Business: 101: Starting and Running a Business in Canada
Starting a business in Canada can be exciting — and confusing. Between taxes, registration, and payroll, there’s a lot to keep track of. But understanding the structure of your business and how money flows through it will save you serious headaches (and CRA letters) later.
Types of Businesses
- Sole Proprietorship → The simplest structure. You and your business are legally the same entity. All profits go directly to you and are taxed as personal income. Easy to start, easy to manage — but you carry all liability personally.
- Partnership → Similar to a sole proprietorship, but shared between two or more people. Profits (and losses) flow directly to each partner’s personal return. Be careful with liability and have a written agreement.
- Corporation → A separate legal entity. It can own property, hire employees, and pay its own taxes. Corporations offer liability protection but require extra paperwork, filings, and legal fees.
How Canadian Taxes Really Work
Canada’s tax system is designed so that, no matter how you earn your business income — as a sole proprietor, partner, or corporate shareholder — you’ll roughly pay the same total tax once money is in your pocket.
- If you’re a sole proprietor, all profits go on your personal T1 and get taxed at your marginal rate.
- If you’re incorporated, you first pay corporate tax (~11–12% small business rate federally + provincial). Then, when you pay yourself via dividends or salary, you pay personal tax — but the system integrates them so your total combined tax ends up roughly similar to being unincorporated.
- That’s why most people incorporate for liability protection or retained earnings (keeping profits inside the corp to reinvest), not for tax avoidance.
Registering Your Business (ISC, CRA, Etc.)
In Saskatchewan (and most provinces), registration happens through your province’s corporate registry — in Saskatchewan, that’s the Information Services Corporation (ISC). You use ISC to:
- Register or renew your business name
- File annual returns if incorporated
- Search existing businesses
- Update directors or address information
For corporations, it’s highly recommended to work with a lawyer to ensure articles of incorporation, share classes, and resolutions are properly filed — especially if you ever plan to add shareholders or sell your business.
Sales Tax: PST, GST, and HST
Canada’s sales tax depends on your province:
- GST (5%) — applies everywhere in Canada.
- PST — varies by province (e.g., 6% in Saskatchewan).
- HST — combined GST+PST in provinces like Ontario, Nova Scotia, and Newfoundland (13–15%).
Some goods and services are exempt or zero-rated (like basic groceries, most financial services, and certain health/education services). But if you’re selling taxable goods or services and make more than $30,000 in annual revenue, you must register for GST/PST/HST with the CRA (and provincial agencies) and collect/remit it.
Tracking and Bookkeeping
Track everything. Every invoice, expense, subscription, receipt, and payment. The CRA expects detailed records for six years, and it’s the only way to know your true profit. Even small side hustles should use accounting software (like QuickBooks, Wave, or Excel).
Understanding your numbers — your margins, fixed costs, and tax obligations — is what separates a real business from a hobby.
Business Permits
Even home-based businesses often need a Residential Business Permit from your municipality. This ensures you’re following zoning laws and not causing issues for neighbours. In most cities, it’s a quick online application renewed annually.
Payroll, Contractors, and Employees
If you hire people, you need to understand payroll. The CRA differentiates between:
- Employees → You withhold and remit income tax, CPP, and EI on their behalf. You also pay the employer portions of CPP and EI.
- Contractors → They handle their own taxes. You simply pay invoices and issue a T4A if you pay over $500 in a year.
Payroll Deductions (2025)
- CPP (Canada Pension Plan): 5.95% each (employer + employee) up to a yearly max (~$68,500 earnings).
- EI (Employment Insurance): 1.66% employee, 2.32% employer, up to ~$63,200 earnings.
- Employers must remit these monthly or quarterly through CRA My Business Account.
Workers’ Compensation (WCB)
Every province has a Workers’ Compensation Board. If you have employees, registration is mandatory. Rates depend on your industry (e.g., construction is higher than IT). WCB covers employees for injuries on the job.
End-of-Year Filings
- T1 — Personal income tax return (includes sole prop income or dividends/salary from corp).
- T2 — Corporate income tax return.
- T4 — For employees, reporting their income and deductions.
- T5 — For dividends paid to shareholders.
Filing deadlines vary, but missing them can trigger penalties. Always track your fiscal year-end carefully.
Final Thoughts
Running a business isn’t just about making money — it’s about managing it smartly. Whether you’re a one-person sole prop or running payroll for twenty employees, understanding how taxes, registration, and compliance work will keep your business healthy and audit-proof.