Have you ever dreamed of starting your own business? As stable, well-paying, 9-to-5 jobs seem to be increasingly rare, and stories of small start-ups morphing into million-dollar companies fill the internet, a growing number of Canadians are embracing entrepreneurship. If you’re hoping to one day be your own boss, check out our step-by-step guide on how to start your own business in Canada.
Starting Your Own Business: A Step-By-Step Guide
Step 1: Do Your Research
Before you spend a lot of time and money on trying to start a business, you need to solidify your business concept and—even more importantly—ensure there’s a market for your product or service. Dreams and passions are great, but they won’t get you very far unless you do your research and confirm that your business is viable. Just because you and your friends think that running a daycare for cats would be a thriving business, that isn’t enough to ensure it will be successful.
For example, if you’re planning on starting your own business in Ontario, the provincial government has fantastic resources, including free-market research services to better gauge if there’s a need for your product. Contact your local MPP or the Business Development Bank of Canada to see what may be available in your province, and consider some of the Best Business Ideas for Canadians.
Step 2: Develop A Business Plan
There’s a lot of legwork involved in turning a business dream into a reality. A detailed, well-organized business plan provides a kind of roadmap for would-be entrepreneurs to ensure they’ve thought of everything to make their business a success. Starting your own business in Canada involves hours and hours of exhausting and menial background work, and your business plan needs to account for all of those steps (tedious and time-consuming as they may be).
Possible elements to include in your business plan:
- Estimating start-up costs
- How to build financial reserves for hard times
- Estimate on when you’ll turn a profit
- Whether or not you’ll need to hire employees
- Ways to access extra funding
Step 3: Decide On A Business Structure
Another important step is determining what kind of business structure is right for you. The three main types of business in Canada are sole proprietorship, partnership and incorporation.
- A sole proprietorship is the most popular kind of business in Canada because it’s informal and you don’t need to incorporate it. It’s a business that is run by one person. If your business operates under your legal name without any changes, you may not need to register your business name. However, each province has its own rules about business registration, so check with your provincial business authority.
- A partnership is similar to a sole proprietorship, but there are two or more people running the business. Business partners usually have a contract that governs each person’s rights and obligations.
- Incorporation is when your business operates as a separate legal entity. It is the costliest form of business to set up, but it affords numerous benefits to business owners like limited liability and a more favourable tax status. Incorporating is usually advisable for large businesses.
It’s important to fully understand that each of these types of structures has its own legal and tax responsibilities. Additionally, whether or not you’ll be required to register an official business name also depends on what form of business you opt to go with. Because selecting a business structure has so many ramifications, it’s worth consulting with a lawyer or accountant who specializes in small businesses to see which one would work best for your needs. Read more about the types of business structures and how to choose.
Step 4: Apply for a Small Business Loan
When it comes to figuring out how to start your own business, getting help with its financing can feel daunting—but it doesn’t have to be. The federal government has numerous helpful resources on government financing programs, grants and financial assistance. There’s also a wide variety of accessible business loans available to Canadians starting a business.
For example, Loans Canada is an online lending platform that gives borrowers access to a large pool of lenders offering business loans of up to $500,000, starting at 4.70%. The federal government also has numerous helpful resources on government financing programs, grants and financial assistance.
Moves Financial is also a solid choice: it’s the first financial services platform specifically for independent “gig” workers. Without relying on credit scores, Moves offers up to $2,500 in low-interest loans (with no early repayment fees) to independent workers.
A small business loan can serve many purposes: from providing start-up funds to surviving a slow period, it’s a good idea to explore what’s out there and how a loan can help launch your future biz.
Step 5: Set Up A Bookkeeping System
Shoving receipts into a drawer is no longer going to suffice as a bookkeeping system once you’ve started your own business. Because you’re allowed to deduct eligible business expenses at tax time, you’ll need to maintain scrupulous records of business-related purchases. You’ll also need to have exact numbers when it comes to your business earnings, too.
You can keep track of your expenses with an Excel spreadsheet, use online software like Quickbooks, or hire a bookkeeper. As a sole proprietor, I find paying a professional accountant to calculate my income tax and eligible deductions saves me major headaches at tax time. It also forces me to maintain detailed records of my earnings and expenditures.
Step 6: Organize Business and Personal Expenses
Office supplies and coffees with clients add up but are easily forgotten if you’re charging business expenses onto a personal credit card. For small business owners, a business credit card is essential to staying organized, and come tax time, getting more money back on your tax return. It helps track your expenses and serves as a source of funds when cash flow is tight.
There’s an incredible variety of business credit cards designed with the particular needs and expenses of an entrepreneur in mind. Some also offer loyalty or rewards programs that could help support your business with redeemable points for flights or cash back perks.
Step 7: Register and Start Charging GST/HST
When starting your own business in Canada, it’s crucial to be aware of your GST/HST responsibilities. Generally speaking, once your business earns more than $30,000 in a calendar year, you must register for the goods and services tax (GST)/harmonized sales tax (HST). Keep in mind the amount you charge will depend on which province you live in. You will then be expected to charge GST/HST for your products and/or services and remit the amount to the government at tax time. The good news is that you can recoup some of the GST/HST you paid on business-related expenses.
Pros and Cons of Starting Your Own Business
- Being your own boss
- Doing something you love and feel passionate about
- Embracing innovation and your creative potential
- Better income potential
- Becoming an integral part of your community
- The financial cost of setting up a business
- May not generate a profit for a year or longer
- Risk of failure and financial losses
- The stress of setting up and managing a new business
- Long work hours, especially at the beginning
The Last Word
Starting your own business in Canada may seem daunting but it doesn’t have to be. Just be realistic and practical about the time, money and amount of work an entrepreneurial endeavour can really take. Pre-planning and a definitive plan of action are the keys. Armed with knowledge and a commitment to work hard, you can bid adieu forever to a boring and unfulfilling 9-to-5 job.