Step by step: How to register your Sole Proprietorship
The most common and most straightforward form of business is a sole proprietorship.
Because simplicity and convenience are favorable when starting a business, this is usually the best choice of legal structure for small businesses. This is the business structure we will be going over in this blog post for registering your business, and it is also the business structure that Small-Books specializes in.
It’s important to understand your legal obligations if you're starting a new business endeavor as a sole proprietor. By definition, a sole proprietorship is an unincorporated business that is owned by one individual, who in the eyes of the CRA is legally identical to their business. This comes with its own benefits as well as risks.
The legal obligations when registering a sole proprietorship or its name vary from region to region in Canada. To register as a sole proprietor or partnership, you may need to:
register with the provinces and territories where you plan to do business
get a federal business number and tax accounts with the CRA
apply for any permits and licenses your business may need
We will cover each of these points in this blog post.
Disclaimer: Please bear in mind that this article doesn't substitute accounting or legal advice.
STEP 1: Register your business name
Generally, the first step for new Canadian sole proprietors is to register the business name in the Register of Businesses. There are some exceptions to this, such as if you will be operating under your exact legal name. In Ontario, you may legally operate a sole proprietorship using your own name with no additions. If you choose to do this, there's no need for a business registration, as the CRA already recognizes your full legal name in relation to your business. (Be sure to check with your provincial or territorial business registrar for regulations in other provinces). An example of the use of additions to legal names would be "John Doe Consulting"; this would be considered as an actual business name, and treated the same as if you call your company something completely independent from your own name such as “Consulting R US”. In the case of operating under a unique business name like either of the two prior examples, you must register your business name with the provinces and territories where you plan to do business (except for Newfoundland and Labrador, where you do not have to register the name of sole proprietorships or partnerships at all). Sole proprietorships are governed under the provincial and territorial legislation in Canada, this is why the procedure slightly differs depending on the provinces or territories. Under the Ontario Business Names Act, fines of up to $2,000 can be levied against individuals for failure to register or for registering false or misleading information. So, although registering the name of your business doesn't provide you with exclusive use of the name, the minor fee of $60 through Service Ontario is well worth your while to operate under your desired business name.
You can use the links below to find the official website of your provincial or territorial government for specific information and to register your business name if needed.
Here is an overview of the registration in each province:
Alberta (in Alberta, registering a Business Name can't be done online)
British Columbia (Name Approval)
Manitoba (Business Name Registration)
New Brunswick (Registration of a Business Name)
Northwest Territories (Business name registration)
Nova Scotia (Reserving a business name)
Nunavut (Business registration)
Ontario (Business Name Registration)
Prince Edward Island (Business Name Registration)
Quebec (Register an enterprise)
Saskatchewan (Name Reservation)
Yukon (Business Names).
Note: This list of links is provided for your convenience. It may not be a comprehensive list of the registration requirements in all provinces and territories. Please check with the authorities in your provincial or territorial government to determine if there is anything else you need to do.
STEP 2: Register for a federal business number and tax accounts
Sole proprietors may need to register for a federal business number along with related tax accounts through the CRA. The Canada Revenue Agency (CRA) uses a Business number (BN) to communicate with Canadian businesses.
What exactly is the BN?
The BN is a nine-digit number the CRA assigns to your business as a tax ID. It's unique to your business and you will use it to deal with federal, provincial, or local governments.
When do you need a Business Number?
The CRA assigns a BN to your company in case you register for any of the four major program accounts needed to operate a business:
Goods and services tax/harmonized sales tax (GST/HST) in case your business collects GST/HST;
Payroll deductions in case your business pays employees;
Import/export privileges in case your business imports goods or sells goods or services abroad.
Corporate income tax in case your business is incorporated (not relevant to sole proprietorships, but may be down the road should you decide to incorporate);
You will need a BN if you will be using any of these four common CRA program accounts, or if you need to interact with other federal programs. Registering for one of these CRA programs will also automatically register you for a BN if you don’t have one already. Alternatively, the CRA program account will be added to your existing BN if you already have one.
If you don't fall under any of the four categories above, you won’t need to register for a BN. To be in this position, you would have to be a sole proprietor with no employees, who does not import or export goods/services, and is qualified as a “Small Supplier” (which means that you are making less than $30,000 annually from all your activities and are not required to register for GST/HST). In this case you could operate without a Business Number.
(To learn more about when and how to start charging the GST/HST, check out our blog post “The sole proprietor’s guide to: Taxes”).
If your situation changes and you hire employees or need to begin collecting GST/HST, you can register for the CRA program accounts at that time. Although you may need one or more CRA program accounts depending on your situation, you will only ever need one BN.
How do you get your BN?
When you register your business name (like we discussed in the first step) your federal business number is automatically assigned in the process if you registered in the following provinces:
Ontario
British Columbia
Manitoba
Nova Scotia
Saskatchewan
Alternatively, if you were not required to register your business name, you can apply online or call 1-800-959-5525 to get a BN and to apply for CRA program accounts. Consult the RC1 form to see the information you will need to provide.
STEP 3: Permits and licenses
You may also need permits and licenses from the federal, provincial/territorial and municipal governments you will be operating within. Consult this CRA-approved database for a list of permits and licenses you may need. It is searchable by city, municipality, or First Nation. Search by keyword if you're looking for certificates with a specific keyword in the permit name or description.
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This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Small-Books assumes no liability for actions taken in reliance upon the information contained herein.
