Register a Sole Proprietorship in Canada

Individuals who want to open companies in Canada can set up small, medium or large-sized businesses depending on their needs and field of activity. Those who decide to start a small company Canada have the sole proprietorship as a means of carrying out a business without going through a complex registration procedure.

The sole proprietorship or sole trader is, just like in other countries, the simplest form of starting a business in Canada, which is why we invite you to read below how to set one up in the quickest time possible. If you need help in setting up a Canadian sole proprietorship, our team of company formation agents is at your disposal with registered agent services.

Features of sole proprietorships in Canada

The sole trader is governed by the Company Law just like all other types of Canadian companies. However, the most important difference between the sole proprietorship and limited liability companies is the sole trader will not have a different personality than the business’ personality. This will make the sole trader fully liable to the business’ debts and obligations.

Because of the increased liability, the sole proprietorship is mostly suited for small businesses. Also, reserving a trading name for a Canadian sole trader business is also mandatory upon registration.

Our company formation consultants in Canada can offer more information on the characteristics of sole traders.

What are the main steps to register a sole trader in Canada?

Just like in the case of any other business form, the registration of a sole trader in Canada implies following a few steps. These steps usually consist in:

1. decide on the province/territory where you want to run your business;
2. register the business name with the provincial/territorial registry where it will operate by filing an application form;
3. obtain the business number and tax program accounts from the Canada Revenue Agency;
4. apply for the necessary business licenses and/or permits with the relevant Canadian authorities.

It is good to know that most of the time, individuals who decide to start a company in Canada under the form of a sole trader have various professions, such as accountants, lawyers, and doctors. For this purpose, they are first required to obtain their practice licenses with the respective associations. In the case of accountants, for example, these must be licensed by the provincial CPA body (e.g. CPA Ontario).

Our company registration advisors in Canada can offer more information about the registration requirements imposed in different provinces or territories, where applicable.

Bank account requirements for sole traders in Canada

It is good to know that the registration of a sole proprietorship in Canada will require the opening of a bank account based on the business license obtained with the Trade Register. This account needs to be kept separate from the personal account of the sole trader.

Other requirements related to starting a sole proprietorship in Canada

Foreign entrepreneurs can start sole proprietorships in Canada as long as they rely on their valid residence permits. Also, once the sole trader is registered, it is also required to purchase liability insurance, depending on the field in which the business operates.

Tax registration is also mandatory for sole proprietorships, however, Goods and Services Tax (GST) registration is not mandatory from the beginning of the activities.

It is also worth noting that in certain provinces or territories, the authorities require the sole trader to comply with specific office space requirements.

Taxation of sole proprietorships in Canada

One of the most important aspects related to the registration of a sole trader in Canada is that the business owner will be subject to the personal income tax. The payment of the tax is made (if required, through quarterly instalments) on the basis of the annual Form T2125 Statement of Business and Professional Activities and Form T1 income tax and benefit return.

The tax rates applicable depend on where the sole trader will pay the income tax.

You can rely on us for accounting services for your business in Canada.

Facts on sole traders in Canada

There are a few other aspects to consider when it comes to starting a company in Canada under the form of a sole proprietorship. Among these:

• GST registration becomes mandatory once the business reaches a revenue of 30,000 CAD;
• a sole trader does not need to register for GST/HST until taxable revenue exceeds 30,000 CAD, but business income must always be reported on the T1 return;
• the filing deadline for sole traders in Canada is June 15^th of the current year for the previous year;
• any balance owing must be paid by April 30th, and quarterly instalments are due on March 15, June 15, September 15 and December 15.

For assistance in setting up a sole trader in Canada, please feel free to contact our local agents.