Thinking of starting a business in Canada? Knowing these twelve facts will help make the startup process easier.
1) You need to be a Canadian citizen or a landed immigrant to start a business in Canada.
You may be able to partner with one or more Canadians to start a business here but that doesn't mean that you will be able to reside in Canada. To do that, you need to immigrate to Canada. This page from Citizenship and Immigration Canada provides information on immigrating to Canada.
2) It's easy to start a business in Canada.
In fact, Canada was ranked as the third best place to start a business in the world in 2011 according to the World Bank's Doing Business project. It takes only one procedure and an average of five days to register a firm.
And as you'll see in the next fact, sometimes it doesn’t even take that much effort to open one.
3) Not all businesses in Canada need to be registered.
If you start a sole proprietorship in Canada and use only your legal name as the name of your business, you don’t need to register your business with your province. Newfoundland and Labrador take this even further; there, no sole proprietorships or partnerships need to register their business names. See Starting a Business: Register a Business Name for more information on name registration.
(Note, however, that whatever province or territory you’re in, you may still need to register your business with your municipality.)
4) Registering a business name does not protect your business name.
It would be nice if registering your business name with your province or territory meant that no one else was allowed to use it, but generally, it doesn't. Different forms of business ownership provide different levels of business name protection, but none of them provide full name protection. See What If Someone Else is Using the Same Business Name for more information.
5) Canada’s "system" of incorporation is very different than the American one.
We have no LLCs or S corps here. (There are some Limited Liability company options available, but they are usually only available to groups of professionals such as doctors, lawyers and accountants.)
Because of potential liability, incorporation is always a form of business ownership you consider when you're starting a business. Here are 7 Reasons to Incorporate Your Business.
Convinced? Here's How to Incorporate in Canada.
6) Most new Canadian small businesses are bankrolled by their owners.
Canadians starting businesses tend to dig into their own pockets first when they’re looking for the money to get started. Read more about the Sources of Business Start Up Money.
That may be tied to the small amount of money required; Most Canadian Small Businesses Started With Less Than $5,000, according to an Intuit Canada study of entrepreneurship.
7) There are very few grants for Canadian small business startups and those that do exist are specific to particular industries, locations, and sometimes, groups of people.
The Canadian government appears to be more interested in offering businesses a hand up rather than a hand out. So no-strings-attached out and out small business grants are relatively rare and are always attached to particular conditions.
They may focus on encouraging entrepreneurship among a particular group of people, such as aboriginals, or in a particular place, such as Northern Ontario. Read The Truth About Small Business Grants in Canada for more details.
8) There are, however, many sources of small business loans.The Canada Small Business Loans Financing Program has long been the flagship program for financing both startups and established Canadian businesses, but there are many other government-sponsored and non-profit agencies that provide small business loans, from Community Futures Development Corporations through women's organizations.
There are also an increasing number of private loan sources, such as investor's groups. 10 Small Business Loan Sources explores sources of small business loans other than traditional banks.
9) Canadian small business owners can get back the amount of GST/HST they pay out on goods and services used in the course of doing business.Yes, it's true that most Canadian small businesses do not have to become GST/HST registrants and charge and remit GST/HST if their small business qualifies as a Small Supplier (essentially makes less than $30,000 in a year). Note the word ‘most’; not all small businesses have this option.
However, you can register for, charge, and remit GST/HST even if your small business does qualify for Small Supplier status, and you might want to do this because if you don't, you can't get any of the GST/HST you pay out on business purchases back through Input Tax Credits. Read all about the GST/HST registration process here.
10) Small businesses, even micro-businesses, can qualify for SR&ED tax credits.
Your business does not have to be incorporated, or affiliated with a particular university or program to participate in SR&ED and earn SR&ED tax credits. Here's an introduction to the SR&ED Tax Credit Program and the kinds of work that would qualify. Interested? Here's How to Identify SR&ED-Eligible Projects.
11) There are many income tax deductions available to Canadian small businesses.Some of these are available only to corporations such as the Small Business Deduction but others, such as Investment Tax Credits are open to sole proprietorships and partnerships as well.
There are also special income tax deductions for home-based businesses such as The Business-Use-Of-Home Deduction.
And every small business owner can claim their legitimate business expenses and write these off against their business income.
12) Your best assurance of success when you’re starting a small business is to have a business plan.
Many small businesses are started each year. Many small businesses fail. In most cases, they fail because of poor planning. So give yourself and your chances of success a big leg up by writing a business plan before you start.
Starting a business is such a huge investment of your time and resources that you need to do everything possible to be sure that it's a successful venture.
Still not convinced that you should bother with one? Hopefully these 5 Reasons for Writing a Business Plan will persuade you.
The best of luck with your new venture!