If you’ve ever thought about starting a business, whether alone or with some friends, you’ve probably heard how long and arduous the process can be. It’s normal to feel overwhelmed and unsure of what steps to take next. But don’t worry! This blog will guide you through the process, step-by-step, of how to start your own business in Ontario as either a sole proprietor or a corporation with friends (Corporation & Sole Proprietorship).
Sole Proprietorship
In business terms, a sole proprietorship is a business owned by one individual or owner. The proprietor is responsible for making all decisions, bearing all losses, and reaping all profits.
Step 1: Choosing a Business Structure
The first step in starting a business is to choose a structure for your operations. A business structure determines how your business is run on a daily basis. We will start by looking at how to set up a sole proprietorship in Ontario.
Step 2: Selecting a Business Name
Choosing the right name for your business is crucial as it will be the face of your brand. You can check the availability of a business name on Google, online platforms, or NUANS (Newly Upgraded Automated Name Search).
Step 3: Registering Your Business
Next, register your business name. In Ontario, you can register your business name through various available services, such as Service Ontario.
Step 4: Registering for Tax Purposes
When starting a business, you need to register for a vendor permit and a GST/HST number with the Canadian Revenue Agency.
Step 5: Obtaining Commercial Insurance
Insurance is crucial for sole proprietorships as the owner has unlimited liability. In case of bankruptcy, accidents, or risks, the owner is responsible for all debt. Therefore, obtaining commercial insurance is necessary.
Step 6: Opening a Bank Account
Opening a bank account is another important step when starting a sole proprietorship. Bring a copy of your registration, photo ID, and other important documents to easily open your bank account.
Step 7: Launching Your Business
Congratulations! You have successfully launched your own sole proprietorship. If you encounter any difficulties during the process, remember that you can always seek professional assistance.
Now that we have covered how to register a sole proprietorship, let’s move on to the process of registering a corporation.
Corporation
A corporation is a business entity that is owned by shareholders and is legally recognized as a single entity, according to an article published on the government of Canada’s website on July 18, 2022.
Step 1: Choose a method of incorporation.
There are three methods available for incorporating a corporation, as stated in an article on the Ontario website on December 3, 2021: electronic registration, over-the-counter registration, and registration via mail. You can choose the method that best suits your needs.
Step 2: Fill out the necessary documents.
Filling out the required legal documents is a crucial step in incorporating a corporation. You can download the Article of Incorporation Form 1 and the Consent to Act as Director Form 2 and provide the details about your company.
Step 3: Choose a name for your corporation.
Selecting an appropriate business name is important for your corporation, as it serves as the company’s identity. The name should be easily understood by the consumer and reflect the products or services offered. You can check the availability of a business name on NUANS.
Step 4: Determine the structure of your corporation.
Creating the articles of incorporation is an essential step to determine if your corporation is small, large, private, or public. You will need to provide details about directors, shareholders, and the percentage of shares allotted to each director.
Step 5: Shareholder agreement
The company minute book is a written record that serves as the organizational framework for the corporation. This book includes details about the approval of the legal company, the issuance of shares, the election of directors, and the agreement of all shareholders.
Step 6: Submit and register the articles of incorporation.
After completing the documents, you must submit the articles of incorporation and other supporting documents to start the process.
Step 7: Obtain necessary permits and licenses.
Obtaining permits and licenses is a crucial step after submitting the articles of incorporation. You will need to register for taxes, open an account for import/export, obtain a GST/HST number, register for sales tax, employer health tax, workers’ compensation, and a federal business number.
Step 8: Open a bank account.
To open a corporate bank account, you will need to provide the articles of incorporation and any articles of amendment. These articles must be signed by all directors of the company.
Step 9: Start your business.
Congratulations, your corporation is now open. Work hard, cooperate with everyone, and make all your dreams come true.
Summary
In this blog, I have provided a comprehensive guide to registering two important business structures in Ontario: sole proprietorship/sole trader and the corporation. I have given step-by-step guidance on what legal documents and forms you need to fill out and submit to register your business.
While some people may say that you should save money before starting your business operations, I believe that passion and diversity are more important. There’s no better time than now to start your business, and registering it is the first step toward climbing the ladder to success.