Paid employment is not for everyone. Some people prefer to be their own boss, while others enjoy the experience of starting a business and nurturing it into something they can bequeath to their loved ones.
For those with an entrepreneurial itch, as the most populous province in Canada, Ontario offers many business opportunities and an enabling environment. This guide will walk you through the steps you need to follow to start a business in Ontario. We will also share resources to help you through the process.
Ready? Let’s turn that idea into a business.
What You Need To Know Before Starting A Business
The first thing to note is by starting a business you are assuming financial risk. Think carefully about the line of business you are entering before investing yours or other people’s money:
- Do you have any experience managing a business?
- Do you understand the market and industry you are getting into?
- Do you have the financial, people management, administrative, and marketing skills needed to successfully run a business?
- If you lack the critical skills to run a business, are you prepared to hire them?
If you can’t answer these questions confidently, it may mean that you are not ready to launch this business. Even when you have what it takes to run a business, the business idea itself may not be a viable one.
If you can’t refine and find a market fit for your idea, it may be better to buy into a business that is already running instead of starting a new one. Another option is to start a franchise.
What you need to know is that the majority of startups fail. In Canada, 20% of businesses fail in their first year. And as high as 60% will fold before their third year anniversary. The failure of a business can be very stressful and often leads to financial ruin.
As daunting as it may seem, starting a business can be an exciting adventure and a real opportunity to make a difference in your community. Assuming you have tested your business idea, have a clear business plan, and are ready for the challenges and thrills the journey may turn up, here is the process to legally start a business in Ontario.
The Steps to Start a Business in Ontario
The decision to start a business imposes certain legal responsibilities on you the owner. You have to formally register and obtain all the permits that apply in your field of operation. You also have legal obligations to your employees and the tax authorities.
To ensure compliance and give your business the best possible start, it is critical to seek the right help, including the guidance of an experienced corporate lawyer. And to be clear, only lawyers and accountants can complete the process to register a business in Ontario. The responsibility is on you to hire one that will competently represent your interests.
1. Decide on the type of business ownership
Deciding what type of business you are going to start is the first step in the process. Here we are referring to the type of business ownership, which is subject to legal regulation. You have the option of registering your business as a sole proprietorship, a partnership, or a corporation.
Registering as a sole proprietorship or partnership has its advantages. It is easy and relatively inexpensive. However, you assume full or shared liability for the business, meaning your personal assets can be seized to settle your business debts.
Incorporation also has its advantages and disadvantages. While the registration is more involved and expensive, it carries limited liability. You and the business are treated as separate legal entities whose assets are also separate. A corporation, therefore, exists perpetually and will carry on after you are gone, unlike sole proprietorships or partnerships.
Incorporated businesses also have clearer rules of operation, which makes it easier to attract investors and funders and to sell shares if the business no longer excites you. If you aren’t sure what type of business ownership is best for you, you can read further here.
2. Choose a business name
After deciding how you are going to register, it is time to start the formal registration process. The first step is to choose a business name. Note that if you are a sole proprietor and are using your name without any additions, you don’t have to register the business name.
Sole proprietorships and partnerships must register at the Ministry of Government Services. You have to pay some fees for both the registration and the name search. The registration is valid for 5 years after which you must renew it.
Corporations have the options to register with the Province of Ontario or the federal government. The process also starts with a name search. It is essential to carefully consider your choice of name. You want it to be memorable and easy to pronounce. It must also accurately reflect your product or service.
There are no explicit rules for how to select a name, but it must be available, meaning there must be no existing business currently using it. It must also not have the potential to be confused for a government department.
3. Register your business
To determine the availability of your preferred name, you must complete what’s known as a NUANS. With your business name secured, you have 90 days to submit your articles of incorporation.
Both registering your business name and filing your Articles of Incorporation require the payment of fees. This important document describes your particular business activity and provides information on your business address and that of the shareholders if there are 10 or fewer of you.
You will find it is cheaper to register online than to do it in person at the Provincial or federal government offices.
4. Apply for a business license
You will need licenses to conduct certain types of businesses and operate in a specific city or municipal jurisdiction. Some products and services are regulated for safety, health, and security reasons.
Your lawyer will be in a better position to advise on the specific licenses you must obtain before you can trade. But depending on where you intend to trade, you may have to register at the municipal, provincial, and federal levels. BizPal can help you find the permits and licenses you need to operate your type of business.
5. Register with the tax authorities
All businesses have to pay taxes. Evading this obligation is a serious crime. So you must register with the Canada Revenue Agency and know the specific tax requirements for your type of business.
Beyond the legal obligations we have discussed above, you have to decide where your business will operate. This is important as municipalities have zoning restrictions that limit your options. Otherwise, you will now be formally registered and ready to start your business.
De Sa & Associates are a team of corporate lawyers in Toronto. We help businesses of any type and size to register, negotiate contracts, settle disputes, and ensure compliance with all existing laws in Canada. Contact us so we can help you formally register your business in Ontario.