This article is for informational purposes only and does not constitute legal, accounting, or tax advice. The information contained herein is subject to change and may vary from time to time in your region. For specific advice applicable to your business, please contact a professional.
You’re not alone in your desire to start a small business. There are more than a million businesses in Canada. In fact, just under 100,000 big and small businesses are formed every year. It takes a certain type of brave-hearted individual to start a venture from scratch. And while it might sound like the stuff of fairy tales, it could become a real, rewarding life if you know how. So, how do you start a business in Ontario?
You can start a small business in just a few steps:
- Decide what kind of business you’d like to own.
- Write out a business plan.
- File all the necessary paperwork.
- Raise funds.
And voila! You’re a business owner!
But not so fast. There are five things you should know before you begin:
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Step 1: GST and HST Registration
For instance, the Goods and Services (GST) and Harmonized Sales (HST) Taxes apply to all areas of Canada. In Ontario, the previous Retail Sales Tax of 8% was combined with the 5% GST to create the HST in 2010. In Ontario, you’re responsible for collecting and remitting a 13% HST, but only if your company’s gross yearly income exceeds $30,000. At that point, you’ll need to fill in a registration form for the HST collection. Now, if your business is considered a small supplier, you may not have to register your sales tax collection. Certain businesses, such as taxi services, must be registered regardless.
That said, even if your income is not that great in the beginning, if you register immediately for GST or HST collection, you’ll be allowed to claim Input Tax Credits. For instance, any supplies you purchase for use in your business qualify for input tax credits. But you must be sure when taking payments from other businesses that you record the tax you collect.
What business structure should you choose?
When you make the decision to open a new small business, you also must choose how the company will be structured. When opening a business in Ontario, you have four legal choices:
- Sole proprietorship
There are pros and cons to each type of business structure. Depending on your business, there’s a structure that will work most beneficially for you.
Step 2: Obtaining a Business Number
Before you can open, you must register for a business number (BN) through the Canada Revenue Agency (CRA). There are a few different ways you can do this:
- Online at the CRA’s website for business registration
- Over the phone restoration on 1.800.959.5525
- Get a BN in person at a business registration office
- Download the RC1 and mail or fax it to your nearest registration office
No matter your preferred method of registration, you’ll fill out an RC1 Form, or Request for Business Number. If there are any other accounts you must register for, such as for HST collection, you’ll be able to do so at this time.
After you’ve completed the above items, it’s time to begin thinking of opening your doors to the public.
Step 3: Starting Your Business in Ontario
Now that you have those items out of the way, there are a few other considerations as an employer. For instance:
- Are you going to hire employees?
- How are you going to handle payroll?
- How do you plan on reporting income and expenses?
- How are you going to maintain records?
A bit more about these:
Every type of business is different. Some require hundreds of employees, some only need to hire one or two people to run smoothly, some have no hires at all. Small businesses can be incredibly successful, as can larger corporations. For the ones that need to focus more on hiring, you can have a mix of part- and full-time new employees or hire independent contractors and be just as effective. Hiring allows you to determine the wage you pay, but there’s certain employment standards you’ll need to consider for your employees.
If you’re worried about costs during your start-up phase, do as much as you feel comfortable with yourself—but if there’s anything you can’t do or don’t understand, outsourcing to freelancers isn’t a bad idea, you could even learn from them. Plus, you’re not locked into paying a wage and can be flexible with the work for your contract. Whatever you can take off your plate to hone your focus, the better. For instance, maybe you were a marketing major at university — that doesn’t mean you can’t hand off some of your marketing tasks to others. You might even consider a marketing or design firm to take those responsibilities off your shoulders, leaving you to focus on making your product or service the best it can be. This can be an invaluable resource, especially in the early days of a small business.
For any tasks that are minor or menial, you can always consider interns—they can be surprising but may need time, resources, or help to learn too. There are also payroll considerations, as in Ontario (and wider Canada) interns are legally entitled to pay. Essentially, while with you they’re in your employment. This can be efficient for a big or small business, but it’s not an exclusively cheap way to get a worker. Since COVID-19, it’s also worth considering how employment laws protect workers, where they are located, and what kind of extra-considerations may be required. Especially if working in a smaller, start-up workspace situation.
Income and expense reporting
Depending on the size and nature of your business, you’ll likely file a T2125 form from the Canada Revenue Agency at least once per year to report your business’ and/or professional income and expenses.
You’ll be required by law to adopt record-keeping procedures. You’ll need to document all information pertaining to income and expenses (for reporting purposes), as well as other business transactions.
Now that you know about these aspects of starting a small business in Ontario, take a look at these business regulations you might not have heard of.
Step 4: Business Regulations in Ontario
Anyone doing business within Ontario must understand the regulations that apply to all businesses, and those regulations that apply only to certain businesses. The following are six regulations that every business owner should know:
As a business owner, it’s your responsibility to ensure that all disabled people can access your place of business. Accessibility laws state that you must meet certain standards when it comes to making sure both employees, workers, and consumers are able to take advantage of what you offer,
- Customer service
- Physical environments
- Compliance reporting
As an owner, you must also provide assurance that your workplace, products, and services are safe, and that visiting your business poses no risk to customers or staff. This expands to COVID-19 safety considerations.
In fact, the majority of employees, owners and business environments fall under occupational health and safety codes and regulations. Your responsibility is to provide clear instruction as to how an employee should perform in their position and provide adequate supervision.
You’ll be required to register your business with the Workplace Safety and Insurance Board, or WSIB, within ten days from hiring an employee. When you’ve successfully become a registrant, you’ll receive:
- Insurance that protects you and your new employees
- Assistance to help an injured employee return to work
- Lawsuit protection
You’ll have to pay premiums each month, but the protection is worth it.
Health in the Workplace
Aside from providing a safe space for customers and employees, you also must ensure that your place of business promotes the health of both as well.
If you sell any type of cosmetic or health product, you’ll need to know which licences and permits govern your products. In some cases, products must be tested before they can be sold to the public. Tests are performed by Health Canada.
These health regulations also cover smoking in, on or around your establishment. In 2017, Ontario adopted a smoking and vaping ban that covers all public and some non-public places.
Depending on the nature of your business, you may be required to submit to environmental inspections from time to time. These inspections ensure your business adheres to all environmental standards. You’ll be required to submit to these inspections if your company:
- Is responsible for releasing any contaminants into the air, land or water
- Provides to the public supplies for potable water
- Stores, transports or otherwise handles waste products—this includes disposal
Step 5: Advertising
It’s only natural to want to bring in as many customers as you can, but there are ways you can and can’t do so. Being aware of the regulations pertaining to advertising, marketing and letting the public know about your products or services is your responsibility. As you grow, you may decide to integrate with third parties. Make sure that the image that brand portrays is in line with your own, this is especially important if you’re not hiring your own new employees to work in-house. It’s just good business sense.
Advertising is for big and small businesses and is an excellent way to grow your brands awareness. There’s a lot of information and technology available to help you learn how to best use the wealth of advertising channels available.
With the importance of multi-channel customer engagement, having a system in place to aid your marketing campaigns can make things much easier. This is especially true in our post-pandemic world. In fact, online presence is almost central to growing your business online and a lot of that starts with taking advantage of online marketing opportunities.
Opening a brand-new business has a lot of responsibilities, but it can be extremely rewarding. There’s a lot of considerations about how to handle your day-to-day, and what kind of services tools there are out there to help you. From eCommerce tools, to POS systems that can help with reporting, planning, and sales, or marketing software. At Square, we offer a lot of help system designed to help you succeed, whether you’re a big or small business.