How to Start a Small Business in Canada - Relaxed Mode
small business in Canada

How to Start a Small Business in Canada


Would you like to start a small business in Canada but don’t know how to begin? The truth is that the idea may seem frightening and daunting at first thought. However, with the right information, it is not as overwhelming as you may think.

We put together this guide to help you start a small business in Canada without stress. After reading this post, you should know what a small business is in Canada and how to start one. Without further ado, let’s dive straight in.

What qualifies as a small business in Canada?

There are so many definitions of the phrase “small business.” It is different in every country based on their constitution and economic values. This brings us to the question, “what qualifies as a small business in Canada?”

According to the Key Small Business Statistics Journal of the Industry Canada, a small business is defined by the number of its employees. The number of employees varies depending on the sector. Based on this criteria, it has defined SMEs using the format below:

         Micro enterprises: Less than 5 employees

         Small businesses: Above 5 employees but less than 100 employees.

         Medium businesses: Above 100 employees but less than 500 employees.

As such, an SME in Canada is a business with less than 500 employees. So, if you want to start a business in Canada and it will have less than 500 employees, it is a small business.

How do I start a small business in Canada?

The next question on your mind should be how to start a small business in Canada. In this section, we will provide you with a few helpful tips.

Develop your business idea

Every successful business is the result of a good business idea. The term “good” when it comes to business is relative. Before an idea can be good for you, it should match your skills and contribute positively to the market.

To develop a good business idea, you need to watch the trends. Also, you must find a need that you can meet. More than anything else, test the idea thoroughly. Never invest money or time into an untested idea. It could end up being a bad investment.

Write a detailed business plan

One very good way to test that idea is to create a detailed business plan for it. Before you can write a business plan, you must first carry out a feasibility study. This affords you the opportunity of studying your target market, the industry, and your competitors.

The information you get from your research helps you to write a detailed business plan. A business plan presents you with several benefits. Some of them include:

         Raising capital for your business.

         Attracting investors.

         Acting as a road map and guide for your business.

Choose a business name

Your business name is the identity by which people will know and relate to your business. When choosing a business name you must put your business’ marketing and legal needs into consideration.

The Canadian government has put in place some name restrictions for business. However, they are more lenient with sole proprietorships than they are with corporations. Before you start a business in Canada, whether large or small, you must register the name with the government. Ensure that you choose a name that relates to your industry. This makes it easy to market your business.

Decide on a business structure

Your business structure is simply who owns or bears the risk of the business. Canada allows just three types of business structures. They are:



         Sole proprietorship

Every other kind of business structure like a limited partnership and the cooperative corporation is under these broad categories. When deciding on the structure of your business, you must consider several factors. Some of these factors include:


         Tax deductions

         Comfort level



Raise Capital

This is where many potential business owners get scared and stick to their 9-to-5 jobs. On average, you need less than $5,000 to start a small business in Canada. Most people prefer to raise capital for their new businesses from personal savings. However, not everyone has the luxury of infusing funds from their savings. If you fall into the second category, then you need to raise capital through other means.

The Canadian government has made it quite easy to raise capital for business. You have quite an array to choose from including government grants, sharing equity, and debt financing. Carry out sufficient research to understand each of these provisions and their obligations. After this, you can choose the one that you are most comfortable with.

Register for a Business License

Not every business needs to register for a license to operate in Canada. You need to find out whether yours should or shouldn’t. To do this, check the website of the municipality that the business will be domiciled.

Asides from the business license, you may also need other permits and licenses. You can use BizPal to find out the licenses and permits that your business needs.

Apply for Provincial Sales Tax

Some of the provinces are yet to harmonize their sales taxes with the GST on the Federal level. If your business operates in such provinces, you need to register specially to collect provincial tax and remit it appropriately. Again, ask questions from the appropriate authorities to know what you’d be registering for.

Purchase Additional Business Insurance

Asides from the employment insurance (required), your business needs an extra layer of protection or indemnity. In Canada, you have several policies to cover business interruption, disability, property, general liability, etc. Discuss your options with your lawyer or an insurance agent so that you can make the right choice.

Establish Efficient Recordkeeping

Once you open your business, ensure that you establish an efficient recordkeeping system. This makes paying taxes and other accounting processes easier. The first step is to open a business account. After this, ensure that you organize your receipts. Finally, make use of basic accounting software.


By now, you must have noticed that it is pretty easy to start a small business in Canada. If you have any questions, let us know in the comments section.

Israel Chima

Israel Chima is a pro blogger that derives joy in helping small and medium businesses gain an online presence.

He guides business owners in having a full online presence by creating world-class websites, social media marketing, and content marketing.

Well-written SEO content ranks easily on the first page of Google, which translates to getting real customers.

Israel chima is an authority in planning and developing well-structured SEO content. So, you can contact him for your blog content.

He is the author of book 3 books on entrepreneurship, education, and transportation business. You can check out his book on Amazon titled “Discover to Recover.”

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