Finding stability and having a source of income are goals that most newcomers have in mind as they plan their move to Canada. While a majority of them seek opportunities as an employee, some aspire to start their own business and become an employer. Navigating the process of setting up a company or business in a foreign land may seem daunting or confusing for many.
Through this article, we hope to explain and simplify some of the basics you should be aware of as you plan to start your business in Canada. For easy consumption, we’ve divided all essential action items into three phases: 1. Planning, 2. getting the business up and running, and 3. managing finances.
1. How to plan your business
Developing a business idea
One of the initial action items is to fully develop your business idea. Think about the details and fill in all the gaps. You may want to begin by:
Choosing a location and renting office space
Many entrepreneurs start-off working from home, and as they grow their operations, seek an office space. So don’t feel compelled to find an office space from the get-go. However, remember that finalizing a work location is essential for tasks like business registrations, and obtaining licenses, and permits.
A few factors that you should consider while choosing a business location are:
Tip: For those considering setting up your business at home, be sure to look into the regulations and restrictions that apply to home-based businesses. These can be found on all city-specific websites.
Writing a business plan
A business plan is a written document that serves as a guide for your business, outlining the roadmap, goals, milestones, success measures, and other useful information. Some key elements that define a strong and well-thought-out business plan are business objective and opportunity, market positioning and analysis, competitor landscape, financials, and target market information.
Creating a business plan will help you:
- Sell your idea to investors and potential stakeholders,
- Measure your success,
- Plan for operational requirements, and
- Set reasonable financial forecasts.
Planning the business structure
Before you start your business, it is essential to understand the different business structures in Canada and identify one that would work best for your business type.
There are five main types of business structures:
- Sole proprietorship
This is the most common way to start a small business. A sole proprietorship is a business made up of one business owner (you) that has not been registered with the government as a corporation. For tax purposes, a sole proprietorship is the most basic way to run a business in Canada.
Tip: You can start as a sole proprietor and decide to incorporate your business later.
This is a type of business consisting of two or more individuals that own a business together. There are three types of partnerships: General partnerships, limited partnerships, and joint ventures. There is no legal structure for a partnership. However, partners usually have some type of contractual agreement that outlines revenue, expenses, and task sharing.
Corporations are more complicated legal structures than proprietorships or partnerships. Incorporation is a process in which a separate legal entity, owned by its shareholders, is formed. Corporations are expected to keep meticulous records and report their financial situations to governing authorities yearly.
According to the Business Development Bank of Canada (BDC), corporations are more costly to operate than sole proprietorships and partnerships, and hence, new businesses do not usually incorporate unless they plan to acquire capital through the sale of shares or desire greater credibility. Typically, companies consider incorporating when they generate at least $50,000 CAD in annual revenue.
A cooperative is an incorporated business that is democratically controlled by people with common needs. There are different types of cooperatives in Canada, including consumer, producer, worker and multi-stakeholder.
Establishing a nonprofit business in Canada is a similar process to setting up any other business. Nonprofits provide a product or service designed to benefit their community. Examples of non-profits include a community organization, social or sports club or charity.
Tip: Ownr, an RBC Venture, has published the pros and cons of each type of business structure, which can help you in deciding which structure might be best for you.
You can also take the online Ownr business structure quiz to find out which structure might be right for you!
2. How to start a business in Canada
Naming your business
Some of the things to keep in mind while choosing a business name are:
- Ensuring the name is reflective of the product or service you’re offering,
- How you want your business to be perceived,
- Choosing an easy to remember and pronounce name, and
- Keeping it unique and distinctive to avoid confusion and legal issues.
As a next step, you should find out if the name is taken. The government of Canada outlines that in most cases, if someone is already using a name, you cannot legally use it. And by law, the name of your business can’t be the same as or very similar to an existing corporate name or trade-mark.
There are a few places you should check to see whether a name is taken:
- General internet search: Using a simple Google search is the easiest way to find out if someone is already using the business name you intend to use. You may also want to check whether the Internet domain name and social media handles you want to use are already taken. If you plan to do business outside Canada, check whether anyone is using the name in those countries too.
- National name databases: There are two national databases that each cover most of the jurisdictions you may want to search in Canada. You can search one or both of these depending on where you want to set up your business:
- New Upgraded Automated Name Search (NUANS): It is Canada’s official database of incorporated and trademarked businesses across the country and reports a list similar to provincial/territorial corporate names and trademarks, except for names in Quebec.
- Provincial and territorial trade name databases: After searching the national databases, you may also want to search registered trade names in other provinces and territories if you ever plan to do business there.