Info-Guide – Starting your business

Now that you have decided to start your own business, you will have to determine what business structure or form of organization suits your needs. The structure of your business will depend on whether you want to run your business yourself or with a partner or associates. There are four types of business structures: sole proprietorships, partnerships, corporations and cooperatives.

Sole proprietorship

With this type of business organization, you would be fully responsible for all debts and obligations related to your business and all profits would be yours alone to keep. As a sole owner of the business, a creditor can make a claim against your personal or business assets to pay off any debt.

Advantages:

• Easy and inexpensive to form a sole proprietorship (you will only need to register your business name provincially)
• Relatively low cost to start your business
• Lowest amount of regulatory burden
• Direct control of decision making
• Minimal working capital required to start-up
• Tax advantages if your business is not doing well, for example, deducting your losses from your personal income, lower tax bracket when profits are low, and so on
• All profits will go to you directly

Disadvantages:

• Unlimited liability (if you have business debts, personal assets would be used to pay off the debt)
• Income would be taxable at your personal rate and, if your business is profitable, this may put you in a higher tax bracket
• Lack of continuity for your business, if you need to be absent
• Difficulty raising capital on your own

Partnerships

A partnership is a good business structure if you want to carry on a business with a partner and you do not wish to incorporate your business. With a partnership, you would combine your financial resources with your partner into the business. You can establish the terms of your business with your partner and protect yourself in case of a disagreement or dissolution by drawing up a specific business agreement. As a partner, you would share in the profits of your business according to the terms of your agreement.

You may also be interested in a limited liability partnership in the business. This means that you would not take part in the control or management of the business, but would be liable for debts to a specified extent only.

When establishing a partnership, you should have a partnership agreement drawn up with the assistance of a lawyer, to ensure that:

• You are protecting your interests
• That you have clearly established the terms of the partnership with regards to issues like profit sharing, dissolving the partnership, and more
• That you meet the legal requirements for a limited partnership (if applicable)

Advantages:

• Easy to start-up a partnership
• Start-up costs would be shared equally with you and your partner
• Equal share in the management, profits and assets
• Tax advantage, if income from the partnership is low or loses money (you and your partner include your share of the partnership in your individual tax return)

Disadvantages:

• Similar to sole proprietorship, as there is no legal difference between you and your business
• Unlimited liability (if you have business debts, personal assets would be used to pay off the debt)
• Hard to find a suitable partner
• Possible development of conflict between you and your partner
• You are held financially responsible for business decisions made by your partner (for example, contracts that are broken)

Corporations

Another type of business structure is incorporation. Incorporation can be done at the federal or provincial level. When you incorporate your business, it is considered to be a legal entity that is separate from the owners and shareholders. As a shareholder of a corporation, you will not be personally liable for the debts, obligations or acts of the corporation. When making such decisions, it is always wise to seek legal advice before incorporating.

Advantages:

• Limited liability
• Ownership is transferable
• Continuous existence
• Separate legal entity
• Easier to raise capital
• Possible tax advantage as taxes may be lower for an incorporated business

Disadvantages:

• A corporation is closely regulated
• More expensive to incorporate than a partnership or sole proprietorship
• Extensive corporate records required, including shareholder and director meetings, and documentation filed annually with the government
• Possible conflict between shareholders and directors
• Possible problem with residency of directors

More information:

To learn more about incorporation, please consult the following information:

• Federal cooperatives 

  Find out how to incorporate and maintain a federal cooperative in Canada.

• Registration with the Commission des normes, de l'équité, de la santé et de la sécurité du travail (in French only)

  You are required to register with the CNESST if you have paid employees and your business is located in Quebec.

• Steps to incorporating 

  Follow these step-by-step guidelines to help you incorporate your business federally and set up an appropriate structure.

Provincial incorporation

• Constitute a Quebec business corporation 

  Learn the steps to constitute your business corporation in Quebec, especially the forms to be filled out and the application process.

Cooperatives

The last business structure you could create is a cooperative. With a cooperative, you would have a business that would be owned by an association of members. This is the least common form of business, but can be appropriate in situations where a group of persons or businesses decide to pool their resources to provide access to common needs, such as the delivery of products or services, the sale of products or services, employment, and more.

Advantages:

• Owned and controlled by members
• Democratic control (one member, one vote)
• Limited liability
• Profit distribution

Disadvantages:

• Possible conflict between members
• Longer decision-making process
• Participation of members needed for success
• Extensive record keeping
• Less incentive to invest additional capital

More information

To learn more about cooperatives, please consult the following information:

• Federal cooperatives 

  Find out how to incorporate and maintain a federal cooperative in Canada.

• Setting up a cooperative (in French only)

  Do you want to create or start a cooperative? If so, learn more about the laws, programs, policies and tools related to starting a cooperative.

• Futurpreneur Canada resources for social enterprises 

  Discover resources to help you start a business with a social purpose. Find tips, tools, guides, plans, and more.

Non-Profit Legal Person or organization

The Registraire des entreprises du Québec defines a non-profit legal person, also called a non-profit organization (NPO) as follows: “a group of individuals who do not intend to make pecuniary gains to distribute among the members of the group. Such a legal person is a separate legal entity and, accordingly, has its own specific rights and obligations.”

• Creating a non-profit corporation or organization 

  Learn the major steps for establishing a non-profit corporation or organization in Quebec.

• Becoming a registered charity for community economic development 

  Your social enterprise may be eligible for charitable status, making your earned income tax exempt. See how your social enterprise may qualify.

• Futurpreneur Canada resources for social enterprises 

  Discover resources to help you start a business with a social purpose. Find tips, tools, guides, plans, and more.

Joint ventures and partnering

A joint venture involves two or more businesses pooling their resources and expertise to achieve a particular goal. The risks and rewards of the enterprise are also shared.

The reasons behind forming a joint venture include business expansion, development of new products or moving into new markets, particularly overseas.

• Joint ventures and partnering 

  Get an overview of the key ways to set up a joint venture, the pros and cons of joint ventures, and learn how to manage this type of company.

Changing your legal status

Are you planning to change the legal status of your business — for example, from sole proprietorship to partnership, or from parternship to corporation? In most cases you will have to close your existing business number (BN) and CRA accounts and register for new ones.

Although business plans vary in terms of length and scope, all successful business plans contain common elements. The plan should take into consideration your particular business and its environment.

Know what elements are considered essential in any business plan and the key points that should be included in each section of your plan presented in our Info-Guide Write your businress plan.

Choose the name for your business carefully. It will precede you wherever you go!

What's in a name?

The right name can be an effective advertising tool that can help your customers understand what your business does and which market you are targeting. The wrong name can confuse or drive away customers.

Some things to think about:

• Does it describe the product or service you offer?
  You don't want to waste your customers' time or give them the wrong impression about your products or services, especially when you can't always control the context in which they first see or hear about your business.
• Does it reflect the values of your business?
  Think about how you want your business to be perceived.
• Is the name distinctive?
  It's important to separate yourself from the competition and allow customers to identify you as a unique brand. Choose a name that doesn't already exist in the market. Unless you plan to have a fairly robust marketing strategy, keep your name simple and avoid abbreviations and acronyms.
• Can customers identify and remember it?
  Names that are easy to pronounce and spell will help customers remember you. It may be tempting to choose a name that has personal significance, but put yourself in the customer's shoes
• Are you legally allowed to use it?
  By law, the name of your business can't be the same as (or very similar to) an existing corporate name or trade-mark. You'll want to do an online name search once you have an idea for a name, to be sure that it's unique.

Some aspects of selecting a business name are subjective, and you may come across advice that is based on people's personal preferences or experiences, and not on practical evidence. If you need assistance, you can hire a professional to help you with creating a name and navigating the trade-mark laws.

Learn more about choosing and protecting your business name, as well as naming a corporation.

• Naming your business 

  Consider these important factors before choosing the name of your company.

• What's in a name? Using trademarks as a business tool 

  A trademark helps identify your company and your products. Find out how to use a trademark to protect your business name.

Your business name and your Web domain name

Before you register your business under the name you've chosen, give some thought to your online presence as well. Even if you aren't planning to establish a website immediately, you may want to do so in the future. As with your business name, you'll want your domain name to be unique and distinctive.

• If someone else already owns the rights to the Web domain name you've selected, you may end up sending a lot of business their way or making it difficult for customers to find you. If the domain is already taken, you may wish to choose a different business name.
• If your business name is very long, you might want to think about having a shortened version of it for your domain name, which will be easier to remember and to type.
• Think about what category of domain extension you might want; for example, .ca (Canadian), .com (commercial), .org (organization), or other extension.
• You may want to have multiple domain names or domain extensions; for example, one dot ca and one dot com, or one with the long version of your company name and another with an acronym. You might even choose different domains for different business lines.
• Take a close look at your domain name, especially if you are combining words or using phrases. Because there are no spaces in a domain name, you don't want any unintentional meanings to crop up

Have a domain name in mind? Learn more about domain names, check the availability of your chosen domain, and find out how to register it:

As a prospective entrepreneur or new business owner, you are no doubt aware of the importance of spreading the word about your organization. In addition to informing potential customers about your business, you must let the government know about your plans.

You may need to register with several different levels of government for many different reasons. This document provides an overview of the key registration requirements that may apply to your business.

Business Number

• NEQ — Quebec Enterprise Number (in French only)

  Simplify and speed up your dealings with the various Quebec government departments and organizations by registering with the Registraire des entreprises [Quebec enterprise registrar].

• Business number registration 

  ​Canada Revenue Agency
  ​Your Business Number is your single account number for dealing with the government regarding GST/HST, payroll, import/export and other activities.

Business registration

• Business registration online 

  Register for a business number, GST/HST, corporation income tax, payroll and import/export accounts in one convenient online location.

• Registration with the Commission des normes, de l'équité, de la santé et de la sécurité du travail (in French only)

  You are required to register with the CNESST if you have paid employees and your business is located in Quebec.

Incorporation

If you decide to incorporate your business, you can incorporate federally or provincially.

Federal incorporation allows you to do business under the same name in all provinces and territories, although you may still need to register your business in individual provinces and territories. If you do plan to do business in more than one province or territory now or in the future, you should consider incorporating federally. Before doing so, you need to complete a NUANS name search.

Federal incorporation

• Steps to incorporating 

  Follow these step-by-step guidelines to help you incorporate your business federally and set up an appropriate structure.

• Federal incorporation 

  Innovation, Science and Economic Development Canada - Corporations Canada
  Access convenient online or paper methods of incorporating your business federally.

Provincial incorporation

• Constitute a Quebec business corporation 

  Learn the steps to constitute your business corporation in Quebec, especially the forms to be filled out and the application process.

• La Zone entreprise (in French only)

  Take advantage of this secure space to access Government of Québec services online, to change your address and to meet your obligations.

Get information on provincial tax benefits and find out how to collect sales tax from your local and out-of-province customers.

Canada

• Tax information for business 

  Access Canada Revenue Agency's business section to browse the tax-related information that you need.

• Businesses video gallery 

  Canada Revenue Agency
  Find tax information for business owners. View a selection of online videos offered by the Canada Revenue Agency or register for other information sessions and seminars.

Québec

• Revenu Québec — Business Portal 

  Is your business based in Quebec? If so, learn about your fiscal obligations including taxes and deductions.

Entrepreneurs often report that getting financing is the most challenging aspect of starting a business. There are both government and private-sector sources of financing that you can tap into to get your business off the ground.

Government financing

The government provides financing to help entrepreneurs like you start a business. Some of this financing is targeted at specific demographic groups or industry sectors, and some is more widely available. The financing includes grants and contributions (which generally do not have to be repaid) and loans and loan guarantees (which generally do have to be repaid).

Consult our directory of the main funding programs available to help you start your business.

Private-sector financing

You can also turn to the private sector for financing for your business. You can look to Canada's major financial institutions, such as banks, credit unions, and cooperatives. Depending on the type of business you want to start, you might also be able to secure venture capital or financing from angel investors.

Trying to decide where to locate your business and how to arrange it once you get there? Review these resources and consider your options.

• Home-based business 

  Consider the many factors involved to be sure that working from home is the best choice for you.

• Choosing and setting up a location 

  Learn about the many things to consider before choosing the location of your business and organizing your office, store or facility.

• Understanding your business lease 

  Learn about the different types of commercial leases, and your rights and obligations as a tenant.

• Guide Localisation écoresponsable des bureaux [PDF](in French only)

  Use these practical sheets to choose a location with high added value in an environmentally responsible way.

• Localisation écoresponsable des bureaux (in French only)

  Evaluate online for free the eco-responsibility index for the location of existing premises or building sites in order to select the best location for your company.

You may require specific permits and licences from the federal, provincial or municipal government, depending on your location, industry sector, and specific activities that you plan to conduct.

• Permits and licences (BizPal) 

  Use this tool to find federal, provincial/territorial and municipal permits and licences that you may need to start your business.

Get advice on recruiting, hiring and managing relationships with your employees, and learn about your ongoing responsibilities such as payroll, pension, taxes, compensation, health and safety.

Hiring employees

• Recruit and manage salespeople 

  Learn where to find salespeople, the importance of the recruitment interview and how to institute a commission structure to encourage high sales.

• Job Bank 

  Service Canada
  Post jobs in the Job Bank and find qualified candidates to fill positions.

Your obligations

• Employer responsibilities — The payroll steps 

  As an employer, you must follow a number of steps for managing your employees' payroll. Understand your obligations.

• Employment standards 

  Learn about the federal and provincial employment standards with which you must comply.

• Registration with the Commission des normes, de l'équité, de la santé et de la sécurité du travail (in French only)

  You are required to register with the CNESST if you have paid employees and your business is located in Quebec.

Managing your employees

• monCalcul (in French only)

  Calculate the benefit amount to which your employees are legally entitled for common situations such as vacation days, statutory holidays and overtime pay.

Training your employees

There are many types of training for employees. The ones you choose will depend on your requirements, your work environment, and your preferences. Improving fundamental skills can help lead to success in your workplace.

Find training that meets the needs of your business, from language skills to apprenticeship.

• Essential Skills Tools 

  Use these free, customizable tools to assess and improve the skills of your employees and to better understand essential skills.

• Workforce training measure 

  Emploi Québec
  Get a contribution of up to 50% in training costs to support the development of the professional skills of your workers and to counter the risk of job loss.

You could take advantage of non-financial resources to succeed in your business venture.

You can also visit our website for more content related to startup.

---

Disclaimer

The information available on the Info entrepreneurs website comes from a range of government and private sector sources. Because of its general nature, the information cannot be considered exhaustive and must not be used in lieu of legal or professional advice. The information is updated regularly, however, certain details may not reflect recent changes.