Starting A Business The Essentials
Ontario is home to the largest number of independently owned businesses and small business owners in Canada. Ontarians themselves are entrepreneurial by nature and regularly explore opportunities to engage in business whether to supplement their regular income or to completely change career paths.
I. Choosing The Business Model
The three most common business models are:
- Sole proprietorship;
- Partnership; and
There are subcategories within these models which will not be explored in this article, but which our office is willing to elaborate on in the context of servicing our clients and prospective clients.
The decision of which business model to adopt has important implications from a tax and succession planning perspective as well as a liability perspective and a myriad of factors need to be considered such as:
- Will the business be owned by more than one individual?;
- If more than one owner, will the ownership stake of each be equal?;
- Will the business employ or independently contract in order to carry out its commercial affairs?;
- Will the business carry on commerce in Ontario, nationwide, or internationally?;
- Will the business require start up capital?;
- Will the business require bank financing?; and
- Will the business require special licensing?
The above are just some of the considerations which should be explored with legal counsel and a competent accounting advisor prior to selecting the appropriate business model.
II. Registering The Business Name
Regardless of the business model selected, a business will be ineligible to operate legally absent registration of its name. In fact, a business caught operating in Ontario without a legally registered name will be subject to fines.
First and foremost then, the business name must be submitted for approval. Once the name has been approved, it is eligible for registration. The process of name approval ensures against the registration of business names which are similar to already existing businesses which would otherwise confuse or mislead the public. The registration of business names, in turn, allows the public access to government records which provides vital information regarding the business registered thereunder.
III. Licensing Requirements
Most businesses are legally required to obtain a licence prior to commencing operations.
In some cases, the matter may be as simple as obtaining a business licence permitting the business to carry on commercial activity from its registered premises or head office. In other cases, however, a business may be required to obtain a special licence in order to carry on a prescribed commercial activity.
Since businesses are governed by all three levels of government, proper inquiries must be made in order to ensure compliance with federal, provincial, and municipal legislation and regulation.
In Ontario, a useful starting point would be the ServiceOntario website which contains helpful information regarding permits and licensing. At the municipal level, it is usually sufficient to contact the City Hall and request to speak to the Municipal Licensing and Standards Department in order to determine which licences and/or permits are required for the proposed business.
IV. Registering with the Taxing Authorities
Businesses in Ontario are required to register with the federal and provincial governments in order that the appropriate taxes be charged, collected, reported, and remitted to the taxing authorities.
The most common registration in this regard is the GST/HST which provides a business with the ability to charge Goods and Services Tax, Provincial Sales Tax, and to claim input tax credits for the taxes paid in acquiring merchandise used in the ordinary course of the business’ activity.
If the business has employees, it will be responsible for deducting:
- Income tax from wages paid;
- Canada Pension Plan contributions; and
- Employment Insurance premiums,
and to remit these deductions to the Canada Revenue Agency.
The above illustrates some of the important considerations and highlights the important steps involved in the start up of a new business. The foregoing does not purport to provide an exhaustive list, however, and should not be taken as conclusive by any means. Interested persons are encouraged to consult this article in order to obtain a general understanding of these matters and to contact our office for further legal advice and service if necessary.