HOW to START a BUSINESS in CANADA // REGISTER Sole Proprietorship with CRA //Canadian Business Guide

Summary

In this informative video, Adrian, the Canadian in a T-Shirt, simplifies the process of starting and registering a business in Canada. He explains the benefits of business ownership and clarifies that starting a sole proprietorship is straightforward and cost-effective, requiring no initial registration or fees. Adrian also covers the steps for registering a business name, securing a brand, obtaining a federal tax number, and the considerations for incorporating a business for liability protection and tax benefits, especially when earnings exceed $100,000.

Takeaways

• 🇨🇦 Starting a business in Canada is accessible to everyone and does not require a large initial investment.
• 👕 A sole proprietorship is the simplest form of business and is recommended for new entrepreneurs, as it involves no separation between the individual and the business.
• 💼 Sole proprietorships are easy to start, with no need to register with the government or pay fees, and business income is taxed under the individual's personal name.
• 🔒 The downside of a sole proprietorship is the lack of liability protection, putting personal assets at risk in case of lawsuits.
• 🤔 Incorporation is an option for businesses with higher earnings or those concerned about potential lawsuits, offering liability protection and tax benefits.
• 💡 It's advisable to separate personal and business finances, even when starting with a sole proprietorship, for easier tracking and tax compliance.
• 🔍 Before registering a business name, a NUANS search is necessary to ensure the name's availability and uniqueness.
• 📝 Registering a business name with the provincial government is required when operating under a name other than the individual's own and involves a fee.
• 🌐 Securing a domain name and social media accounts is crucial for brand protection, even if a website is not yet operational.
• 📈 As a business grows, considerations such as registering for payroll and GST/HST become necessary, depending on revenue and business activities.
• 🏢 Incorporation makes financial sense at higher income levels, typically above $100,000, due to the costs involved in setting up and maintaining a corporation.

Q & A

What are the benefits of starting a business in Canada according to Adrian?

According to Adrian, there are huge benefits to being a business owner in Canada, including financial and tax benefits, and the ease of starting a business without needing a lot of money.

What type of business structure does Adrian recommend for most entrepreneurs starting out?

Adrian recommends starting with a sole proprietorship, especially for those who are just getting started, as it is the simplest form of a business.

How does a sole proprietorship handle taxes in Canada?

In a sole proprietorship, all business income, after expenses, is taxed under the individual's personal name. This makes taxes easy as the business income is combined with personal employment income on one tax return.

What are the risks associated with a sole proprietorship?

The main risk with a sole proprietorship is that there is no liability protection. If the business gets sued, the individual can potentially lose their personal assets, such as their house, car, or savings.

When does Adrian suggest considering incorporation for a business?

Adrian suggests considering incorporation when the nature of the business might lead to potential lawsuits or when the business starts earning a lot more money, as incorporating provides liability protection and tax benefits.

What is the cost of registering a business name in Ontario, Canada?

In Ontario, it costs $60 to register a business name, and this fee is tax-deductible as a business expense.

What is a NUANS report and why is it important?

A NUANS report is used to search for all registered business names and trademark names across Canada or a particular province. It is important to ensure that the chosen business name is unique and not already taken.

Why is it necessary to separate personal and business finances when running a business?

Separating personal and business finances is good practice as it makes it easier to track revenue and expenses, simplifies tax returns and bookkeeping, and provides a clear money trail in case of an audit.

What is the difference between a Business Identification Number (BIN) and a Business Number (BN) in Canada?

The BIN is used by the provincial government to identify a business, while the BN, issued by the federal government through the CRA, is used for tax purposes and is more important for business operations.

When is it required to register for GST/HST in Canada?

A business must register for GST/HST if it earns more than $30,000 in revenue over four consecutive quarters or twelve months. This threshold is based on revenue before expenses.

What are some of the factors to consider when deciding whether to incorporate a business?

Factors to consider include the financial costs of incorporation, the potential for high income levels, the need for liability protection, and the tax benefits associated with incorporating a business.

Outlines

00:00

🚀 Starting and Registering a Business in Canada

Adrian introduces his video on starting and registering a business in Canada, emphasizing the benefits of being a business owner and the simplicity of the process. He mentions a previous video discussing financial and tax benefits, and warns of potential pitfalls. Adrian outlines the steps for starting a business as a sole proprietorship, which is the simplest form of business with no need for government registration or fees. He explains the tax implications and the lack of liability protection, suggesting incorporation as an alternative for those concerned about potential lawsuits.

05:04

🔍 Choosing and Registering a Business Name

The paragraph focuses on the process of selecting and registering a business name in Canada. Adrian clarifies that using a personal name for business activities does not require registration, but using any other name necessitates registration to protect the brand. He explains the importance of conducting a NUANS business name search to ensure the name's availability and the steps to register the business name with the provincial government. Adrian also discusses the importance of securing social media accounts and domain names to protect the brand online.

10:05

📋 Understanding Tax Registration for Businesses

Adrian explains the distinction between provincial and federal tax registrations in Canada. He details the process of obtaining a Business Identification Number (BIN) from the provincial government and a Business Number (BN) from the federal government through the Canada Revenue Agency (CRA). He clarifies that while a BIN is used for provincial identification, a BN is crucial for tax purposes. Adrian also discusses the requirements for registering for GST/HST, payroll accounts, and the implications of earning over $30,000 in revenue.

15:06

🏢 Transitioning from Sole Proprietorship to Corporation

In the final paragraph, Adrian discusses the decision to transition from a sole proprietorship to a corporation as a business grows. He highlights the benefits of lower corporate tax rates and liability protection that come with incorporation. Adrian advises that incorporating makes financial sense when earning a significant net income, typically above $100,000, due to the costs associated with setting up and maintaining a corporation. He also touches on the importance of consulting with legal and accounting professionals to make informed decisions about business structure.

Keywords

💡Sole Proprietorship

A sole proprietorship is the simplest form of business ownership where one person owns and operates the business. It is characterized by the absence of a legal distinction between the owner and the business entity. In the video, Adrian recommends this for new entrepreneurs due to its simplicity and ease of setup, as it does not require government registration or fees under the owner's personal name.

💡Tax Benefits

Tax benefits refer to the financial advantages that can be gained from certain business structures or activities. In the context of the video, Adrian mentions that there are financial and tax benefits to starting a business in Canada, which he elaborates on in a separate video. This includes the ease of combining business income with personal income for tax purposes in a sole proprietorship.

💡Liability Protection

Liability protection is a legal safeguard that prevents personal assets from being at risk due to business-related lawsuits or debts. The video explains that a sole proprietorship does not offer liability protection, unlike a corporation, which is a separate legal entity. Adrian uses the example of a business owner potentially losing personal assets like a house or car if their business is sued.

💡Incorporation

Incorporation is the process of forming a corporation, which is a separate legal entity from its owners. In the video, Adrian discusses the financial sense of incorporating a business, especially when it starts earning significant income. Incorporation provides liability protection and may offer tax benefits, but it also comes with additional costs and complexities.

💡Business Registration

Business registration is the process of officially recording a business name with the government. The video script explains that if a business operates under any name other than the owner's personal name, it must be registered with the provincial government. This is necessary to obtain a master business license and to legally operate the business under that name.

💡Business Number (BN)

A Business Number (BN) is a unique identifier issued by the Canadian Revenue Agency (CRA) for tax purposes. The video clarifies that a BN is different from a Business Identification Number (BIN) and is essential for various tax-related activities. It is required for businesses that earn over a certain threshold or that participate in specific tax programs like GST/HST.

💡GST/HST

GST stands for Goods and Services Tax, and HST stands for Harmonized Sales Tax, which are types of value-added taxes in Canada. The video mentions that businesses earning more than $30,000 in a twelve-month period must register for GST/HST and charge this tax to customers. It is an important aspect of business taxation and compliance.

💡Domain Registration

Domain registration is the process of acquiring a unique domain name for a website. In the video, Adrian emphasizes the importance of registering a domain name to protect a business's online presence and brand identity. He suggests registering variations of the business name with different domain extensions, such as .com and .ca.

💡Trademark

A trademark is a legal designation that protects a brand name, logo, or other distinguishing features of a product or service. The video script touches on the topic of trademark registration as a way to protect a business name fully, which is more comprehensive than just registering a business name with the government.

💡NUANS Search

NUANS is a comprehensive name search system used in Canada to check the availability of a proposed business name against existing names. The video describes how to perform a NUANS search to ensure a business name is unique before registering it, which is a crucial step in the business registration process.

💡Personal Assets

Personal assets refer to an individual's possessions, such as a house, car, or savings, which are separate from business assets. The video script uses the term to highlight the risk in a sole proprietorship where personal assets can be at risk in the event of a business lawsuit, contrasting with the liability protection offered by a corporation.

Highlights

Starting a business in Canada is accessible to anyone without requiring a large initial investment.

A sole proprietorship is the simplest form of business and is recommended for new entrepreneurs.

Sole proprietorship allows business income to be taxed under your personal name, simplifying the tax process.

There is no legal separation between the business owner and the business in a sole proprietorship, exposing the owner to personal liability.

Incorporation is considered when a business earns significantly more and provides liability protection.

Starting a business as a sole proprietorship under your personal name incurs no government registration fees.

It is good practice to separate personal and business finances even without a legal requirement for a sole proprietorship.

Professional activities like law or medicine require licensing and cannot be started under a sole proprietorship without registration.

A business name other than the owner's personal name must be registered with the government.

A NUANS search is necessary to ensure the chosen business name is unique and not already taken.

Registering a business name provides a 90-day reservation and is a tax-deductible expense.

A master business license obtained after registration allows for business operations under the chosen name.

A separate business bank account is required once a business name is registered and not the owner's personal name.

Securing social media accounts and registering a domain name are crucial steps in protecting a business's online presence.

Technically, registering a business name does not enforce exclusivity, but legal action can be taken against infringers.

A federal Business Number is required for tax purposes and may come with additional suffixes for specific programs like GST/HST.

A sole proprietorship can be converted into a corporation for tax benefits and liability protection as the business grows.

Incorporate a business when earning a significant net income, typically over $100,000, to benefit from lower corporate tax rates.

Consulting with a lawyer and accountant is advised when considering personal liability and the decision to incorporate.

Transcripts

Hey guys, it's Adrian here, the Canadian in a T-Shirt.

Today, I'll be breaking down how to start a business and how to register your own business

in Canada.

Whether you just wanna start a side business, or you wanna build an entire company, there

are huge benefits to being a business owner.

It can be intimidating and you might not know where to start.

The good news is that anyone can start a business in Canada and you don't need a ton of money.

Plus, there are a ton of options.

I'll go over each of these to help you choose the right one.

I've already made an entire twenty-minute video on why you should start a business in

Canada, where I break down the financial and tax benefits of starting a business as well

as a few warnings to watch out for.

So make sure you watch that video first and then come back to this one.

Starting a business can actually be much easier than you think.

In fact, you can start a business right now without registering with the government or

paying any fees.

If you start a sole proprietorship business under your name.

A sole proprietorship is the simplest form of a business.

This is what I recommend to most entrepreneurs, especially when they're first getting started.

With the sole proprietorship, you are the business and the business is you.

There's no separation.

All of your business income, then net income after your expenses will be taxed under your

personal name.

This makes taxes very easy.

When you file your tax return, you combine your regular employment income from your full

time job with your net business income.

It's all done in one tax return.

With the sole proprietorship, it's very simple.

All of your business' money is your money, but you also get all the risks from your business.

There's no distinction between you and the business.

If something happens and your business gets sued, you get sued.

You can potentially lost your own personal assets.

Like, your house, your car, your savings, even if they have nothing to do with the business.

That's one of the main downsides to a sole proprietorship.

There's no liability protection.

If you're worried about potential lawsuits based on the nature of your business, you

might wanna consider incorporating.

Normally, incorporating only makes financial sense when your business starts earning a

lot more money.

I'll get to that later in the video.

When you're first getting started and you don't have a lot of money or income, a sole

proprietorship under your name is the way to go, and it really couldn't be easier.

You just operate your business under your personal name as an individual.

You don't need to register with the government and you don't have to pay any registration

fees.

With this approach, starting a business doesn't cost you a thing.

You just charge your customers under your name, and that money can go directly into

your personal bank account.

Legally speaking, you do not have to open a separate bank account for your business

unless you register a business name or set up a corporation, both of which I'll get to

later.

It’s definitely good practice to separate your finances and have your personal bank

account and business bank account separate.

This will make it much easier to track your revenue and your expenses so that your tax

returns and bookkeeping will be much simpler.

If your business ever gets audited by the CRA, there's a very clear money trail in your

business bank account, and they won't have to go through your personal bank accounts

or your personal credit cards.

Again, when you're first getting started, you do not need a separate bank account for

your business as long as you're running a sole proprietorship under your own personal

name.

This is a great option for all sorts of business activities, especially if you're working as

a contractor or a freelancer where your name is your brand.

Most of the businesses that I've started throughout the years have been sole proprietorships under

my personal name because it's so easy.

For many years, I worked as a contractor doing software development and I also had a side

business providing tutoring services for high school and university students.

All of this was done under my personal name without any government registration.

Just make sure you keep a record of all income from sales, as well as all business expenses,

including receipts.

Some types of business activities, called "professional activities" are regulated by

a governing body and so you have to get licensed.

For example, you can't just call yourself a lawyer or a medical doctor and start selling

your services to clients.

These professions are licensed and regulated by a governing body in order to protect the

public trust.

So there's no way to avoid registration.

For everything else, you can start a business under your personal name, worry-free, without

paying any registration fees.

This is great if you’re starting as a hobby, or if you're unsure if it will work out, or

how long you'll even pursue this business.

What if your personal name isn't good enough?

If your business is named “John Smith,” clients will have no idea what services you

provide.

If your business name was “John Smith Shoe Repair,” it's very clear and now clients

will start to come to you.

Since you aren't using your personal name, it gets a bit more complicated.

Now, you have to register your business and there's a few important steps to follow.

You need to register your business name, you need to protect your brand, and you need to

register with the federal government for taxes.

First of all, you'll need to come up with a business name that works and is available.

Your business name should be unique, and memorable, and it should give some clue to the services

you provide.

There are few rules that you must follow.

Obviously, no profanity or obscenities, and you can't be misleading.

For example, you can't call yourself a university, or a college, or a charity, and second mislead

the public.

You can't call yourself a corporation if you're opening a sole proprietorship.

A lot of people think that slapping on the word "incorporated" at the end makes them

sound more official.

You can't do that unless you're actually opening a corporation.

Once you have a name, you have to make sure that the name isn't already taken, so you

have to do a NUANS business name search.

NUANS allows you to search for all registered business names and trademark names across

Canada or a particular province.

In a few seconds, I'll show you how to do a preliminary NUANS search for free, but you

can also order a more comprehensive NUANS report for $13.80.

Here's what I suggest.

Start with the free NUANS search to see if your name is available and search on Google,

Facebook, and Instagram.

Once you're convinced that the business name is available, then order the official NUANS

report.

It will only cost you $13.80.

This is a business expense and thus it's a tax write-off.

When you order a NUANS report, they will reserve your name for you for ninety days.

A NUANS report is required for new corporations, but for some provinces, it's only optional

for sole proprietorships.

Even if it's optional, I still think it's worth the $14 just for peace of mind.

Now, let's see how to perform a free NUANS name search.

We start by going to nuans.com and choose your language.

Scroll down to the NUANS report, remember, the official report will cost $13.80.

We can do the preliminary searches for free.

So we click "Order a NUANS report."

Now we search for our business name.

Let's look at my business.

So we'll search "Canadian T-Shirt."

Right away and warns us that the name is already taken, and we can see a list of all the matches.

We can see my business, "Canadian in a T-Shirt" which I registered as an Ontario business

back in March of 2020.

Back then my channel was very small.

I only had about a thousand subscribers, and I wasn't even making any money yet, but I

knew that it was growing and worth investing in.

I registered the business name to protect my brand.

You can see some other similar business names.

Here, you can see that several months later, I decided to incorporate my business and that

I have jurisdiction both in Ontario and across all of Canada.

If you wanna order a full report and reserve your name, continue to the next steps.

Or you can click here to search another name.

Now that we know that the business name is available, it's time to register your business.

Remember, this is required if your business is operating under any name other than your

own personal name, and you must register your business in the province that you live in.

This isn't a federal registration, you'll be registering your business name with the

provincial government and different provinces have different rules.

I live in Ontario, so I'll be talking about the Ontario Business License.

In Ontario, it will cost you $60 to register a business name, and again, this $60 is tax-deductible

as a business expense.

This business registration is valid for five years, so every five years, you will have

to renew it and pay the fee again.

I'll include a link in the box below to register your business with ServiceOntario.

For other provinces just do a Google search.

After you register, you'll obtain a master business license.

Now, you can officially operate a business in your province using that business name.

This master business license will allow you to open up a bank account for your business

and now this is required.

You can't use your personal bank account anymore since you're not using your personal name.

If a client wrote out a check to John Smith Shoe Repair, John Smith, as a person, can't

cash it out to his personal account.

He needs a business account.

Now that your business name is registered, you'll want to take steps to protect your

brand.

So you'll want to secure an account for your business with Facebook, Instagram, and any

other social media platforms, and definitely register for domain name.

Even if you don't have a website yet, you still wanna register for domain so that no

one can steal it from you.

I personally recommend godaddy.com.

I've been using that for years and even before I made a single dollar from YouTube, I registered

the domain, Canadian in a T-Shirt, so that nobody could take it away from me.

It takes months or years to build your brand and your reputation.

If somebody takes your name before you, they can extort you for a lot of money, or they

can even force you to change your name and start from scratch.

If you use godaddy.com, it will cost you about $20 to register a domain name, and I'll include

a link in the box below.

Again, this is a business expense and it's well worth the money.

I recommend buying multiple variations of your domain name including .com and .ca for

Canadians.

When it comes to your business name, technically, just registering it doesn't fully protect

it.

The Business Names Act does not enforce the exclusivity of a business name for sole proprietorships.

Someone could technically register with the same business name as yours, but you can always

sue them for damages.

If you incorporate a business, then identical names are not allowed.

To get the most protection, you'll need to register for a trademark.

For most people, a trademark is definitely excessive.

If you're interested, definitely talk to a lawyer.

When you register a business name, you've registered with the provincial government,

but you also need to register with the federal government for taxes.

This is a common source of confusion.

With the provincial registration, you receive a master business license, and that includes

a Business Identification Number or BIN.

You also need to register with the federal government through the CRA and they will give

you a Business Number or BN.

These are two different numbers, even though they both have nine digits.

The BIN is used by the Ontario government to identify your business but the BN, the

Business Number, is used by the federal government for tax purposes.

The Business Number is much more important, and you can think of it as your social insurance

number for your business.

In most provinces, when you register for business name, you'll automatically registered for

federal business number as well.

If not, I'll include a link below to register for a business number with the CRA.

Remember, if you're just starting out, you do not need to register for a business number

with a CRA as long as you're running a sole proprietorship under your own personal name,

but there are a few exceptions.

If you wanna use a different business name, or if you'll be using any business programs

associated with the CRA, then you will need a Business Number.

This includes payroll for employees, GST/HST, import/export, and incorporating.

Even as a sole proprietor, if you hire employees, in order to pay your employees, you will need

to register with the CRA for payroll account, and thus, you'll need to register for a business

number.

If your business earns you more than $30,000 in a twelve-month period, you will need to

register for GST/HST account and so, you'll need a business number.

I'll be making a whole video on GST/HST for business owners because there are tons to

talk about.

Here is a quick summary, once your business earns more than $30,000 in revenue over four

consecutive quarters or twelve months, you must register for GST/HST.

Note, this $30,000 threshold is on your revenue before expenses, not your net income.

Once you're registered for GST or HST, you will have to charge your customers this extra

sales tax for your services.

This depends on your province, but in Ontario, HST is 13%.

You'll need to charge your customers an extra 13% on any sale.

Remember, this 30% is not your money.

It belongs to the government and you must pay it back.

Do not treat it as extra income.

Put that money in a savings account so that's there and ready to pay back when taxes are

due.

Also note, you can not charge your customers, GST or HST unless you are registered for the

GST/HST program.

This is illegal since you're essentially stealing an extra 13% from your customers.

Even if you make less than $30,000 in a year, you can always choose to voluntarily register

to the GST/HST program.

In some situations, this will actually save you money.

I'll be covering this in much greater detail in my upcoming HST video.

Another source of confusion is the difference between your Business Number and your GST/HST

number.

Your business number is a nine-digit number associated to your business for tax purposes.

It's like your social insurance number.

If you register for additional programs like payroll or GST/HST, they will attach a suffix

to your business number.

If your business number is 123456789, your GST/HST number would be 123456789RT0001.

The same nine-digit business number plus a program identifier, RT for GST/HST, RP for

payroll, and so on.

The 0001 is just a reference number.

For the vast majority of entrepreneurs, I suggest starting your business as a sole proprietorship,

either under your personal name or under a registered business name.

As I mentioned earlier, if you want liability protection from potential lawsuits, you'll

need to open a corporation.

With a corporation, you and the business are two separate entities.

Unlike a sole proprietorship, your corporation's money is not your money.

Your corporation is a separate legal entity, and this protects your personal assets in

the event of a lawsuit.

If someone sues your business, they can only come after your business' money, your personal

assets, like your home and your savings are safe, generally speaking.

In my past video, I discussed in detail the tax benefits of incorporating your business.

There's a lot to talk about and I'll be making multiple videos about corporations and if

incorporating makes sense for you.

Here's the bottom line, incorporating your business only makes financial sense when you're

earning a lot of money, more than $100,000 in net income.

That's because opening a corporation will cost you between $1,000 and $3,000.

On top of that, you'll be paying about the same every year to file your corporate tax

returns.

This is a significant upfront cost and so the lower corporate tax rates only really

make up for it when you're in a high tax bracket, above $100,000.

There are a lot more factors to consider which I will cover in the upcoming video, but here's

my advice.

When you're just starting a business, start as a sole proprietorship, and as your business

grows and your income grows, once you get to the high tax bracket, then you can convert

your sole proprietorship into a corporation to benefit from these lower tax rates.

That being said, some business activities are more likely to face a lawsuit than others.

If you are worried about the personal liability risk, you might wanna incorporate earlier

on.

It will cost you more money in accounting fees, but it will protect your personal assets

if your business ever faces a lawsuit.

This is something you should definitely speak about with your lawyer and your accountant.

There you have it, guys.

That's how you can start and register a business in Canada.

For most people, I suggest starting a sole proprietorship under your personal name to

avoid any registration and fees.

If you wanna operate under a different name, you will have to register that business name

with your province, and you'll need a business number from the CRA.

If you hire employees, you'll also need to register for payroll account.

If you earn more than $30,000 in twelve months, you'll need to register for GST/HST.

Once your business grows and you're in a high tax bracket, you might wanna consider incorporating

your business to enjoy that lower corporate tax rates and liability protection.

Thanks for watching guys, and be sure to like, comment, and subscribe, if you found this

video helpful.

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Thanks, everyone, and I'll see you guys on the next episode of the Canadian in a T-Shirt.

Bye guys.