Are you interested in starting your own business, but not sure what kind of business license(s) you’ll need in order to comply with Canadian laws?
You’re not alone. The process can be confusing, particularly since there are so many different licensing requirements depending on factors like where you plan to conduct business, your business structure, and your industry. But don’t worry, because we’re here to walk you through what a business licence is, when you need one for your business in Canada, and how to get one no matter which business structure you choose.
What is a Canadian business licence?
Generally speaking, a business licence is an official document issued by the government that allows you to conduct business in Canada. There are different licensing requirements at different levels of government, so you need to make sure to comply with all permits, licences, and regulations at a federal, provincial, territorial, and municipal level.
In addition to location-specific requirements for business licensing, the regulatory requirements for your business will vary depending on factors like your industry sector and business structure.
Why do you need a business licence to start a business in Canada?
If you don’t obtain the proper licensing for your business, you could get in real trouble: your business may be fined or even forced to shut down. Plus, your reputation may take a hit when consumers find out you aren’t running your business with the level of professionalism they expect.
Depending on your business structure and other factors, you may not be legally required to obtain a business license in order to operate. However, there are a number of benefits to registering your business, such as access to business tax benefits, the ability to apply for business loans, and even industry discounts from suppliers.
What are the licensing requirements for a business to operate in Canada?
As we’ve already mentioned, the licensing requirements for your business will vary depending on factors like your business structure, where you plan to operate, and your industry. We’ll talk more about business structure later on, but first let’s take a look at how your business location and industry can impact which licences you need.
When it comes to business licences, each province and territory has its own specific rules, which you should be able to access online. Similarly, your business licensing requirements will change depending on the industry your business operates in. For example, certain industries including mining, forestry, tobacco, fuel, and fishing may require specific permits depending on your business location.
In addition to location and industry, your licence requirements will vary based on whether your business will need additional permits like a building permit, workplace insurance, employment insurance, or health permits.
The easiest way to find out what business licence applications you need to submit for your business is using BizPal, which is a free service provided by the federal, provincial/territorial, municipal governments, and First Nations, that lets you search for required permits and licences by location and industry.
Sole proprietorship vs. corporation: which is better?
Now that you know about location and industry requirements for business licensing, it’s time to decide which type of business structure you will have. The business structure you choose determines whether you need to register your business or incorporate.
In order to help you choose the right business structure for your specific needs, we’ll go over the pros and cons of organizing as a sole proprietorship or as a corporation.
- You’re the only one in charge, so you make all the decisions.
- You don’t have to split profits with anyone.
- It’s easy to register as a sole proprietorship, and the registration cost tends to be lower.
- The tax process is more straightforward.
- You’ll be personally liable for any business debts or losses.
- Your business taxes will be charged at your personal income tax rate rather than a tax rate based solely on your company’s business income.
- Your capacity for growth is limited.
- Your business name will only be protected in the province you register in, meaning someone in a different province or territory could use the same name for their business.
- Your business will be considered a separate legal entity, meaning that you are not personally responsible for any debts incurred by the corporation.
- You’ll have access to fundraising options like angel investors or venture capitalists that aren’t available to sole proprietorships.
- Corporations have lower tax rates and other tax advantages.
- There are additional tax requirements for corporations, and the process of filing taxes is more complex.
- It may be more expensive to set up a corporation compared to a sole proprietorship, and ongoing management tends to be more complex and time consuming.
Ultimately, there is no single best business structure for every situation. Rather, you need to determine which business structure is best for your business based on the factors we’ve just outlined.
Steps to get a business licence in Canada
Once you decide on your business structure, you’ll be able to determine the licensing requirements for your business. Let’s go over the different business types in Canada, and the steps you’ll need to follow in order to obtain the necessary business licenses for each of them. Don’t have a business registered yet? Ownr can help you get your sole proprietorship or incorporation off the ground today.
A sole proprietorship is the most basic type of business structure for businesses with only one owner. Here are the steps you’ll need to get licensed as a sole proprietorship in Canada.
- Choose your business name.
A sole proprietorship is the only business structure where, depending on the name you choose to operate under, you may not be required to register your business.
If you operate your business using your legal name, your province or territory’s business registrar will inform you whether or not you need to register your sole proprietorship. Keep in mind that, even if you don’t have to register your business, you still need to comply with municipal licensing rules.
If you’d rather create a new name that aligns with your business voice, start by researching to make sure the name you have in mind isn’t already trademarked or incorporated. A NUANS search isn’t required for a sole proprietorship, but it can be an effective way to make certain your business name isn’t already in use and avoid future issues.
- Register your business with your province or territory (if necessary).
- Apply for relevant licenses.
- Get a sales tax number.
If your business will make over $30,000 per year, you need to charge GST and HST. This means you may need a business number.
A corporation is considered a separate legal entity, meaning you will not be personally liable for debts or losses incurred by your business. Here are the steps to getting your business licensed as an corporation:
- Find an available business name.
- Choose whether you want to incorporate federally or provincially.
If you incorporate federally, you will have wider rights to conduct business across Canada. The process of incorporating may or may not end up being more expensive if you choose to incorporate federally instead of provincially.
- Prepare your Articles of Incorporation, which are required for filing your incorporation application.
- Prepare your Minute Book, another requirement for a corporation’s official record.
A partnership structure is similar to a sole proprietorship, but it allows multiple partners to share the business liability, decision making, and profits or losses. While it’s not required, it’s a good idea to create and sign a written agreement detailing things like partnership rules, division of labour, and income sharing. Here are the steps to licensing a partnership:
- Name your business.
- Register your business with your province or territory.
- Obtain a federal business number and related tax accounts with the Canada Revenue Agency (if necessary).
- Apply for all necessary permits and licenses at a federal, provincial/territorial, and municipal level.
- You may be required to register for GST/HST if you provide taxable supplies.
A cooperative is a democratically-controlled type of incorporated business. Here are the steps to license a cooperative:
- File your application with Corporations Canada.
Your application must include a number of forms and other information, including:
- A cover letter with contact details and information on the type of cooperative you are starting.
- Signed forms for your Articles of Incorporation and Initial Registered Office Address and First Board of Directors.
- A NUANS name search report that is no more than 90 days old.
- A filing fee.
2. Obtain any necessary licenses
The difference between a nonprofit and any other business structure is that nonprofits provide a product or service that benefits their community in some way. Here are the steps for licensing your business as a nonprofit:
- Decide if you want to incorporate federally or provincially.
- Submit your application, including a recent NUANS search, Articles of Incorporation, and more.
- Apply for necessary permits or licenses.
Frequently Asked Questions
Can I start a business without registering it in Canada?
Short answer: yes. However, you can only do this if you operate as a sole proprietorship under your own legal name and your province or territory doesn’t require you to register your business. Even if you’re not required to register, there may be licences required depending on your location and industry.
Do you need a business licence to sell online in Canada?
Online or home based businesses are ultimately no different from brick and mortar locations. Regardless of whether you operate in person or online, your licensing requirements are determined by your business structure, location, and industry.
Do I need a business licence if I’m self employed?
If you operate under your legal name, you don’t necessarily have to register your business. However, the licenses you require will depend on a variety of factors, like the type of business you conduct and where you operate.
There are so many factors that determine what kind of licensing you need to obtain for your business in Canada. The main thing to remember is to check requirements at all levels of government, as well as for your specific industry, operating locations, and business structure. It may feel overwhelming at times, but the more information you have when it comes to starting your own business, the better equipped you’ll be for success.
This article offers general information only, is current as of the date of publication, and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While the information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by RBC Ventures Inc. or its affiliates.