Around 95,000 new businesses pop in Canada every year and many of them fail without the proper know-how. On average, 96,580 businesses were created every year (from 2013-2017) and 90,600 disappeared. If you are seriously considering starting a business, it’s important to consider these steps to learn the ins and outs of what it takes to set up shop successfully in Ontario.
Planning a Business in Ontario
You might already be feeling overwhelmed about turning your idea into a successful business model, but we’re here to help guide you on all the facets you need to start your very own business.
It’s best to start with looking for areas of opportunity to provide a service or product to a community of people. This could mean researching the web for the next big must-have item or interviewing people in your community about their lifestyle and needs.
Idea exploration comes from iterative processes through fact-checking and research. Conducting research to understand your target audience is an important step to identify your brand and marketing strategy.
Getting your ideas down and synthesizing a business model will help you identify what your business needs in order to launch successfully.
Creating a strong business plan is a guaranteed way to ensure you’re starting off on the right track and there are many templates online to get you started and asking the right questions.
A business plan is a great tool to also highlight potential expenses, capital needed, in-depth competitor and market analysis, and any statistics useful in swaying any potential investors or lenders.
It’s important to consider how you will be raising the capital you require to get your business going as even the smallest of businesses have expenses that need to be covered.
Deciding whether you will dive into your savings or raise capital through a bank, private investors or crowdfunding will require some planning and execution on your part.
To help, getting yourself a mentor is highly advised because it’s most likely you’ll come across some pitfalls that an experienced entrepreneur can help you navigate. A good mentor can provide sound business leadership, management, and financing advice to help you get your business up and running quickly and efficiently.
Choosing a Business Entity Type
When starting a business, it’s vital that you pick the business structure that aptly fits your goals and interests as a new business owner. There are three types of legal business structures to consider:
- Sole Proprietorship
A sole proprietorship is the most common structure chosen as it is quite easy to set up. In this structure, the business and the operator are seen as one by the government. Proprietors are personally responsible for all functions and debts of the business and they receive all of the profit.
A partnership works similarly to a sole proprietorship but with two or more proprietors. The business partners usually have contractual agreements to share revenues, expenses, and responsibilities written out in percentages, which would later be applied to their taxes.
A partnership can be general or limited depending on the liabilities they are responsible for based on their investment into the business.
Corporations are far more complicated than the other two legal business structures as the business is considered a separate legal entity owned by shareholders.
Incorporation creates taxation and legal distance between the shareholders and the company, allowing shareholders to enjoy tax benefits as they are considered legally as employees.
It’s important to note that only lawyers or accountants are legally permitted to incorporate a business. This incorporation can occur at the provincial or federal level.
Registering Your Business in Ontario
When starting a brand, it’s vital to choose a good name that accurately reflects the product or service your business will provide. Once you’ve thought of a catchy business name, it’s important to check whether someone is already using it.
More often than not, you cannot legally use a name if it’s already in use by another incorporated business, not to mention the marketing mess it will make in the future.
While Ontario does not restrict more than one non-incorporated company from using the same name, it’s best practice to protect yourself from potential legal liability and use a unique name.
The fastest way to check if your business name is in use is to check the web or search the national name databases in Canada. You can also search using Ontario’s Enhanced Business Name Search registry for a more strategic search, which could cost you anywhere from $8 to $26.
When you picked out your business name, you need to then register your new business unless you are operating your company under your own name.
In Ontario, a registered small business is referred to as an “Ontario Business Registration or a “Form 1” because of the form you need to complete. If you fail to register your business, or if you sign up with false information, you can be fined up to $2,000.
The cost of registration depends on whether you sign up online or by mail. The fastest and most affordable way is online which will cost you about $60 versus $80 by mail.
To register online, you can use the “Integrated Business Services Application.” Upon completion of registration, the government will send you a Master Business License (MBL) that will highlight your Business Identification Number (BIN).
This is legal documentation of your registration that you can provide when dealing with any government or legal bodies. Business registration does expire in five years. As such, it is important to set a reminder to renew it before expiry as the government does not provide a reminder.
In the case you forgot to renew your registration, you are granted a grace period of 60 days to renew your business after it expires.
After reading all these steps, it might seem intimidating to comply with all federal and provincial laws when registering and operating a business, but we hope by outlining the steps we can provide some relief and clarity to a really straightforward process.