How To Set Up a Sole Proprietorship in Canada

by David Ingram; Updated September 26, 2017

The sole proprietorship is the easiest business type to set up in Canada. In certain cases the provincial and territorial governments of Canada will view your business as self-employment for legal and tax purposes. Setting up a sole proprietorship in Canada involves registering a business name, purchasing liability insurance and filing for a federal tax number if necessary.

Items you will need

  • Small business attorney
  • Business plan
  • Business name

Registration, Insurance and Taxes

Step 1

Choose a name for your sole proprietorship and decide whether to apply for a trademark. A trademark is not a necessity, but it offers the highest level of legal protection. According to CanadianBusinessResources.ca, trademarked names for Canadian businesses must be descriptive, distinct and different from any other business name. An example of a name that meets these criteria is “Dave’s Candy Factory.” “Dave’s” satisfies the distinction requirement and “Candy Factory” fulfills the descriptive requirement.

Step 2

Perform a name search to ensure that your chosen name has not already been registered. You can choose to allow the governing authority to perform the search for you, but according to amazines.com, submitting your own name search results with your registration paperwork will help to expedite your registration.

Step 3

Register your company with the appropriate authority in your province; offices and requirements vary for different territories. Most provinces now allow you to register your business online as well as in person. Follow the link in this article to find a list of provincial and territorial government websites that contain the exact requirements for your chosen province. If you will be doing business in more than one province, you must register your business name in each.

Business name registration is good for three to five years, and must be renewed before or on the expiration date. Grace periods are allowed by certain provinces, but it is a good policy to submit your renewal fees early.

Step 4

Purchase business liability insurance. As a sole proprietor, you will be responsible for any claims against your business by creditors, which can result in personal financial difficulty if your business is not successful.

Step 5

File for a GST/HST registration number from the Canada Revenue Agency and begin to collect sales tax when your revenues pass $30,000. According to canada-esl.com, sole proprietorships in Canada do not have to file separate taxes until they reach $30,000 in annual revenue. As long as your revenue is under this level, all business income will be taxed as personal income, and all business losses can be included as personal tax deductions.

Warnings

  • Provincial governments will not send you notification of business name registration expiration. Keep your expiration date posted in a place that is regularly visible to ensure that you do not forget to send your renewal fee.

About the Author

David Ingram has written for multiple publications since 2009, including "The Houston Chronicle" and online at Business.com. As a small-business owner, Ingram regularly confronts modern issues in management, marketing, finance and business law. He has earned a Bachelor of Arts in management from Walsh University.