How to Start a Business in Ontario
With its vibrant economy, robust infrastructure, and favourable business climate, Ontario is ideal for early-stage entrepreneurs looking to launch their ventures. However, starting a business here involves several legal considerations.
To ensure that your business is legally compliant with federal and provincial laws, you must follow several requirements, regardless of whether you choose to set up a sole proprietorship, partnership, corporation, or other business entity.
This roadmap will guide you through creating a business in Ontario by outlining some of the things you need to consider when starting your own company–from developing a comprehensive business plan to navigating legal regulations.
Understanding these considerations can be an important first step in starting a business in the province of Ontario.
While not a legal requirement, a well-crafted business plan is crucial for outlining your business objectives, target market, financial projections, and strategies for growth. It helps clarify your business’s direction and can be helpful when seeking financing or partnerships.
You must choose the business structure which best serves your business and prepare the appropriate foundational document depending on your chosen legal structure. For example, you need an article of incorporation for incorporating a corporation or a partnership agreement if you decide to proceed with a partnership which outlines the terms between the partners. You should always consult professionals such as business lawyers and accountants prior to choosing a business structure to ensure the business structure chosen best serves your needs.
Business Name Registration
If you decide to operate as a sole proprietorship or a partnership and plan on using a name other than your name, you must register a name under the Business Name Act. Similarly, if you plan on incorporating your business, you must comply with the Business Name Act. Choose a unique and distinctive name for your business and check its availability through a search by NUANS (Newly Upgraded Automated Name Search). Once you’ve confirmed its availability, you can register your business name with the Ministry of Public and Business Service Delivery or by using the Ontario business Registry.
The fees associated with business name registrations vary depending on the type of registered entity. In Ontario, it costs $300 to incorporate a business online or by mail. As of the day this article was written, the cost of registering a business name for a sole proprietorship is $60.00 in the province of Ontario. In addition to registration fees, other requirements must be fulfilled before applying for business registration, such as providing proof of identity documents or having a physical address for the entity’s head office, if applicable.
Business Licenses and Permits
Identify whether your business requires any specific licenses or permits to operate legally. The requirements vary depending on the nature of your business activities, so consult the Ontario government’s official website, the municipality’s website or a business lawyer to ensure compliance. For example, eating establishments in Toronto require a license issued by the municipality. Similarly, premises selling alcohol require a liquor license obtained from the Alcohol and Gaming Commission of Ontario (AGCO).
When filing paperwork and applications for these types of licenses or permits, it is essential to follow all instructions carefully and provide any additional information requested by authorities for them to process the application efficiently. Furthermore, some licenses may have application fees which should be considered when budgeting for startup costs related to launching a business venture in Ontario.
If modifications are made later to the ownership structure or operating procedures, new documents may need to be filed to keep one’s license valid. Therefore, it is beneficial for business owners to familiarize themselves with applicable laws beforehand to know what steps they need to take to ensure continued compliance with regulations.
Taxes and Bookkeeping
Once you have registered your business, setting up and maintaining an effective system for managing taxes and bookkeeping is essential. This recordkeeping includes, among other things, recording, collecting and paying Harmonized Sales Tax (HST), payroll tax, corporate tax and personal tax.
Furthermore, all companies must file their income taxes according to specific deadlines enforced by the CRA (Canada Revenue Agency). Failure to do so could result in penalties or fines that may be difficult to pay without proper financial planning.
When filing income tax returns, it is essential to understand how various deductions can help reduce taxable earnings and what types of expenses qualify for such treatment from CRA. For instance, general overhead costs such as office supplies, rent payments, utilities, etc., are usually deductible when calculating net profits. Entrepreneurs should familiarize themselves with relevant deductions, credits and expenses available to them in order to reduce the tax payable by their business. We highly recommend that you consult an experienced accountant as the various stages of your business unfolds in Ontario.
Employer Account Registration
Once registered as an employer with the CRA, you’ll be responsible for deducting income tax, CPP contributions, and EI premiums from your employee’s paychecks and remitting them to the CRA on their behalf.
The frequency of remittances will depend on your payroll size and credit history with the CRA. In addition to payroll deductions, you must comply with Ontario’s employment standards. These standards include minimum wage requirements, overtime rules, vacation entitlements, and other provisions outlined in the Employment Standards Act.
Hire a Business Lawyer to Start a Business in Ontario
A startup lawyer brings specialized legal knowledge and experience, helping entrepreneurs make informed decisions and navigate the legal landscape. Here is how they can assist you:
Business Structuring and Incorporation
A business lawyer can assist you in choosing the appropriate legal structure for your startup such as a sole proprietorship, partnership, or corporation. They can also help you incorporate your business by registering with the relevant authorities and setting up a minute book for your newly incorporated company.
Contracts and Agreements
A business lawyer can also assist in drafting, reviewing, and negotiating various contracts and agreements necessary for your business. This can include commercial leases, disclaimers, employment contracts, confidentiality agreements and buy/sell agreements. Their expertise can help protect your interests and ensure the contracts are fair and enforceable.
Fundraising and Investment
A business lawyer can provide valuable assistance if you plan to seek funding or investment for your startup. They can help you navigate the legal aspects of fundraising, including preparing investment agreements, negotiating term sheets, and ensuring compliance with securities laws and regulations.
Ongoing Legal Advice
Beyond the initial setup, a business lawyer can provide ongoing legal advice and support as your startup grows. They can help you navigate legal challenges, review contracts and agreements, handle employment matters, and protect your interests in various business transactions.
Valuable Legal Assistance for Business Startups in Toronto
Are you looking for a business lawyer in Toronto to help start your business? Jahanshahi Law Firm leverages its vast legal and industry knowledge to help business startups navigate Ontario’s legal landscape.
Please note that the above are not a comprehensive list of all of the legal issues you should consider when starting a business in Ontario. You should always consult a business lawyer, accountant and other professionals to ensure your business complies with all laws and regulations put in place by various authorities. The above content is for informational purposes only and does not constitute legal advice. For legal advice, contact us today.
About the Author:
Shahriar Jahanshahi is the founder and principal lawyer at Jahanshahi Law Firm with a practice focus on representing business star-ups and investors in the province of Ontario. For further information about Shahriar Jahanshahi, click here.