Starting your own business is your chance to follow your passions and realize your dreams, but the process can seem daunting.
Luckily, it doesn’t have to be that way.
This guide aims to help you through the steps needed to register your business in Ontario.
If you’re unsure of which organizational form your business should take, we have provided the advantages and disadvantages of each below.
Organizational form is an important decision to make as it affects taxation, legal liability, company control, and the costs involved in forming and running your company.
It can also determine whether you need to register your business in Ontario, or not.
Sole Proprietorship
Sole proprietorship is the simplest business form.
Basically, it is a company owned and operated by a single individual.
The company does not have a separate tax status.
The owner makes all business decisions, retains all profits, claims any losses, and assumes all risks.
Revenues earned are included in the owner’s personal income and taxed at personal income tax rates.
Sole proprietors can choose to register a business name or operate under their own name, or both.
If you operate under your full legal name, you do not need to register your sole proprietorship. For instance, you would not need to register if you operate as John Smith and that is your full legal name.
If you operate under another name, you must register your business in Ontario.
For instance, you may want to operate under John Smith Consulting.
In this case, you would need to do a company name search to ensure your company name isn’t taken.
If your proposed company name is unique, you can register it.
Advantages of sole proprietorship:
- Ease of formation
- Inexpensive to set up
- Profits flow directly to owner
- Total control over business decisions
- No documentation required to dissolve business
- Owner can claim qualifying business losses against income
Disadvantages of sole proprietorship:
- Owner is 100% liable for business debts
- Business name is not protected – must register a trademark
- Can’t transfer ownership
- Business income taxed at personal rate
- Registration must be renewed every 5 years
Partnership
A partnership is a company with two or more individuals involved in the business.
Owners invest their time and resources in hopes of generating a profit.
The most common partnerships are general partnerships and limited partnerships.
Neither has a separate tax status.
General partnership
A general partnership is an informal agreement (not filed through the courts) between two or more individuals or corporations that conduct business hoping to earn profit.
Partners agree to share profits, assets, liabilities, management responsibilities, and the consequences of the actions of the other partners.
Profits earned in a general partnership are included in each partner’s personal income tax.
However, partners can also deduct business losses and certain expenses from their individual returns.
If a partnership chooses to carry on business under the partners’ names, they do not need to register. For instance, partners John Jones and Mary Smith can operate as John Jones + Mary Smith without registering.
If a partnership wants to operate under a name other than the legal surnames of the group, they must conduct a name search and register. For instance, if they want to call themselves the JSJ Group, they must register.
Limited partnership
A limited partnership is run by a single general partner who contributes the most capital and assumes 100 percent liability risk for partner obligations.
In return, they get a bigger share of the profits.
The limited partners contribute capital, but aren’t involved in management.
The amount they invest is their only liability.
Even though the structure differs in a limited partnership, the rules surrounding registration are the same.
Unless you’re operating your limited partnership under the full legal names of all the partners, you must register your business.
Regulated professionals such as accountants and lawyers that qualify for a limited liability partnership must register their business.
Advantages of partnerships:
- Inexpensive to establish
- Quick and easy business registration
- Pooled resources
- Wide range of expertise
- Shared financial burden
Disadvantages of partnerships:
- Multiple individuals may operate the business
- Can leave owners liable for 100% of business debts and liabilities
- Business name is not protected
- Transferring ownership requires new partner
- Must maintain at least two partners
- Partnership can end at any time
- Business income taxed at personal rate
- Limited access to credit
- Need a new business name registration to change business name or partners and must notify if partnership dissolved
- Must renew registration every 5 years
Corporation
A corporation is a separate entity for tax and legal purposes, and the most popular choice for raising capital.
However, it is also the most complex and costly organizational form to establish.
You must maintain corporate records, make regulatory filings, and pay monthly or quarterly tax installments.
Nonetheless, a corporation offers many benefits.
Parties exchange money, property, or services for shares that can be bought and sold.
The corporation can also own property and enter contracts in its own right.
Unlike a sole proprietorship or partnership, a corporation continues in its same form even if an owner dies.
Legitimate business expenses can reduce taxable revenues.
Profits are also taxed at generally lower corporate rates.
Corporations may be able to defer taxes, enjoy capital gains exemptions, or qualify for tax credits.
Owners are not liable for corporation losses and debts.
All corporations must register in Ontario.
Advantages of a corporation:
- Profits and losses belong to the corporation
- Shares are easily transferred
- Personal assets cannot be seized to pay business debts
- Easier to access capital
- May qualify for lower tax rates, tax credits, deferrals, and exemptions
Disadvantages of a corporation:
- Expensive to establish and maintain
- Must provide regulatory filings and corporate records
- Corporate income is usually taxed twice – once within the company and once when profits are paid to shareholders as dividends
Limited Liability Company (LLC)
The LLC form of business ownership does not exist in Canada.
The Canada Revenue Agency treats a limited liability company as a corporation for tax purposes.
Registering a Sole Proprietorship or Partnership
The Ontario Business Names Act mandates registration if you operate your business in a name other than the legal name of the owner(s).
All limited liability partnerships must also register.
To start the process, you can conduct an Enhanced Business Name Search online.
Hours of operation are 8:30 AM to 6:00 PM, Monday to Friday.
The fee for the search will range between $8 and $26, depending on the results requested.
An Enhanced Business Names Report and a Statement of No Match are the most commonly requested.
This service is also available in-person or by mail for a slightly higher fee.
Once you’ve confirmed no name match exists, you can register online through the provincial Business name registration website or the Government of Canada registration portal if you plan to operate in multiple provinces.
The cost is $80 to register a sole proprietorship or general partnership.
The cost to register a limited partnership is $120. In return, you’re emailed your Master Business Licence (MBL), a profile summary, and a receipt.
Mail or in-person turnaround is 20 business days.
Alternatively, for an extra fee, you can use one of these providers:
Registering a Corporation
Registering a corporation involves a business name search and filing the Articles of Incorporation.
First, obtain an Ontario-based NUANS® report no more than 90 days old from the time you submit your Articles of Incorporation.
This report lists any corporations, trademarks, and business names similar to yours.
Fees vary by provider and many can be found online or in the Yellow Pages.
The next step is to file your Articles of Incorporation.
The Articles of Incorporation, Form 1 and the Consent to Act as First Director, Form 2, are available from the Ontario Central Form Depository or a local legal stationer.
You can File Articles of Incorporation electronically via the internet through an Ontario service provider for $300:
This service is also available over-the-counter and by mail for $360.
No legal requirement exists for a lawyer during incorporation.
However, they can provide professional advice on share types, directors, and more.
Can I Start a Business Without Registering It?
Yes, if you operate a sole proprietorship, general, or limited partnership in the actual names of the owner(s) you do not need to register it.
If you operate a sole proprietorship, general partnership, or limited partnership under a name other than its registrants, you must register your business name within 60 days of opening your company.
All limited liability partnerships must register too.
Frequently Asked Questions
- How much do you have to make to register a business Ontario?
- Earnings aren’t relative to business registration, but they are of interest to the Canada Revenue Agency.
When running a business in Canada you have a 12-month income limit of $30,000 before you must register for GST/HST. If you think you will exceed this limit, it is best to register voluntarily. Otherwise, you may pay back taxes. - What happens if you run a business without registering it?
- Except for in the cases mentioned above, failing to register your business name can lead to consequences. Fines of up to $2,000 for individuals and up to $25,000 for corporations can be levied under the Ontario Business Names Act.
