A Guide to Starting a Business in Canada
Planning your new Canadian business might appear overwhelming at the start. For this reason, it is essential you tackle one step of the process at a time – something this guide with help you with. We will be discussing the steps involved in starting a new business in Canada. Now, while the steps are outlined pretty much in order, there is some room for flexibility. For instance, it will not make a difference if you go to the third step before completing the second one.
So, let us jump right in the quest to realize your dream of becoming an entrepreneur in Canada.
Step 1 – Find a good idea for your business:
Regardless of where you want to establish a business, the first step is always about the idea. You need to assess current trends, analyze what you are good at, and come up with ways that you can contribute something to the market or use an existing concept and reshape it for the better. Furthermore, before you decide to invest your money and time into the idea, be sure to ascertain that it works.
Step 2 – Come up with a business plan:
We concluded the first step by mentioning that you need to test your business idea – the best way to do that is through a business plan. Preparing a plan will enable you to perform a thorough analysis of the market and industry in which you will be introducing your product or service. Additionally, you will have something concrete that you can take to your lenders or investors – the acid test for your business idea.
Step 3 – Choose the perfect business name:
When selecting a name for your Canadian business, you need to be mindful of both marketing and legal aspects. In Canada, corporations are subject to greater name restrictions compared to individual traders. However, regardless of your business type, there will always be some legal considerations while naming your startup. Almost every business will be required to get its name registered by the government. As far as marketing goes, the name should be about what your business is and does, and should communicate your message in a manner that is positive, attractive, and memorable.
Step 4 – Select a business ownership type:
If you wish to start a business in Canada, you will have to choose one of the three available types of business ownership: corporation, partnership, or sole proprietorship. There are additional options within those three broad categories (for instance, you can either opt for a limited partnership or a cooperative corporation). You need to make sure that you go with the ownership type that is ideal for your particular business – some factors to consider include liability, tax deductions, and your own level of comfort.
Step 5 – Look for business financing:
Even though a few owners use their own money to fund their new business, the majority will require cash infusions from other sources. If you belong to the latter category, you will have to consider your financing options such as equity sharing, debt financing, and government grants. Be sure to know how every financing option is different from the others, the pros and cons of each option, and if you can handle the obligations associated with your preferred source of financing.
Step 6 – Get your business license:
Although a business license might not be mandatory for some businesses, most will need one before they can legally commence operations in their municipalities. If you live in a city or town that does not have its own website, you can always surf the internet for government agencies’ contact details.
Depending upon your business type, you might require other permits or licenses in addition to your business license. BizPal is a helpful tool that you can use to search for the licenses and permits you will need before you can start operations. This tool provides you with a tailored list containing every business document that you will need at every governmental level.
Step 7 – Get registered for HST/GST:
Unless your business income remains below $30,000 for four straight quarters, you will likely have to get registered for the HST (Harmonized Sales Tax) and GST (Goods and Services Tax). The exemption for small suppliers is also not applicable for every business. Limousine and taxi services, for instance, do not always require HST/GST registration.
It is likely that your business will not make a lot of money at the beginning, but you should still consider getting it registered for HST/GST. This will allow you to benefit from ‘Input Tax Credits’ – a way to receive reimbursements on the HST or GST that the business has paid to make purchases.
Step 8 – Get registered for professional sales taxes (optional):
Certain provinces are still to reconcile the federal GST with their sales taxes. If you are operating in such a province, you will need to get yourself registered if you want to ensure the collection and remitting of the appropriate amount of provincial tax. For entrepreneurs starting operations in Manitoba, British Columbia, Saskatchewan, or Alberta, PST (Professional Sales Tax) registration is required. If you are based in Quebec, you will need to get yourself registered for QST (Quebec Sales Tax).
Step 9 – Get ready to sign employees:
It is understandable to not focus on signing employees when you are starting a new business. However, the need to get employees comes up quickly. Hence, make sure you are prepared and have everything you will require in order to legally start hiring in Canada. This means the need to take care of issues like employment insurance, workers’ compensation, and payroll deductions.
Step 10 – Get extra insurance for your business:
Alongside the employment insurance required by law, your business might require some additional protection. You can choose from various policies that cover aspects such as general liability, property, disability, key people, and business interruption. Make sure that you go through all these options with a trusted lawyer and insurance agent, and decide the ones that will be best suited for your particular business.
Step 11 – Do not delay establishing your records:
Ensuring that you have all your records intact right from the first day of business will make tax and accounting much easier for you. Your first step should be to get a separate bank account for your business and maintain every business receipt. You can also consider using some fundamental accounting tools or software to ensure organization and scalability.
Step 12 – Promote your business:
After implementing the above steps and putting in the hard yards required to open a business in Canada, it is essential that you do not forgo promoting. This is the time that you execute the marketing strategy that you planned while preparing the business plan. Make sure that you have established goals against which you can measure the success of those plans.
Things to Avoid While Starting a Business in Canada:
1) Picking the wrong business:
You should always focus on what you love doing or are good at, and try to convert that into a revenue-generating model. If you want to start a business only to earn, there is a high chance that you will not be able to stick it out when things are tough – which they often are at the start. However, love and passion, while crucial, are not sufficient – your business should be based on something that your target audience actually needs and is going to purchase.
2) Making the perfect plan:
Naturally, your business plan is important to you, and is one of the most essential steps in starting a small business in Canada. However, you need to make sure that you are not overdoing it and trying to perfect it right down to the smallest details. Your time is valuable, and you need to apportion it smartly.
3) Spending instant money:
Even though there are some business costs that need to be addressed early on, do not convince yourself that you absolutely have to spend money instantly. In other words, you need to stop searching for ways to spend money simply because you think that you have to. For instance, if you have not met any clients yet, there is no need to invest in business cards. You should instead dedicate your energies towards making money, and focus on spending only when you have accumulated a sufficient amount.
4) Going it alone:
‘One’ is always lonely – this is particularly true when it comes to starting a business in Canada.
Not doing everything alone does not mean that you must have a partner or go on a hiring spree, but it means knowing when you need help and not shying away from asking for it. It is not easy to start a business, and sometimes it is just not possible to carry the burden of every hat on our head.
5) Going for the wrong partnership:
The whole point of getting a partner is to make your job and life easier. If you find that your partner is having the opposite impact, you likely do not have the right partner and, unless they are willing to change your ways, you should seriously consider getting out while you still can.
6) Working within a bubble:
This is somewhat similar to tip three where we discussed the importance of asking for help. Allow people in, be open to feedback, pay attention to their suggestions, and make any changes if needed. If you try to achieve success all by yourself, you cannot expect to go far.
7) Ignoring your credit:
If you are new to the country, you likely will not have a credit history on the basis of which banks or financial institutions can determine if your business is worthy of funding. The way to remedy this is signing up for a credit card and being a responsible user. You can also research government programs like the Newcomer Entrepreneur Loan by the BDC.
8) Not understanding local customers:
Successfully operating a business –regardless of location – requires a thorough understanding of your customers and target market. This includes knowing their buying habits and preferences. Enhance your knowledge of the local market by interacting with business associations or volunteer organizations.
9) Undermining the importance of networking:
Networking is crucial for any entrepreneur – let alone an entrepreneur who is also a newcomer. Meet people in your commerce chambers and cultural community, and increase your contacts with associations, organizations, and businesses.
Many contacts turn out to become valuable mentors in the long run; the importance of a mentor cannot be stressed enough, especially when it comes to opening a business in a new land. Speaking of mentors, you can find a few through organizations like ACCES Employment that handles the program for Entrepreneurship Connections. Another option is Futurepreneur Canada, where you can go for a mentoring program that spans six months.
A business in Canada can be extremely rewarding, provided that you go about starting it the right way. We hope that the information in this guide will serve as a useful reference point as you begin your entrepreneurial journey in Canada.