Starting a Business in Canada as a Newcomer

Canada is a welcoming place to build something of your own, and many newcomers arrive with the skills, savings and ambition to start a business in Canada. The good news is that the federal government has standardized much of the process: choosing a structure, registering, getting a tax account and finding the right permits can all be done through official channels. This guide walks you through the steps using only Government of Canada resources, so you can launch on a solid legal footing.

Before you spend a dollar, it is worth understanding how the pieces fit together. The structure you pick affects your taxes and your personal liability, your Business Number connects you to the Canada Revenue Agency (CRA), and permits depend on your activity and location. We also cover the one issue unique to newcomers: how your immigration status affects your right to work for yourself.

First, check your immigration status

This step comes before everything else. Your right to be self-employed in Canada depends on your immigration status. Permanent residents and Canadian citizens can generally start a business freely. If you are in Canada on a temporary status, such as a study or work permit, the conditions on that permit determine whether you may work for yourself. Some work permits are employer-specific and do not allow self-employment at all.

Do not guess. Immigration, Refugees and Citizenship Canada (IRCC) sets the rules, and there is also a dedicated permanent-residence stream, the Self-Employed Persons Program, for people who intend to be self-employed in cultural or athletic fields. Confirm your eligibility with IRCC before registering anything.

Choose a business structure

The Government of Canada recognizes a few common structures, and your choice shapes your paperwork, taxes and risk.

Sole proprietorship

A sole proprietorship is the simplest and most common way to start. You make all the decisions and keep all the profit, but you are also personally responsible for all of the business's debts and obligations. Your business income is reported on your personal tax return.

Partnership

A partnership is a relationship between two or more people who carry on a business together. Partnerships are easy to create and flexible to run, but, like a sole proprietorship, the partners are personally liable for the business's debts.

Corporation

A corporation is a separate legal entity, distinct from its owners. This separation protects shareholders from personal liability for most business debts, but a corporation costs more to set up and has heavier reporting requirements. You can incorporate federally or provincially.

Register your business and get a Business Number

How you register depends on your structure. Sole proprietorships and partnerships are typically registered with your province or territory. Corporations are registered when you incorporate federally or provincially.

Most businesses also need a Business Number (BN), a unique 9-digit number the CRA uses to identify your business across government programs. You need a BN if you collect GST/HST, hire employees and need payroll, import or export goods, or incorporate. You register through Business Registration Online, where you can also add CRA program accounts. Registering online is the fastest option, and you should save or print your BN during the session because it is not mailed to you.

Understand the CRA business number and GST/HST

Once you have a BN, you may need to add a GST/HST account. The key threshold is revenue. You are generally a "small supplier" and do not have to register for GST/HST until your taxable revenues exceed $30,000 over four consecutive calendar quarters. If a single sale pushes you over $30,000 in one quarter, you must charge GST/HST on that sale and register within 29 days.

Many new owners register voluntarily even below the threshold so they can claim input tax credits on business purchases. Either way, GST/HST is a separate program account (it ends in "RT") under your BN. Keeping clean records from day one makes taxes far less stressful at year-end.

Find the permits and licences you need

Depending on your activity and location, you may need permits or licences from federal, provincial or territorial, and municipal governments. Rather than guessing, use BizPaL, the official online service that generates a personalized list of the permits and licences you need once you enter your location and industry, with links to apply. The Government of Canada also maintains a permits and licences hub that points you to the right tools.

Sort out banking, taxes and funding

Keep your business finances separate from your personal ones. Opening a dedicated account makes bookkeeping and tax filing cleaner, so compare options for business banking early. For taxes, a sole proprietor reports business income on a personal return, while a corporation files its own corporate return.

For funding, the Business Development Bank of Canada (BDC), a federal Crown corporation, is a useful starting point. BDC notes that start-ups often have a harder time accessing loans than established firms, and that a well-researched business plan with realistic financial projections is what lenders look for. Common sources of start-up financing include personal investment, loans from family and friends, government-backed loan programs, and bank or BDC financing.

Newcomer startup checklist

• Confirm immigration status: verify with IRCC that you may be self-employed.
• Choose a structure: sole proprietorship, partnership or corporation.
• Register the business: with your province, or incorporate federally or provincially.
• Get a Business Number: through CRA Business Registration Online.
• Add GST/HST if needed: mandatory once you pass the $30,000 small-supplier threshold.
• Find permits and licences: use BizPaL for your activity and location.
• Open a business bank account: separate business and personal finances.
• Plan funding and records: build a business plan and explore BDC financing.