How To Start A Business in Canada: The Ultimate Guide 2024-25

Here is step-by-step roadmap from a brilliant idea to a fully operational business for you.

It’s everyone’s dreams that running own business can be an exciting and rewarding career. It gives a great opportunity for self-employment, developing something valuable for oneself, close ones, and the community as well.

However, getting a business off the ground is anything but easy as you think. Today out of 100%, 50% of new enterprises with between 1 to 4 employees fail to make it to their 5th birthday ever. It requires a lot of hard works, months of preparation, and perpetual creativity just to get through the tough times.

Although intimidating to some, keep in mind that millions of Canadians have already been able to do what you hope to accomplish. And with cautious planning, firm determination, and a little imagination, you can be among them.

This guide is for you to be a successful businessman. It will walk you through what you need to do in order to get started with your business. You will become more confident and develop the needed skills while you are building your business.

Business idea

Before investing in your company, it is a must to verify whether your idea really can succeed. As we live in an intercepting world, the time invested in researching now for the idea will be great and will have greater results afterwards.

→ What will make your company stand out from the crowd?

→ Who does this ideal target?

—> How much money will you need and where will you get it?

Start by doing market research

To be able to identify your profitable niche, you need to conduct an initial market research to identify who your customers are, what they need or desire. You need to study your competition and make sure you look out for recent gaps in the market that your business can exploit.

Your objective is to find the best product-market fit-the sweet spot where you sell to consumers and turn them into loyal advocates of your business. The Canada Small Business Hub features research tools for existing and future entrepreneurs to create and manage their business venture.

Start thinking about finance and find mentors

Presently is a good time to think about that how you are going to find the money to set up and run your first ever business. Nowadays more than ever, there are many of options available for everyone, and it’s a question of how choosing one that fits your needs. 

To assist further with this as well as other steps of the process, it is a best idea to consult an experienced mentor for you. If you are between age from 18 and 39 years, Futurpreneur Canada can help you in finding a mentor.

Types of Business Structures

The second step toward establishing your new business is to determine what type and how it will be. More importantly, there primarily exist 3 typical kinds of business structures in Canada, and each has its own advantages and disadvantages.

1. Sole Proprietorship – Being the easiest and least complicated to establish, a sole proprietorship is the very most common business entity amongst budding entrepreneurs. Before the law and taxation system, the business and the owner are taken as one and the same thing. The failure of it, though is that then all liabilities and debts the business has are taken on personally by the owner.

2. Partnership – In this form, a partnership is simply a proprietorship with two or more owners or depends. Like a proprietorship, it has no legal entity separate from its owners. Commonly, the partners have some kind of agreement that outlines the terms on how the revenues, expenses, and responsibilities are shared.

3. Corporation – An incorporation of a business is done by issuing shares of ownership. You thus have legal and tax separation between the business and the shareholders. You will also have tax benefits for owners whereby business debts have some limitation in going after the owners. Another advantage is that it may protect the name of the company. The incorporation of a company, however, has disadvantages in initial and ongoing legal and accounting fees.

How to Register a Business In Canada?

Incorporating your business involves the following steps for you:-

—> Federal / Provincial / Territorial Incorporation of your business

—> Obtain a federal business number and a corporation income tax account with the CRA

—> Extra- provincial registration in all other jurisdictions of Canada beyond your home province/territory.

Do Startups or New Business need to Pay Taxes in Canada?

If the total of your taxable revenues or income from sales of goods and services in Canada is $30,000 or more in any single calendar quarter or over a period of four or more consecutive calendar quarters, you must register for Goods and Services Tax/Harmonized Sales Tax. Please refer to this information on the official Canadian website of the Canada Revenue Agency.

You will be responsible to pay income tax on the funds you bring in. You will have to file a Tax return after your first year in business to figure out just how much tax, if any you owe. Income tax rules are vary depending on the province you live, the territory and the federal government. Generally speaking, it is advisable that the services of a Chartered Professional Accountant are engaged to assist one through yearly filings. Secondly and finally, there is also the CRA liaison officer service, which is a free service that gives small business owners and the self-employed information on their tax obligations and a number of their rights.

Naming Your Business

This is very challenging to Finding just the right name for your business can be pretty challenging. In real, it may be even more challenging than what you just think. Your business name should be distinctive, catchy, as well as above all, not taken. Most cases, it will be the first impression customers have of your first business ever, and so you want to make it count.

Consider the following inquiries:

—> Does the name clearly convey my business and the products/services I sell?

—> Does it come easily to mind?

—> Does it stand out and have its own special characteristics?

Legally, your business name cannot be identical or too similar in various contexts to another business or trademark. You should, therefore, do substantial research on your business name before settling on one. Most businesses will have to formally register their name with the government. However, if you are operating your business under your legal name and personal bank account, typically, there’s no need to formally register as a sole proprietorship.

Steps to obtain a business license

Sometimes you may also require special permits or licenses to operate your business. Try searching this site for what you need or contact your province, territory or local municipality for more information.

Protect intellectual property

Do you think that your ideas or inventions may need protection against copying? Take the time to learn about protecting intellectual property. To learn more, consult the CIPO website.

Now, create a business plan for your project.

Once you have a solid business foundation, the next task will be to write a business plan. The business plan is a description of your vision and, in very fine detail, how to accomplish that goal.

These are the basic elements your business plan should be explaining:

Executive Summary: An overview of your business plan in summary.

Company Profile or Description of Business: Under your company profile, you provide a description of the different products or services that your business will be offering. Also, in this section, you need to include markets you will serve and what the trend is in the industry.

Sales and Marketing Strategy: An identification of who your target customers will be, as well as a general method to be used in selling to and marketing the product or service to them. This section can also include information on pricing and distribution, and how you’ll actually get your products to your target customers.

Operations Plan: Information such as your location, equipment, production process, customer interaction, research and development, and/or any information that would play a crucial role in the operation of the business.

Human Resources: The plan delineates the number and type of personnel required, describes policies, and strategies for staffing, training and maintaining personnel. In many cases, this plan is incorporated into the operations plan.

Action Schedule: A calendar of key actions to be taken in initiating and conducting your business.

Financial Plan: Key financial data that include forecasted sales, expenses, cost of goods sold, cash flow, and a two-year budget. In most cases, the first 12 months is the key period.

In one document, the compilation of this information will not only facilitate your efforts to strategize your business effectively but will also provide any potential investor or lender with information necessary to make a financing decision.

Read BDC’s guide “How to Write an Effective Business Plan” for more on key elements of your business plan. Or you may want to read our related article on common mistakes to avoid when drafting your business plan. You can also count on BDC’s free business plan template to support you along the way.

Prepare a short pitch

What is more to your business plan, you should also create a pitch. This is a brief but persuasive presentation of your company, able to be shown in 60 to 90 seconds.

Today, not everybody have the time or desire to read your complete business plan. Also that is a good reason to be able to pitch your business to investors, lenders, partners, and potential customers in the length of time it takes to go up in an elevator to the top floor.

Most entrepreneurs initially finance their own money to start a new business; however, most startups eventually do seek outside funding.

Getting finances is a huge milestone for any startup. 

Two of the major kinds of funding include debt and equity.

Debt financing:-  This means you borrow money which you are obligated to repay. The money you borrow can be from banks and or from the private lenders. You will have to pay with interest(%) on the money borrowed and the money has to be repaid periodically, usually on a monthly basis or depends on terms.

Equity financing :- This means when an investor gives cash in exchange for ownership of your company. During there is no requirement to repay money, equity investors may still expect a say in some decisions of your business. This source of funds is provided by angel investors and venture capital.

Major sources of initial capital for new businesses.

Personal Investment

Investing in one’s self or one’s own growth and development.

You must be the very first investor when you start your business. When you use your own money or your assets as collateral, you can then show to investors and lenders that you, too are committed to your business over the long haul and willing to share some risk with them.

—> Money is in love with. 

This would include money provided by a spouse, parents, family, or friends. Many investors and bankers view this as patient capital that can be repaid later when your business has grown and becomes more viable. However, there are problems with borrowing from family or friends, and the professional boundaries of the relationship with family or friends must not be forgotten.

—> Business loans

Small as well as medium-sized enterprises largely depend on borrowing from banks and other financial institutions to raise capital. For new companies requiring small quantities of loans, online loan would be the best option. Several lenders currently employ algorithms and artificial intelligence to determine risk by considering an individual’s history of credit, income, home ownership, and outstanding debts. These are then matched against hundreds of thousands of other borrowers’ credits to determine whether they are suitable for a loan.

Specialized institutions like Futurpreneur, on the other hand, are good sources to check for your startup capital.

—> Credit cards and credit lines

Many naive business owners rely on credit cards and lines of credit, especially in financing. Convenient ways of accessing cash though they are, and despite frequent high marketing from banks, caution should be exercised. High, variable interest rates are common with them, and they can suck the life out of your cash flow. Generally speaking, a fixed-term loan is a better option since it often has a lower rate and fixed payments.

—> Financing and funding

There are different types of funding, financial support, and other financing options to help you at the beginning of your business. These funds are not repaid; however they can be minimal and sometimes not that accessible.

Use the Canada’s business benefits search tool to look for grants that fit your needs.

—> Accelerateurs de démarrage EN

While business incubators or accelerators do not supply any direct financing, they do provide very valuable opportunities for networking and accessing resources in the earliest stages of setting up a business. Most incubators and accelerators focus on the technology sector, but a number of economic development incubators foster the formation of startups in traditional industries as well.

Hiring Workers

As your company expands by the times, you will probably have to deal with hiring employees too. This becomes a daunting task for entrepreneurs, especially because of labor shortages across the country nowadays.

Read our study on labour gaps to discover why it’s happening and find four methods you can use to attract the best-and keep them. You can also visit the employee page on BDC’s website for a range of articles about hiring, retaining, and managing your staff.

How to Recruit Your First Employee Guide

When one needs a replacement, at times, it is important to try to avoid the pressure to rush through the recruitment process. Giving ample time to an intensive search can save you from many pains and loss of time when you happen to hire the wrong person.

Here are a few guidelines for recruitment of staff:

→ Prepare the jobs that you are hiring for with specific and detailed descriptions. The more specific you are, the better the candidates you attract.

→ Advertise the job on job boards, social media, and internally for maximum visibility.

→ Screen applicants carefully and choose top candidates to invite for an interview.

→ Make a list from your job description of the required skills, qualities, and education to base your judgment of candidates on.

 → Devise interview questions which would consider deeply going back into the candidate’s history and experience. You would want to know precisely how good they will fit in your organization and how good they will be for the job at hand.

→ Steer clear of personal and discriminatory questions relating to, for example: age, marital status, family circumstances, race, religion, or sexual orientation.

→  Consider giving applicants a project to complete that reflects the kind of work that would be required at your company.

→ Match applicants up against your needs and rank them based on your checklist.

→ When a candidate has been selected, request references and follow through to contact them.

→Once your choice is made and the references checked, it’s time to prepare an offer letter. This should include things such as: pay, hours of work, time off, and benefits.

→ When the individual is hired you will need to deduct the appropriate amount from their pay for the CPP, EI, and federal or provincial taxes.

Expanding Your Business

Starting up as well as running a business is just the first step of your journey as an entrepreneur. The very first year is especially going to be really challenging and tough as most businesses do not survive beyond this time.

You have to keep an eye on your daily activities as well as strategize for the development and growth of your company. This, in general, is referred to as the difference between being hands-on versus being strategic in the business.

After all, learning how to handle your cash flow is a very critical skill that may make all the difference between your success or failure. A cash flow diagram will help you project both receipts and payments for the purpose of averting financial crises.

Equally important will be being on top of your finances and learning self-management to manage your time effectively.

Everything you need to know to grow your business successfully in its first months can be found in the Growth Management Hub.