Businesses are everywhere; which is no wonder when reasons to start them are considered. It could be that a person had a unique business idea, wanted some kind of financial independence, or wanted to establish their dream career among others. It can be exciting to establish a business but first, there should be clarity of what’s involved. Eighty percent of businesses actually fail in their first five years.
This article is meant to guide you if you want to start a business in Canada with the hope that it guides you to be among the successful twenty percent.
So Let’s Dive-in!
In this article…
1. Brainstorm ideas
2. Develop a business plan
3. Financial assessment
4. Business legality structure
5. Incorporation and requirements
6. After incorporation
7. Selection of technology
8. Insurance coverage
9. Choosing partners
10. Team building
11. Branding and advertising
12. Business growth
Every business starts with an idea. It can be because of personal interest, specialization, a business gap that needs to be filled or simply an entrepreneurial spirit. Brainstorming alone or with others will generate a number of ideas which should then be narrowed down.
A quick industry search should indicate what others are doing that can be improved. If you can deliver what others are not or can do better what others are already doing, then the idea is good enough. Still, others choose to franchise with already established businesses.
A good business plan should indicate what a business intends to do, how it will do it, how it will overcome any challenges, and finally how it will sustain itself. A business plan is a result of questions emanating from how a business idea will be implemented.
Bringing a business idea to life has a cost associated with it. Majority of entrepreneurs put their own money into a new business. However, it depends on how big the venture is and whether it is a full-time job. Big ventures often need financial assistance say from a bank loan, partners (equity or debt funding), private funding, crowdsourcing, business grants etc. Also, a new business often needs to set aside some money for sustaining itself before profits can be made if they will be made.
What may be legal in another country may be illegal in Canada and vice versa. Immigration issues, labor laws and a lot more may influence the kind of business structure that works best. Furthermore, some kinds of business structures bear personal liability apart from affecting how taxes are remitted.
- Sole proprietorship-owned by a single individual who also bears all debts and obligations
- Partnership-owned by two or more people as partners who also share debt and obligations personally based on the initial capital contribution ratio.
- Limited liability Corporation-a business established as a separate legal entity from its owner(s) and bears its own debts and obligations.
The incorporation specifics may differ from province to province but here are general ones.
1. Deciding on provincial or federal incorporation
This decision solely lays on the scope of business a partnership or corporation bears. Say for example a business started small and was incorporated provincially in Toronto, if there is need to expand, it can be incorporated as extra-provincial in other provinces.
Although federal incorporation is expensive, it is not as limiting as provincial and furthermore, a corporation uses the same name in all states.
2. Choosing a corporate name
Compared to a sole proprietorship or partnership, a corporate name has stringent requirements for it to be approved. A corporate name is made up of:
- A distinctive portion identifying the corporation from others
- A descriptive part detailing the particular activities of the corporation
- A legal element as pertains to a corporation name like Limited, Corporation, or Incorporated
Note that also:
- A corporate name should not be a misrepresentation of the business intended to be carried out. For example, if Airlines Incorporation is intended to be an airline, it should not be selling shoes.
- A corporate name should not contain obscenities or point to illegal activities being carried out
- A name can be in English, French, or a combination of both
- A corporate name must not be identical to any other existing name
3. Corporate name search and reservation
Regardless of the province, a business is intended to be incorporated, a name search must be conducted to determine its suitability. In some provinces like British Columbia, a name approval request or name reservation request form must be submitted.
If a name is accepted, it is reserved for a number of days pending completion of the incorporation process. If this time lapses, the process has to be repeated all over again.
4. Preparation of relevant documentation
Generally, to register a business in Canada, the following documents are necessary in the case of a corporation;
- A memorandum of association-sets out conduct rules for the company
- Articles of incorporation-rules and regulations governing the conduct of company members/ directors
- Notice of offices-outlines the physical location of two required offices: the records office and the registered office
5. Filling of documents and subsequent application for incorporation
Applications can be submitted manually by mailing forms and fees to appropriate agencies or online via relevant websites.
What are the next steps after receiving a certificate of incorporation?
1. Purchase of a corporate minute book
The law decrees that certain corporate records be maintained and kept at a company’s records office. The minute book will include documents like:
- A register of directors
- A register of members
- A register of business securities
- A copy of all the corporate by-laws
- Minutes of every company meeting
- Copies of any relevant documents filed with the government/municipality
2. Purchase of a corporate seal
Although no legal requirement exists to have a corporate seal, most corporations still have one. Some banks, for example, may demand a seal before issuing any form of credit and some business like to accompany their official documents or correspondence with a seal.
3. Completion of by-laws, minutes, and issuance of shares
All these will need to be captured in an organization’s minute book and will develop as a result of meetings between directors and shareholders or a written resolution. At this meeting:
- By-laws and documents of incorporation will be approved and adopted
- Election of directors will take place
- Corporate officers will be appointed as CEO, COO etc.
- Shares will be issued out to shareholders
- Any other resolution will be formally approved and adapted
4. Corporate bank account set up
A corporation cannot operate with an individual’s account because of the by-law, it is recognized as a separate legal entity. Before an account can be set up, signatories of the account or accounts must be already selected and approved. Banks will require certain incorporation documents and may even demand that specific banking resolutions be passed by a corporation. Signatories will also be mandated to fill certain forms with the bank.
5. Acquisition of any other final permits or licenses required to run
Some of the final requirements for a corporation are a business number recognized by the federal government. This business number is used to issue operating licenses and most importantly register for tax obligations. Tax registration is in two forms:
- Goods and Services Tax/Harmonized Sales Tax (GST/HST)
There are a number of requirements to register for this tax which is covered by the Canada Revenue Agency’s registration rules.
- Provincial Sales Tax (PST)
Some provinces like Manitoba, Saskatchewan, British Columbia, and Quebec have not harmonized their sales taxes with the federal GST/HST. In such provinces, a corporation has to register to collect and remit the appropriate provincial taxes.
The only thing left after all the above processes is to run the registered business. For a business to run, it will need employees, certain insurances, good record keeping, and above all excellent marketing to ensure sufficient business.
We are in the days of cloud storage, accounting software, and other tech tools that businesses now need to operate at optimum which will also include having a good website design. Well, how tech-savvy a business depends on the industry it operates in but at the least a desktop computer, laptop, smartphone, or tablet will suffice.
It is good to separate business from personal matters which calls for almost everything separate to avoid information going out to the wrong people. Heavy technology needs will need proper infrastructure and even an entire IT department with proper auxiliary support.
Different businesses need different kinds of insurance. Insurance explains what property is insured, what liability is borne, what happens in case of interruption, damage, and other whatnots. It is good to have insurance coverage which saves cost in case of damage or other business disablements. However, it is also good to choose coverage wisely as some may be exploitative.
A business cannot run on its own. It needs partners like third party vendors and other businesses (B2B partners). Partners have to be selected very carefully because they may need to have access to sensitive data and business secrets. It is good to consider their track record before getting into the partnership agreement.
Hiring a great team saves a lot of future trouble. A brand is built by people more than the products/services it offers. Teamwork should be as important as the products any business intends to sell. In Canada, employees have to be registered and have payroll deduction for income tax apart from other guidelines to hiring. Also, they must have employment insurance (EI) and be signed under the Canada Pension Plan (CPP) offered by the Canada Revenue Agency.
Before a business can start operating, it is crucial to develop the necessary anticipation among its target audience. This gives a level of success because people are ready to jump onto it the moment business doors open. Consistency is vital in building a brand be it in the use of a logo, publishing content, or on promotional channels like social media.
Business growth needs patience and takes time as well as effort. But the good news is that you often get what you put into it. Selling is only one single step; there needs to be planning to stay afloat and generate profit. Establishing connections, partnerships, collaborations, and shared promotions are some of the ways a business can grow.
Most people agree that without marketing, it is difficult for a business to be sustained as customer bases change approximately every five years. The Internet is considered one of the best way to market and reach target audience. So if you would like to consult about your marketing needs on the Internet speak with SEO Toronto.
Starting and running a business in Canada is a doable thing. With the right management and marketing team, a business will keep growing, expanding beyond Canada’s borders and spanning generations to be among the 20% who survive the challenges.
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