 2: Choose and Register Your Business Name

Option A: Operating Under Your Own Name

Option B: Register a Business Name (DBA)

Option C: Incorporate with a Corporate Name

Name Search Tips

Step 3: Register Your Business

Sole Proprietorship or Partnership

Corporation

Step 4: Get Your Business Number (BN) from CRA

What is a BN?

Who needs a BN?

How to register

Step 5: Understand Your Tax Obligations

Income Tax

GST/HST (Sales Tax)

Payroll Deductions (If You Have Employees)

Provincial Taxes

Step 6: Business Bank Account and Accounting

Business Bank Account

Bookkeeping and Accounting

Receipts and Records

Step 7: Licenses, Permits, and Insurance

Business Licenses

Insurance

Step 8: Government Grants and Funding

Federal Grants and Loans

Provincial Grants

Common Business Scenarios

Scenario 1: Freelance Graphic Designer (Sole Prop)

Scenario 2: Two Friends Opening a Coffee Shop (Partnership)

Scenario 3: Tech Startup (Corporation)

Provincial Business Differences

Ontario

British Columbia

Quebec

Alberta

Tools, Calculators, and Templates

Essential Tools

Government Calculators

Business Templates

Frequently Asked Questions

Do I need to register my business if I'm just testing an idea?

Should I incorporate right away or start as a sole proprietor?

How much should I set aside for taxes?

When do I need to register for GST/HST?

What expenses can I deduct?

Can I use my personal vehicle for business?

Do I need a business credit card?

How do I pay myself as a corporation?

Can I hire family members?

What if I lose money in year one?

Do I need a lawyer or accountant?

Can I start a business while employed full-time?

When to Get Professional Help

Your Business Launch Checklist

Related Topics

Corrections Policy

Official Resources

Get the Daily Canadian Briefing