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1. Company profile · Company history. Explain the development stage of your company or business idea. · Mission statement, vision statement and company values.
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Outline the education, skills, training, knowledge and experience you and your team bring to the company to achieve its goals. “This is very important for establishing your credibility,” Fryling says. “People often overlook qualities that could lend credibility to <anchor>starting a business</anchor>. Include any transferrable skills, qualities, business contacts, even relevant hobbies.”
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How to start a business in Canada: The ultimate guide



# How to start a business in Canada: The ultimate guide

Here’s your step-by-step roadmap from great idea to operating company

19-minute read

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Running your own business can be an exciting and rewarding career choice. It gives you the chance to be your own boss while building something of lasting value for yourself, your family and your community.

But starting a business is not easy. Close to 40% of new businesses with one-to-four employees don’t make it to their fifth birthday. Beating those odds will call on you to be hard working, well-prepared and constantly creative.

This guide is here to help. It will lead you through the steps to get your company up and running. As your business takes shape, your confidence will grow and you will develop the skills to take it further.

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Business plan template

Prepare a professional business plan that will guide your business and increase your chances of getting financing.

#### The business plan template will be sent to you by email.

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Job role-- Select an option --OwnerSenior LeaderManagerEmployeeProfessor / Student

Company name

Industry-- Select an option --Construction and EngineeringConsulting and Business ServicesHealth ServicesIT and TechnologyManufacturingMedia and PublishingRestaurantFood ServicesRecreation and Creative IndustriesEducationalRetailTransport and WarehousingWholesale and DistributionOther

Annual sales-- Select an option --< $100,000$100,000 - $499,999$500,000 - $999,999$1M - $1,999,999$2M -$ 4,999,999> $5M

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## Business idea

Before you start spending money to set up your company, it’s essential to ensure your business idea has the potential to be successful. It’s a competitive world out there. Taking some time to research your idea will pay huge dividends down the road.

### Start with market research

To find a profitable niche, you should do some initial market research to identify your target customers and understand their needs and desires. You should also get familiar with the competition and pinpoint market gaps your company can fill.

Your goal is to find the right product-market fit—the sweet spot where you are attracting customers and turning them into loyal advocates for your company. Statistics Canada’s Small Business Hub offers research resources to help existing and aspiring entrepreneurs plan and run their enterprises.

### Think about financing and look for mentors

This is also the time to start thinking about where you’re going to find the money to start and run your business. Here, there are more possibilities than ever before, but you have to make sure the one you pick fits your ambitions. There is more information on financing your company lower down in this article.

To help with these tasks and others on the road to launching your company, it’s a good idea to find a mentor with deep business experience. If you are between 18and 39, Futurpreneur Canada can assist you in finding a mentor.

## Types of business structures

The next step is to select a structure for your new company. In Canada, there are three common types of business structures, each with their own pros and cons.

- Sole proprietorship— A sole proprietorship is quite informal and easily created, which is why it’s the most common structure chosen by new entrepreneurs. In this structure, the business and the operator are the same in the eyes of law and tax authorities. The downside is that the owner is personally liable for all functions and debts of the business.
- Partnership— A partnership is similar to a sole proprietorship, but instead of one proprietor there are two or more. As with a sole proprietorship, there is no legal structure, as such, for a partnership. However, partners usually have some type of contractual agreement among themselves that governs the sharing of revenues, expenses and tasks.
- Corporation— When you incorporate a business you create ownership shares, which produce a taxation and legal distance between the company and its shareholders. This has tax advantages for the owners; provides some liability protection from the corporation’s debts; and offers some measure of protection for a company’s name. The downside is that setting up a corporation involves initial and ongoing costs for legal and accounting fees.

### How to register as a corporation

To register as a corporation, you will need to take the following steps:

### Pros and cons of business structures

Here’s a summary of the pros and cons of the three most common business structures.

Sole proprietorship****Partnership****Corporation****Legal status

Does not exist as a separate legal entity.

Proprietorship = ownership

Does not exist as a separate legal entity.

Partnership = partners as owners

Corporation is treated as a separate legal entity from its owners.

Corporation = shareholder ownershipControlOwner has total control.Partners’ agreement determines control between partners.Directors and shareholders.ProfitsProfits are paid to the owner.To partners according to a partnership agreement.Earned by the corporation. Dividends may be paid to shareholders and/or retained in the corporation.DebtsThe owner is responsible (unlimited liability).Partners are individually and collectively responsible.Paid by corporation.TaxationThe owner is taxed as an individual on the income of the business as if he or she was employed.Partners are taxed individually according to their share of the income.The corporation pays corporate taxes separately from taxes paid by directors and shareholders.AssetsBusiness assets are wholly owned by the proprietor.Partners jointly own business assets and/or ownership is governed by partnership agreement.Business assets are owned by the corporation. There is no specific claim on the corporate assets by shareholders.

## Do start-ups have to pay taxes in Canada?

If you provide taxable property and services in Canada and your total taxable revenues exceed $30,000 in any single calendar quarter or in four consecutive calendar quarters, you will have to register for the GST/HST. More details are available on the Canada Revenue Agency’s website.

You may also need to collect income tax for the profits you earn. You will need to complete a tax return at the end of your first year of activity to determine how much tax you owe, if at all. Income tax laws vary by province and territory and at the federal level. It is probably best to hire a professional accountant to help you complete your annual tax return.

The Canada Revenue Agency offers a free liaison officer service to owners of small businesses and self-employed individuals to help them understand their business tax obligations.

## Choose a business name

Selecting a name for your business is not a task to be taken lightly. In fact, it may prove more difficult than you expect. Your name must be accurate, catchy and, most importantly, available. Your name will often create your company’s first impression on customers, so choose it with care.

Ask yourself the following questions.

- Does the name reflect my business and what I sell?
- Can it be easily remembered?
- Is it unique and distinctive?

By law, the name can't be the same as, or very similar, to an existing corporate name or trademark. So, it’s important to do a careful search of existing business names before selecting one. Most companies need to register their business name with the government. However, you generally do not need to register a sole proprietorship if it operates under your own legal name and personal bank account.

## How to get a business licence

You may also need permits or licences to operate your business. Try searching on this site to find out what you need or contact your province, territory and/or local municipality.

## Intellectual property protection

## Put together a business plan

With the steps you’re already taken, you’re well on your way to setting up a business. Now, it’s time to write a business plan. This is the document where you describe your vision for the business and outline how you will accomplish it in detail.

Your business plan should include the following elements.

- Executive summary— An overview of your business plan.
- Business overview or company profile— Your products and services, the market you will be serving and trends in your industry.
- Sales and marketing plan— Your target customers and how you intend to market and sell to them. This section also provides information on pricing and distribution.
- Operations plan— Your location, equipment and machinery, production planning, customer interactions, research and development and any other important information about your operations.
- Human resources plan— The number and characteristics of employees and what policies you will have in place for them. Short-term and long-term plans for recruitment, training and retention of workers. The human resources plan is sometimes included in the operations plan.
- Action plan— A timetable for achieving specific milestones in establishing and running your business.
- Financial plan— Key financial information, including projected revenues, expenses, costs of goods, cash flow and a budget for two years, but mostly focused on the first 12 months.

Bringing this information together in one document will not only give you a roadmap for building your business, but also provide investors and lenders with the information they need to decide whether to finance your company.

### Prepare an elevator pitch

Apart from your business plan, you should also prepare an elevator pitch. This is a short and compelling description of your business that can be delivered in 60 to 90 seconds.

The idea is that not everyone will have the time or the interest to read your business plan. That’s why you need to be able to pitch potential investors, lenders, partners and customers on your business in the time it takes for an elevator to go up a building.

## Finance your new business

While many entrepreneurs start out by bootstrapping their businesses—meaning they use only their own money to finance their company—sooner or later most growing businesses will want to find outside financing.

Getting financing is a huge milestone in the life of a new company. There are two broad categories of financing—debt and equity.

Debt financing means you are borrowing money from someone that will have to be repaid. This type of financing includes loans from financial institutions and personal loans. You’ll pay interest on the money you borrow and repay it in regular, usually monthly, instalments.

Equity financing refers to investments made in return for a share of the ownership of your business. While, it doesn’t have to be repaid, an equity investor will likely want to be involved in decision-making. Equity financing includes money from angel investors and venture capitalists.

### Main sources of financing for start-ups

#### Personal investment

When starting a business, your first investor should be yourself. Investing your own money, and/or putting up your assets as collateral, shows investors and bankers you have a long-term commitment to your business and are ready to share risk with them.

#### Love money

This is money loaned to you by a spouse, parents, family or friends. Investors and bankers considers this to be patient capital, meaning it’s money that can be repaid later as your business grows and become more profitable. When borrowing love money, you should remember that a business relationship with family or friends should never be taken lightly.

#### Business loans

Loans from banks and other financial institutions are the most common source of funding for small and medium-sized businesses.

For new businesses seeking relatively small loans, the best route is often to get an online loan. Many lenders now use algorithms and artificial intelligence to assess risk. They take such information as your personal credit history, income, home ownership and current debt and compare it to the credit profiles of thousands of other borrowers to make a decision on granting you a loan.

Specialized organizations such as Futurpreneur can also be a good place to get your first business loan.

#### Credit card and lines of credit

Many new entrepreneurs rely on credit cards and lines of credit to fund their businesses. While these are easy sources of cash and their use is often encouraged by financial institutions, you should be careful with them. They often carry high, variable interest rates that can drain your company’s cash flow. Term loans are often a better option because they carry lower rates and your payments are fixed.

#### Angel investors

Angel investors are generally wealthy individuals or retired company executives who invest directly in start-ups. They are often leaders in their field who can also offer their experience, network of contacts and technical and/or management knowledge to early-stage companies. You can find angel investors through such organizations as the National Angel Capital Organization.

#### Venture capital

Venture capitalists are looking for technology-driven businesses and companies with high-growth potential in sectors such as information technology, telecommunications and biotechnology. Venture capitalists take an equity position in the company to help it carry out a promising but higher risk project and expect a high return on their investment.

#### Grants and subsidies

Many types of grants, subsidies and other resources can help in starting to build up your business. While these funds don’t need to be repaid, they are limited in nature and can be difficult to obtain.

#### Business incubators

While business incubators or accelerators are not strictly a source of funding, they can be a great place to network and access resources when starting a business. Most incubators and accelerators are focused on the high-tech sector. However, there are also local economic development incubators that assist start-ups in more traditional sectors.

### Pros and cons of each source of financing for start-ups

Pro****Con****Personal investmentShows you are committed to your businesRepayment is dependent on your business’s success.Love moneyIs based on your personal relationship with the lender and usually comes with few conditions.Often not enough money to fully finance your business.Bank loanComes with relatively low interest rates.Must be repaid, usually in monthly instalments.Credit cardsEasy source of cash that can help you build your credit score.High interest rates can quickly drain your cash flow.AngelsOften share knowledge and experience with you.May require giving up ownership in your business.Venture capitalCan be more tolerant of risk.Expects a high return on investment.GrantDoes not have to be repaid.Hard to obtain.

## Choose a commercial space

When it’s time to set up your business in a commercial space, you will have to make some important decisions, including whether to buy or rent and how much you can afford to pay. For some types of businesses, such as retailers, location will obviously be a key consideration. For others, like tech start-ups, it will be less important. (More companies are foregoing a commercial space altogether in favour of working virtually.)

Other important factors in your choice of premises include access to the property for employees and suppliers and whether you will need to make improvements to the property to run your business.

If you are renting space, you will probably have to sign a commercial lease. It’s a good idea to consult your lawyer to understand all the clauses in the lease before signing it. Whether renting or buying your premises, you will need insurance to protect your assets.

## Hire employees

As your company grows, you will likely need to hire employees. This could be one of your most challenging tasks as an entrepreneur, especially at a time of labour shortages in many parts of the country.

Check out our study on labour shortages to learn more about why they are happening and find four strategies you can use to find and keep the best workers. You also can visit BDC’s employees page for a wealth of content on recruiting, retaining and managing employees.

### How to hire your first employee

It’s important resist the temptation to rush the hiring process because you have an immediate need to fill a position. Taking the time to do a thorough job can save you a lot of headaches and wasted time if you hire the wrong person. Here are some tips on hiring employees.

- Write clear job descriptions for the positions you are hiring for. Make them as detailed as possible to attract the right applicants.
- Post the position on job boards, social media and internally.
- Select the best applicants to call in for an interview.
- Referring to your job description, make a checklist of required skills, personal qualities and education so you can grade the applicants.
- Prepare interview questions that will delve into an applicant’s experience and background. You want as clear a picture as possible of how they would fit into your organization, focusing on what the person would be doing and their ability to fulfill that role.
- Avoid personal questions and questions that are discriminatory (i.e., those that touch on age, marital/family status, race, religion, sexual orientation, etc.)
- Consider getting candidates to do a sample piece of work that reflects what they would be doing at your company.
- Using your checklist, ask yourself how well each candidate meets your requirements and rank them.
- Once you’ve chosen a candidate, ask for references and make sure to follow up on them.
- Once you have checked references and made a final selection, it’s time to draw up a letter of offer. The letter should cover such items as compensation, working hours, vacation and benefits.
- Once the candidate has been hired, you’ll need to make the proper payroll deductions for the Canada Pension Plan, Employment Insurance as well as federal, provincial or territorial income taxes.

## Grow your business

Getting your business up and running is only the start of your business journey. Your first year will be one of your most challenging. It’s when many businesses fail.

You will have to keep your eye not only on your day-to-day operations but also planning for your company’s future growth. The difference between the two is often described as working in the business versus working on business.

One skill that can mean the difference between success and failure is learning how to manage your cash flow. Using a cash flow planner will help you forecast inflows and outflows and avoid cash crunches.

Equally important as managing your cash is learning how to manage yourself so that you’re making the best use of your time.

Visit our manage your growth hub for more tips on how best to move your business forward in the early months.

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