Once you’ve developed a business idea, there are a few important things you need to consider before you can register with the government: you must decide on how your business will be organized, and what you want to call your business.
Types of Business Structures
There are three main ways to structure your business in Canada: sole proprietorship, partnership, and corporation. For a more in-depth look at business structures, read The 3 Most Common Business Structures. You need to decide which type is best suited to you and your needs.
Sole proprietorship: This is the simplest and most straight-forward business type. You are the sole owner, meaning that you are fully responsible for all debts and obligations related to your business, and all of your profits are yours to keep. One major disadvantage of being a sole proprietor is that since you are personally liable for your business, a creditor can therefore make a claim against your personal assets as well as your business assets, in order to satisfy any debts.
Partnership: A partnership is a non-incorporated business that is created between two or more people. In a partnership, you and your business partner(s) combine your financial resources to run the business, and you also share the business’ profits. When you establish a partnership, we recommend hiring a lawyer or other legal professional to help you draw up a partnership agreement. This is important because it establishes the terms of the partnership and can help you avoid disputes later on.
There are three primary types of partnerships: general, limited, and limited liability. In a general partnership, each partner is jointly liable for the debts of the partnership. In a limited partnership, a person can contribute to the business without being involved in its operations. A limited liability partnership is typically only available to a group of professionals, such as lawyers, accountants, or doctors.
Corporation: When you choose to incorporate your business, it becomes a legal entity that is separate from its shareholders. As such, you will not be personally liable for the debts, obligations, or acts of the corporation. Incorporation can be done at the federal or provincial/territorial level, depending on your industry and where you intend to operate. Before incorporating your business, we recommend seeking legal advice to help you complete the process properly.
Naming your Business
Before you register, you need to decide on the right name for your business. Your business name should be unique and easy to remember, and ideally it should also describe the products and services you provide.
By law, you must choose a name that is distinctive – the name of your business can’t be the same (or very similar to) an existing corporate name or trademark in Canada. Once you have an idea for a business name, do an online search to be sure that it’s unique. For more help in choosing an appropriate business name, please visit the Government of Canada’s Choosing a business name page.
Once you’ve determined what type of business organization you want to start and what your company’s name will be, you’re now ready to register your business through the necessary levels of government. You may also require specific permits and licences from your municipal government, depending on your location and the business activities you plan to conduct (for example, if you plan to open a restaurant that sells liquor, you will need to apply for a liquor license). For more information and to get the registration process started, please visit the Government of Canada’s Registering your business site.
The ACCES Employment Entrepreneurship Connections program is designed for newcomers who plan to start a business in Canada. If you have owned or operated a business outside Canada, this innovative and informative program could help you use that experience in the Canadian market.