Starting a Business in Canada as a Newcomer: A Complete Guide

Can Newcomers Start a Business in Canada?

Absolutely. Canadian permanent residents and citizens have the full right to start and operate a business in Canada. Even some temporary residents, such as those on open work permits, may be able to start a business depending on their immigration status. Canada consistently ranks among the best countries in the world for starting a business, thanks to a stable economy, strong legal protections, diverse consumer market, and supportive government programs for entrepreneurs.

As a newcomer, you bring valuable skills, international experience, and a unique perspective that can give your business a competitive edge. Many of Canada's most successful companies were founded by immigrants. The key to success is understanding the Canadian business environment, following the proper legal steps to register and operate your business, and taking advantage of the many resources available to support you.

Step 1: Choose Your Business Structure

The first major decision you need to make is how to structure your business. The two most common structures for small businesses in Canada are sole proprietorship and corporation. Each has different legal, tax, and liability implications, and the right choice depends on your specific situation.

Sole Proprietorship

A sole proprietorship is the simplest and least expensive business structure. You and the business are legally the same entity. All business income is reported on your personal tax return, and you are personally liable for all business debts and obligations. Registration is straightforward and inexpensive, typically costing $60 to $100 to register your business name with your provincial government. This structure is ideal for freelancers, consultants, and small-scale operations where liability risk is low.

Incorporation

A corporation is a separate legal entity from you as an individual. This means the corporation can own property, enter into contracts, and is liable for its own debts. Your personal assets are generally protected from business liabilities. Incorporation costs more upfront, typically $200 to $300 for federal incorporation through Corporations Canada or $300 to $500 for provincial incorporation. You will also need to file separate corporate tax returns and maintain corporate records, which adds ongoing accounting costs.

The main tax advantage of incorporation is that small business income up to $500,000 per year is taxed at a lower corporate rate (approximately 9% federally, plus provincial rates totaling 11% to 15% depending on the province) compared to personal tax rates, which can exceed 50% at higher income levels. If you plan to reinvest profits in the business rather than paying yourself all the income immediately, incorporation can offer significant tax savings.

Step 2: Register Your Business Name

Before you can operate, you need to register your business name with your provincial or territorial government. If you are operating as a sole proprietorship under your own legal name, registration may not be required, but using a trade name (doing business as) does require registration. For corporations, the business name is registered as part of the incorporation process.

Make sure to search existing business names and trademarks to avoid conflicts. You can search the Canadian Intellectual Property Office trademark database and your provincial business registry. Choosing a unique, memorable name that reflects your business is important for branding and legal protection.

Step 3: Get a Business Number from the CRA

A Business Number (BN) is a unique nine-digit identifier assigned by the Canada Revenue Agency (CRA). You need a BN to open CRA program accounts, including GST/HST, payroll, corporate income tax, and import/export accounts. You can register for a BN online through the CRA Business Registration Online service, by phone, or by mail. The process is free and usually takes just a few minutes online.

When you register for a BN, you can simultaneously register for the program accounts you need. At minimum, most businesses need a GST/HST account (if your revenue exceeds $30,000 per year) and, if you have employees, a payroll account. Corporations also need a corporate income tax account.

Step 4: Understand GST/HST Registration

The Goods and Services Tax (GST) and Harmonized Sales Tax (HST) are consumption taxes applied to most goods and services sold in Canada. The GST rate is 5% nationwide, while some provinces combine their provincial sales tax with the GST into the HST (for example, Ontario's HST is 13%, and the Atlantic provinces charge 15%). If your business earns more than $30,000 in gross revenue over four consecutive calendar quarters, you are required to register for and collect GST/HST.

Even if your revenue is below $30,000, you may choose to register voluntarily. This can be advantageous because it allows you to claim Input Tax Credits (ITCs) for the GST/HST you pay on business expenses. For example, if you pay HST on office rent, equipment, and supplies, you can recover that tax by filing GST/HST returns. The decision to voluntarily register depends on your business expenses and whether your clients are other businesses (who can claim ITCs themselves) or individual consumers.

Step 5: Open a Business Bank Account

Keeping your personal and business finances separate is essential for proper bookkeeping, tax filing, and legal protection (especially for corporations). All major Canadian banks offer business banking accounts, and many have programs specifically designed for newcomers. To open a business bank account, you will typically need your business registration documents, Business Number, personal identification, and proof of address.

Business bank account fees vary widely. Basic accounts with limited transactions may be free or cost $5 to $10 per month, while accounts with unlimited transactions and additional features cost $30 to $60 per month. Some banks waive fees for the first year or for new businesses. Compare offerings from multiple banks and consider factors like transaction limits, e-transfer fees, integration with accounting software, and access to business credit products.

Step 6: Obtain Permits and Licenses

Depending on your type of business and location, you may need various permits and licenses to operate legally. A municipal business license is required in most cities, typically costing $50 to $200 per year. Certain industries require specific provincial or federal licenses, such as food service permits (for restaurants and food trucks), health and safety certifications, liquor licenses, professional licenses (for regulated professions like accounting or engineering), and contractor licenses.

The BizPaL service is a free online tool that helps you identify the permits and licenses you need based on your business type and location. Simply enter your business activity and municipality, and BizPaL will generate a customized list of requirements from all three levels of government (federal, provincial, and municipal).

Home-Based Business Regulations

Many newcomers start their businesses from home to save on overhead costs. This is perfectly legal in most Canadian municipalities, but there are usually zoning bylaws that regulate home-based businesses. Common restrictions include limits on the number of employees, signage restrictions, parking requirements, and prohibitions on businesses that generate excessive noise, traffic, or odors. Check with your local municipal planning department to understand the rules that apply to your home-based business.

Step 7: Access Funding and Support Programs

Canada offers numerous funding programs and business support services for entrepreneurs, including newcomers. The Industrial Research Assistance Program (IRAP), administered by the National Research Council, provides financial support and advisory services to innovative small and medium-sized businesses. IRAP can fund research and development activities, hiring technical staff, and technology commercialization.

Other notable programs include the Business Development Bank of Canada (BDC), which offers loans and advisory services specifically for Canadian entrepreneurs; the Canada Small Business Financing Program, which helps small businesses obtain loans for equipment, leasehold improvements, and real property; and various provincial programs such as grants for women entrepreneurs, Indigenous business owners, and technology startups.

WelcomeAide is here to help newcomers succeed in Canada. Our AI Newcomer Navigator can answer your questions about starting a business and other settlement topics. Explore our blog for more newcomer guides or see how to get involved in supporting newcomer communities across Canada.