Starting and Running a Business in Canada

The first decision is which legal vehicle the business will operate through. Five structures cover almost everything in Canada:

• Sole proprietorship. One person, no separate legal entity. Cheapest to start. Income flows through to the owner's personal T1 and is taxed at marginal rates. Personal liability for every debt and every claim — no shield.
• Partnership (general or limited). Two or more owners. Income flows through to each partner's personal return. General partners are jointly and severally liable; limited partners risk only what they put in but cannot manage the business. Use a written partnership agreement — silence is expensive when partners disagree.
• Corporation. A separate legal person. Limits personal liability for owners, opens access to the small business deduction (which lowers federal corporate tax to roughly 9% on the first $500,000 of active business income), and allows income splitting and deferral within the rules. More paperwork: annual returns, directors register, financial statements, T2 corporate return.
• Cooperative. Member-owned, one-member-one-vote governance. Common in housing, agriculture, and consumer co-ops. Provincial co-op statutes plus the federal Canada Cooperatives Act for inter-provincial co-ops.
• Non-profit / not-for-profit. Incorporated under the federal NFP Corporations Act or a provincial equivalent. Has no shareholders and cannot distribute profit to members. Charity registration with CRA is a separate, additional step.

For most growth-oriented small businesses with employees, customers, or any meaningful liability exposure, a corporation is the default recommendation. The annual filing cost (a few hundred dollars in most jurisdictions) is small compared to the liability shield and the tax planning room it opens up.

A corporation can be created under the federal Canada Business Corporations Act (CBCA) or under any of the thirteen provincial / territorial corporate statutes (OBCA in Ontario, BCBCA in British Columbia, ABCA in Alberta, the QBCA in Quebec, and so on). The choice matters for three reasons:

• Name protection. Federal incorporation gives you corporate-name protection across all of Canada (subject to the NUANS report). Provincial incorporation only protects the name within that province — meaning someone in another province can register an identical name. If you plan to operate or be searched for nationally, federal is usually the right call.
• Where you operate. A federally-incorporated company that operates in any province must still register extra-provincially in that province. So "federal" does not mean "skip the provinces" — it adds a layer rather than replacing one. A provincially-incorporated company that operates in another province must extra-provincially register there too.
• Director residency. Six jurisdictions still require at least 25% of directors to be Canadian residents: Saskatchewan, Manitoba, Newfoundland and Labrador, Yukon, the Northwest Territories, and Nunavut. The federal CBCA repealed the rule in 2019; Ontario followed in 2021 (OBCA) and Alberta in 2022 (ABCA). British Columbia and Quebec have never required it. If you have an all-foreign board, this list narrows your options.

Cost-wise, federal incorporation is roughly $200 online; provincial fees range from about $150 to $450 depending on jurisdiction, plus NUANS or equivalent name search. Hidden costs come later from extra-provincial registrations and per-jurisdiction annual returns.

Every Canadian corporation has a continuous file at the registry it was incorporated under, plus one extra-provincial file in each additional province it operates in. Each registry expects regular filings to keep the corporation in good standing. The four main patterns are:

• Annual return. A short form filed once a year confirming directors, registered office, and (sometimes) ownership information. Federal CBCA annual returns are due within 60 days of the corporation's anniversary. Most provincial annual returns are tied to either the anniversary month or the fiscal year end. Filing fees range from $0 (Quebec, bundled into the REQ update) to about $50.
• Business name renewal. Sole proprietorships, partnerships, and trade names must renew their registered name on a 3- or 5-year schedule depending on the province. Forgetting this is the most common reason a name lapses and someone else grabs it.
• Director and officer changes. Most jurisdictions require notice within 15 days of any change to the board (CBCA, OBCA, BCBCA, ABCA, and most others); Quebec, New Brunswick, and Prince Edward Island use 30 days. Missing the window can result in penalties and sometimes makes transactions awkward (a counterparty pulling a corporate profile sees stale directors).
• Beneficial ownership filings. Federal and most provinces now require corporations to maintain a register of Individuals with Significant Control (ISC) — anyone with 25% or more of voting rights or fair-market value. Quebec's REQ requires this information to be filed publicly; the federal CBCA now publishes part of it too. Most other jurisdictions keep the register internal but require it to exist and be available on request.

A late filing usually does not dissolve the corporation immediately — but enough of them in a row will. Quebec, Ontario, and the federal government all administratively dissolve corporations that go multiple years without filing. Reviving a dissolved corporation costs more than just keeping up.

The Canada Revenue Agency assigns a nine-digit Business Number (BN) to every business that needs to deal with CRA — corporations always, sole proprietorships and partnerships when they have to register for GST/HST, payroll, or import / export accounts. The BN is the root; program accounts are appended as suffixes (RT for GST/HST, RP for payroll, RC for corporate income tax, RM for import / export, RZ for information returns).

GST/HST registration is required when worldwide taxable supplies exceed $30,000 in any four consecutive calendar quarters (the "small supplier" threshold). You can register voluntarily before you cross the threshold — useful when you have input-tax credits worth claiming. Once registered, you charge GST/HST on all taxable supplies and remit the difference between tax collected and input-tax credits.

The applicable rate depends on the customer's province, not yours. Five provinces (Ontario, New Brunswick, Nova Scotia, PEI, Newfoundland and Labrador) have harmonized — you charge 13% or 15% HST and CRA does the split with the province. Three provinces (British Columbia, Saskatchewan, Manitoba) charge 5% federal GST plus a separate provincial sales tax, registered separately with the province. Quebec collects 5% GST and 9.975% QST through Revenu Quebec. Alberta and the territories charge 5% GST only.

Payroll is the other big BN program. Once you pay your first employee you need an RP account, you have to remit source deductions (CPP, EI, income tax) on the same day you pay them, and you have to issue T4s by the end of February following the calendar year.

On top of federal and provincial obligations, almost every Canadian business with a physical presence — a storefront, an office, a home-based service — needs a municipal business licence. The exact rules vary by city and by activity, but the pattern is consistent: a base licence with an annual fee, plus add-on permits for any regulated activity (food, alcohol, signage, alarms, contractor trades).

Some examples of municipal licensing regimes:

• City of Toronto issues over a hundred categories of business licence through the Municipal Licensing and Standards division — separate categories for trades, body-rub centres, second-hand dealers, holistic centres, and more.
• City of Vancouver requires a base business licence per location plus separate permits for food premises, outdoor patios, and signage. Renewal is annual.
• Ville de Montreal licenses by occupation (occupation permit), with separate health permits for food establishments and a posting / signage permit for storefront advertising.
• City of Calgary licenses commercial activity by category, with the home occupation classes (Class 1 / Class 2) specifically for home-based businesses depending on whether customers visit.
• Smaller cities — Surrey, Burnaby, Mississauga, Brampton, Hamilton, Halifax, London, Quebec City, Edmonton, Winnipeg, and many others — each have their own municipal licensing portals with their own fee schedules.

A separate municipal layer that often gets missed: alarm permits. If your premises has a monitored security alarm and the city dispatches police on alarm calls, most municipalities require the premises to be registered. False-alarm fees can mount quickly.

Employment law in Canada is split: the federal Canada Labour Code covers federally-regulated industries (banking, telecom, inter-provincial transport, broadcasting, federal Crown corporations) — roughly 6% of the workforce. The other 94% of employees fall under their province's employment standards act. Rules differ by jurisdiction and the differences are real. Some examples relevant to a small employer:

• British Columbia — Bill 41 (Pay Transparency Act). Employers must include expected pay or pay range on every public job posting. Larger employers also publish annual pay-transparency reports.
• Ontario — AODA + Bill 168. The Accessibility for Ontarians with Disabilities Act requires accessibility policies, training, and customer-service standards. Bill 168 amended the Occupational Health and Safety Act to require workplace violence and harassment policies and risk assessments.
• Quebec — Bill 96. Employers with 50 or more employees over six months must register with the Office quebecois de la langue francaise, complete a francization analysis, and adopt a francization plan when called to.
• Alberta — OHS for 20+. The Occupational Health and Safety Act requires employers with 20+ workers at a worksite for 90+ days to establish a joint health and safety committee. Federal pay-transparency rules (separate from BC's) bind federally-regulated employers with 100+ employees.
• Most provinces. Statutorily-required written policies usually include workplace harassment / discrimination, occupational health and safety, and accommodation of disabilities. Five-or-more-employee thresholds typically trigger a written sexual-harassment policy.

Termination and severance are separate from these policy requirements — minimum notice periods are set by the ESA, and common-law reasonable notice (often much longer) applies on top unless properly contracted around. Termination clauses in employment agreements are notoriously easy to get wrong: in Ontario, Waksdale v. Swegon Hitachi (2020) made an entire termination clause unenforceable because the "for cause" subsection didn't comply with ESA minimums, even though the employer wasn't relying on it.

Every province and territory runs its own workers' compensation board — a no-fault insurance scheme that funds wage replacement and medical care for workplace injuries. Coverage is mandatory for most employers in most industries. Premiums are paid by the employer and calculated from the industry classification and assessable payroll. The boards are not interchangeable; if you operate in three provinces you register with three boards.

The thirteen authorities by jurisdiction:

• Ontario — Workplace Safety and Insurance Board (WSIB)
• Quebec — Commission des normes, de l'equite, de la sante et de la securite du travail (CNESST)
• British Columbia — WorkSafeBC
• Alberta — Workers' Compensation Board (WCB-Alberta)
• Saskatchewan — Workers' Compensation Board (WCB)
• Manitoba — Workers Compensation Board of Manitoba
• Nova Scotia — Workers' Compensation Board of Nova Scotia
• New Brunswick — WorkSafeNB
• Newfoundland and Labrador — WorkplaceNL
• Prince Edward Island — Workers Compensation Board of PEI
• Yukon — Yukon Workers' Compensation Health and Safety Board
• Northwest Territories & Nunavut — Workers' Safety and Compensation Commission (WSCC, a single board for both territories)

A few industries are exempt by default — most commonly very small employers in some provinces, and certain finance / insurance / real estate categories — but the rules are board-specific. Voluntary coverage is available for sole proprietors and corporate executive officers in most jurisdictions.

Workers' compensation handles employee injuries inside the mandatory provincial scheme. Everything else — claims by customers, property damage, professional negligence, data breaches — is private commercial insurance. The four coverages most small businesses need:

• Commercial General Liability (CGL). The base coverage for third-party bodily injury and property damage claims. Required by most landlords as a condition of leasing commercial space, by most clients as a condition of doing business, and by most municipalities as a condition of certain licences. Typical limits: $1M to $5M per occurrence.
• Commercial property. Covers your owned or leased premises, equipment, inventory, and tenant improvements against fire, theft, water damage, and similar perils. Required by virtually every commercial lease. Often bundled with business interruption coverage so a fire that closes you for three months doesn't close you permanently.
• Errors and omissions / professional liability. Covers claims that your professional advice or service caused financial loss to a client. Required by most professional regulators (lawyers, accountants, engineers, real-estate agents, consultants) and increasingly demanded by enterprise clients in standard vendor contracts.
• Cyber liability. Covers the costs of a data breach — forensics, legal, notification, credit monitoring, ransomware response. Premiums have stabilized after the 2020-22 spike but underwriters now ask detailed security questions (MFA, backups, patch cadence) before quoting. Increasingly a standard ask in B2B contracts.

Pricing is roughly proportional to revenue, headcount, and risk profile. A two-person consulting firm in Ontario might pay $400 a year for CGL plus $1,200 for E&O. A storefront retailer with a $200K inventory and one employee in BC might pay $2,500 to $4,500 for a packaged business owner's policy bundling CGL and property. Cyber adds anywhere from $500 to several thousand depending on records held and existing controls.

A business should run on its own bank account, full stop. Mixing personal and business funds — even in a sole proprietorship — collapses your liability shield, complicates your tax return, and makes audits painful. Open the business account before you take your first dollar of revenue.

The big six Canadian banks all offer business chequing accounts, typically with a $10 to $30 monthly fee plus per-transaction charges. A handful of newer entrants (Wealthsimple Business, Float, Loop) offer fee-free or fee-light alternatives, often with cards and FX features oriented to digital businesses. Credit unions are usually competitive on price and a good fit for businesses tied to a specific community.

Bookkeeping software is now table stakes. The major options used by Canadian small businesses:

• QuickBooks Online (Intuit). Largest market share in Canada. Strong accountant ecosystem.
• Xero. Cloud-native, good multi-currency support, popular with consultants and agencies.
• FreshBooks. Originally invoicing-first; time-tracking and recurring billing built in.
• Wave. Free for the basic accounting + invoicing; charges only for payments and payroll.
• Zoho Books. Strong if you already use the Zoho suite; competitive standalone pricing.
• Sage Business Cloud Accounting. Long-established Canadian presence, strong on compliance and inventory.

Payroll, once you have employees, is its own problem. CRA's payroll deduction calculator is free and surprisingly usable for one or two employees. Past that, dedicated payroll software (Wagepoint, Payworks, Ceridian Powerpay, ADP, plus the payroll add-ons in QBO, Xero, and Wave) handles source deductions, ROEs, and T4 issuance automatically. The cost is usually $20-$40 per employee per month.

Canadian corporations are required to maintain a corporate records book — sometimes called the minute book — at the registered office or another address authorized by the directors. The minimum content is set by your governing statute (the CBCA, OBCA, BCBCA, etc.) and generally includes:

• Articles of incorporation — including any amendments, amalgamations, or continuance documents.
• By-laws and unanimous shareholder agreements — current versions, with prior versions retained for the audit trail.
• Directors register — every director (current and past) with their name, residential address, occupation, dates of appointment and cessation, and Canadian-residency status where relevant.
• Officers register — same shape as the directors register, with title.
• Share register and securities register — every share class, every issued share, every transfer, every redemption or cancellation. CBCA s. 50 and equivalents require this — even for a one-shareholder company.
• Register of Individuals with Significant Control (ISC). Required by CBCA s. 50.1 and most provincial equivalents. Anyone holding 25% or more of voting rights or fair-market value, directly or indirectly, must appear with their name, date of birth, address, and the basis of their control. Some jurisdictions (Quebec, federal) require part of this to be filed publicly; others keep it internal but available to law enforcement and tax authorities on request.
• Minutes of shareholder and director meetings — including written resolutions in lieu of meetings (which is how small corporations handle almost everything).
• Financial records — accounting books, supporting documents (invoices, receipts, bank statements), tax filings. CRA requires you to keep these for six years from the end of the relevant tax year.

The penalty for ISC non-compliance is real: fines of up to $200,000 for the corporation and up to $200,000 plus six months imprisonment for directors and officers under the federal CBCA. Most provincial regimes follow the same template. Filling in the register honestly and keeping it current is far easier than reconstructing it under audit.