How to start a business in Canada

Canada has the 10th largest economy in the world as of 2024.

International trade makes up a third of Canada’s economy, while its biggest industries are real estate, mining, and manufacturing.

Canada can be an excellent country for setting up small and medium enterprises (SME). Around 97.8% of all employer businesses in Canada are small businesses, suggesting there’s a supportive environment for entrepreneurs starting new business ventures.

This blog post will focus on how you can start a new business in Canada, what types of businesses you can set up, and anything else you need to know to start trading.

Things to know before getting starting a business in Canada as a US citizen

As a relatively entrepreneur-friendly country, Canada makes it simple to start a new business as a new arrival.

The process to start a business in Canada is mostly online, and there’s no minimum capital requirement, meaning you can start your business without proof of funds in the business.

According to the type of business you wish to set up, you’ll be required to fill out and present the following documents:

• Articles of Incorporation
• Registered office address and board of directors’ details
• Completed provincial registration for

You might also have to register at both the federal and provincial level.

If you expect that the annual revenue for your business ¹will exceed CAD $30,000, you’ll need to register for GST/HST (or PST in some provinces).

If you’re looking for inspiration to name your new company, you can try our Business Name Generator tool to brainstorm ideas.

What types of corporate entities are there in Canada?

The main types of corporate entities in Canada are:

Sole proprietorship

Sole proprietorship is intended for very small (or ‘one-man’) businesses, and your business interests are taxed alongside any personal income. This means you only have to do one tax return for yourself and the business, but this can increase your liability overall.

Partnership

Partnership is a popular option, but has a similar liability issue made more complex by the fact that any partner in a business can be held liable for all the debts of that entity.

Corporation

Corporations are the most common type of business structure because they are limited liability, meaning they are taxed separately to the individuals who set them up. However, to get this benefit you're required to keep detailed accounts (which come at a cost), and comply with all relevant legislation.

Cooperative

The cooperative is a less common structure which is both owned and controlled by the members.

If you’re not sure which business structure is best for you, then you can find out more by checking out the government of Canada’s handy comparison guide.

Visa requirements

To start a business in Canada as a US citizen, you’ll need to acquire a visa.

Start-Up Visa

One visa option for US citizens is the Start-Up Visa, which allows foreign entrepreneurs to set up businesses provided they satisfy the qualifying criteria.

For example, you’ll need to secure investment from a Canadian venture capital fund, business incubator, or angel investor group.

Temporary work permit

Another option is to obtain a temporary work permit as you pursue permanent residency in Canada.

There are two routes to securing a temporary work permit:

1. C11 Work Permit

With the C11 Work Permit, US citizens and other foreign nationals can work in Canada while their permanent residency application is processing.

1. NAFTA-USMCA Professionals

With the NAFTA-USMCA work permit, issued under the United States-Mexico-Canada Agreement (USMCA), service providers and professionals can work in the country on a temporary basis.

What is the company registration process in Canada?

To register your business in Canada, the first step is to decide whether you’ll register federally or provincially.

**Federal incorporation - **Registering your business with the Canadian federal government means your business will be recognized across all provinces and territories in the country.

**Provincial incorporation - **Registering your business with a provincial or territorial government means your company will need to operate within the laws of that specific province and only recognized in that province.

To register your business at the federal level, you can use Corporation Canada’s online registration system. The fee for federal incorporation is ²CAD $200, and you can have your registration complete within a few days.

To register at the provincial level, you’ll have to go through the registration process dictated by the province in question. Fees for provincial incorporation will depend on which province you decide to register your business in.

A full list of the contact details for provincial and territorial registers are available on the government supported Canada Business Network site.

You're encouraged to apply online to register your business.

Once your application has been processed, you’ll receive your Canada Business Number (BN) which means your company will be officially registered.

Legal obligations and responsibilities

For some types of business activities you’ll need to secure additional permits to operate your business.

The Canadian government website offers a tool, BizPal, that allows you to search for the permits that might apply to your business. You can then get details of how to apply for any permits you require to operate legally.

If you hire employees for your business, you’ll assume certain extra responsibilities, ranging from payroll management to references.

For each employee you must complete a TD1 tax form for each employee, and you’re responsible for deducting pension contributions, income tax and employment insurance from them.

You can find more information about the deductions on the Canada Revenue Agency website.

As a business owner, there are federal taxes that apply to your business. It’s your responsibility to understand and manage these payments, as well as any provincial or territorial taxes that may apply.

Where can I find help to start my business in Canada?

The Canada Business Network website has great information that will help you run your business, and also hosts a tender page giving details of the government support (such as tax credit) you may be eligible for.

Simply enter some details about the field in which you work, and you'll find any government programs for financing, or other support available.

The Canada One website offers an ‘Ask an Expert’ service, where you can pose questions relating to business growth (as well as tax or legal issues) directly to experts in the field.

The Canadian Acceleration and Business Incubation organisation is an umbrella operation, helping foster links between start up businesses, government, industry, academia and other stakeholders in the growth of small business. Their website hosts information about topics such as getting a Startup Visa, and can be a helpful resource for anyone planning on moving to Canada for work.

Once you’re in Canada and ready to get going, look for local networking events on sites such as Meetup, Eventful and Eventbrite.

Each province also has a ‘Small Business Network’ which run online and offline Meetups and other events. Here you can meet like minded people and build your customer and business contact book.

Every business needs a great plan and a little luck - but with help from your new network and friends, your business will get off to a flying start.

Discover Wise Business: A seamless solution for international payments

Managing international payments when you take your business abroad can be challenging, and requires an adaptable solution.

Wise offers an economical solution. Wise is not a bank, but a Money Services Business (MSB) provider and a smart alternative to banks. With a Wise Business account, you can easily send, receive, and hold business funds in multiple currencies, without paying monthly account fees. You can get local bank account details to receive payments in major currencies for a one-off fee and make sending money abroad hassle-free with access to 160+ countries.

That means that you can get a CAD account number even as a US citizen, and receive payments from Canadian customers with zero hassle.

Open a Wise Business account online

Some key features of Wise Business include:

• Major local account details to receive international payments with ease.
• No monthly account fees, just a simple one-off fee for account details.
• Receive payments from e-commerce platforms such as Amazon or viaStripe.
• Create invoices using the Wise invoice generator orinvoice templates.
• Accounting integrations, including a QuickBooks Bill Pay connection.
• Batch payment options for fast payment of up to 1,000 people.

Read the guide on how to open a Wise Business account

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Sources used :

¹ Canada.ca

² Government of Canada

Sources last checked on 15-November- 2024.