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Expats Owning and Operating a Business in Canada

Author: Jim Newham
Submitted:July 2014

Canada has been ranked 19th out of 189 of the world’s countries and territories in terms of its ease of doing business, and is therefore a favourable country in which to start and run a business. Particularly, starting a businesses is considered easy in Canada.

If you are an expat wanting to start your own business in Canada, the first step is to ensure you have the legal right to live and work in the country. In order to start a business in Canada, you normally need to have either a permanent residence permit or citizenship.  For more information on residence and citizenship, see Immigration –Working for Expats in Canada.

The Start-Up Visa programme was set up in 2013 with the aim of speeding the process of entrepreneurs starting a business in Canada. This is the first such scheme in the world and aims to fast-track immigrants’ entry clearance and permanent residence so that they are granted within weeks. To gain approval for this programme, you need to have financial backing from a government-designated group of investors. These investors normally require additional evidence of how your business will work, such as a business plan.

 

Business Plan

The Canadian market is very competitive; therefore it is vital to have a good business plan before starting your own business. When writing your business plan, make sure to research which businesses already exist in your field and determine your potential customers, partners and competition. Your business plan should set out your business objectives, target market, commercial strategies, potential obstacles and financing projections. For further advice and information on business plans, see  the Canada Business Network website.

 

Legal Structure

The first important step is to decide which legal structure is best suited for your business. The legal structure will determine the nature of your legal, financial and tax obligations. The simplest business structures in Canada are self-employed (sole proprietorship), partnership and limited liability company.

Sole Proprietor (Self-Employed)

The advantage of setting up your business as a self-employed person is that you have full ownership and control over the business, and that all after-tax profits are yours. In addition, set-up is simple and relatively quick and costs are low. On the other hand, you are personally liable for all the losses your business makes, and have additional responsibilities, such as keeping business records. You pay income tax at the personal income rate, rather than the corporate tax rate with a small business deduction.

Partnership

A partnership can consist of two or more partners. During setup, partners should have a partnership agreement written down, to ensure that all are aware of each other’s rights and duties. This will require the services of a lawyer. This agreement should also stipulate whether partners are all equal or if some have a greater share in the partnership (normally because they paid more starting capital.) Partners are jointly responsible for the debts and obligations any of them may incur. Each partner pays personal income tax on their share of the profits.

As an alternative to a standard partnership, you can opt for a limited liability partnership. This is the same in all respects except partners only have restricted liability to pay the debts that another partner has incurred.

Other Structures

Other legal structures in Canada include incorporated companies. These are either set up under the laws of one province, or, for those doing international business, federally. These take longer to set up and require the presence of a lawyer from the offset. All businesses must pay Sales Tax on all goods they sell and services they provide. To read more on tax for expats in Canada, see Taxation.

 

Setup and Registration

After choosing a legal structure, the next stage of setup is to register. Procedures for registration differ according to the province or territory in which you want to register. There is also the choice of registering federally, if you will be doing business across the country. For more information, see the Canada Business Network website.

Part of the registration process is choosing a unique name. You will need to search registration databases to ensure that the name you want has not been used before. Once registration is complete, your company will be granted a business number (BN), or, in Quebec, an NEQ (Quebec Enterprise Number).

Rather than going through the process of registration, it may be simpler to buy an existing business or buy into a franchise. You may be eligible for grants or other start-up funds from the provincial government, so this may be worth enquiring into.

 

Employing Staff

If you want to employ someone – including yourself – to work in your business you will have to register as employer at the local tax office. Online registration is possible. However, in certain cases expat business owners must register by telephone or in person.

As employer, you will have to ensure that your business complies with Canadian labour regulations. You should familiarise yourself with different types of contracts, minimum wage requirements, equal opportunity policies, work permits, insurance payments and recruitment options. Note that if you employ freelance workers, you will not have so many legal obligations as they will be liable for paying tax and insurance themselves.

 

 

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