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.