Freelancing is becoming a popular side (and main) hustle for a lot of Canadian workers. While it’s pretty easy to start freelancing, many find themselves asking, “do freelancers need a business license in Canada?” We’ve got the answers you need.
What is a freelancer?
First things first, what actually is a freelancer? The term freelancer refers to someone who is self-employed and is not necessarily committed to a particular company or organization. At any time, a freelancer often has multiple clients and is working on multiple projects.
It’s a business style that offers entrepreneurs the opportunity to work on their own terms, focus on projects that they love, and flex the skills they excel in. It can also be a great gig to start for those looking to make a little something on the side.
Some popular industries where you can find a freelancer include, but are not limited to:
Do freelancers run businesses?
A common misconception, even among freelancers themselves, is that freelancers are not business owners. They’re more often seen as gig workers or side hustlers and aren’t considered by their peers as someone like a tech start-up entrepreneur might be.
But in Canada, folks who freelance do, in most cases, run businesses.
The term freelance, in and of itself, does not have actual legal standing in Canadian business. Instead, many freelancers are self-employed and operate a sole proprietorship.
Sole proprietors do have a legal business standing, though the structure is not the same as you would find in an incorporated business. This legal structure means that the taxes that are paid on business income aren’t going to be treated the same as traditional employment.
This all equates to running a business.
But a simpler way to look at it from a practical perspective is that freelancers are tasked with getting clients to make money. They perform the same tasks that many traditional entrepreneurs would, such as marketing, invoicing, and expense reconciliation.
The big difference that many freelancers experience from a traditional business is that they work for and by themselves, with a few exceptions. Regardless, if someone is a freelancer, they run a business.
Canadian business licences
What is a business licence?
Business licences are documents issued by official government authorities. Depending on what type of business licence is issued, it gives permission to operate a specific business in the province, territory, municipality, or country.
While many businesses require licences, not all need to register for one; likewise, not all industries and sectors have the same business licence. The rules for licencing vary based on location and industry.
Do freelancers need a business license in Canada?
In many cases, freelancers are not required to have a business licence in Canada. This is true in most jurisdictions where the freelancer plans to work from home.
For example, a freelance writer who works from their home office and does not physically see clients at their place of business would not need a licence. However, if one was operating as a freelance hairstylist and seeing people in your home, you might require a licence in some jurisdictions.
There also might be other licensing and documentation requirements to operate as a freelancer. For example, while a business licence might not be required for a real estate appraiser that works from home, they will need to meet the requirements of the industry’s governing body.
How to apply for a business licence
However, not every licence is provided by the federal government. Provincial governments and municipalities also grant business licences, and how to apply for them can most often be found on their websites.
Do Canadian freelancers need a business number?
While a freelance business might not need a licence, it might need a business number. In Canada, this is provided by the Canada Revenue Agency or CRA. It helps to simplify dealings with government agencies.
Freelance businesses don’t necessarily need to start out with a business number, but when they reach the threshold that requires the filing of GST/HST, or sales tax, they will need it. In most cases, the threshold is $30,000 in revenue. A business number can be obtained even if a freelancer operates as a sole proprietorship.
How to incorporate a freelance business in Canada
For some running a business as a sole proprietorship, there comes a time where incorporation is the next best move. The steps to incorporating a business in Canada vary depending on the jurisdiction that you live in.
In Alberta, BC, and Ontario, Ownr can make incorporating more affordable and easier. For other jurisdictions, their respective websites or professional assistance can help find information on the official process.
While the process varies, incorporation in Canada generally takes the following path:
Name the corporation
Every corporation needs a business name. Much like people have legal names, this corporate name is its legal identifier. Businesses can have a legal name that is numbered or word-based.
Create articles of incorporation
Canadian corporations also need articles of incorporation. This paperwork is filed with the government body that oversees businesses in the jurisdiction it is being registered. They are necessary to register a corporation and include:
- Corporate legal name
- Address of the registered office
- Names and addresses of the directors for the Articles of Incorporation
- Citizenship status of the directors
- Share structure and revisions
- Restrictions for business activities or share structure transfers, if any
These need to be filed in the official language of Canada, either French or English.
Establish registered office and board of directors
Every Canadian corporation must also have a registered office where their articles of incorporation will be kept. This is also the address that official paperwork will be delivered to, which means it’s important to have access.
Pay the fee
Once the paperwork has been completed, you need to pay the incorporation fee of the jurisdiction you are registering in. This fee will vary depending on whether you are completing this yourself or have professional assistance.
Starting a business as a Canadian freelancer
Freelancing is one of the easiest (and cheapest) ways to start a business these days. In many cases, there is no need to rent a space, purchase stock or supplies or even do a ton of paperwork to get started. But it is important to remember that it is just that—a business.
So next time someone asks you, “do freelancers need a business license in Canada?”, you can tell them to make sure the proper research is done, that the legal loose ends are tied up, and to check out Ownr.
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.