How to Start a Business: An 8 Step Guide to Starting a Business in Canada

Starting your own business in Canada is exciting, but it’s also a lot of hard work. To help make the process easier, here is an eight-step process that tells you all you need to know about becoming a business owner.

Step 1. Start your own business with a solid business plan

Technically, you don’t need to write a business plan, unless you’re seeking outside investment, but the process of writing a business plan is incredibly beneficial. A business plan helps you to understand why and how your business will be profitable. When written properly, it will help you identify and overcome potential hurdles and give you action steps if things don’t go according to plan.

A strong business plan includes the following:

• Business name and address.
• Your mission statement. Why does your business exist? What do you hope to achieve? What is your vision for the future?
• Your target market. Include as much detail as possible. Write down why you have chosen to serve this demographic. Is there a gap in the market?
• Products and services. A full list of what products and services you offer. How much does it cost to deliver each of them? How much will you sell each product and service for? What is the net profit?
• Competitors. Who are they? Why do customers choose these brands or products? What is your unique selling point?
• Marketing plan. What platforms will you use to market your business? What is your budget for each platform?
• Financial plan. What are the estimated monthly running costs of your business, including the cost of launching? What are your monthly sales forecasts and how much profit will that attract? It’s good to have a minimum target, base target and stretch target.

You should review and tweak your business plan at least once every quarter. This ongoing review helps you stay focused, adapt your business model as situations arise and identify opportunities.

Step 2: Register your business

How and where you register your business depends on a number of factors.

First, what type of business structure will you use? The four main options are:

• Sole proprietorship. You’ll continue to pay income tax and other remittances to the government as an individual. You personally will be held liable for business debts or lawsuits against your business.
• Partnership. This is essentially the same as a sole proprietorship, except profits are shared with your business partner(s). Under a general partnership, each partner is held personally liable. Under Limited Partnerships and Limited Liability Partnerships, only general partners (those who manage the business) are liable, while limited partners (investors) are not.
• Corporation. Your business becomes its own legal entity and all finances and liabilities are now separate from you, the individual. Incorporating a business has advantages — a lower corporate tax rate charged on earnings, the ability to pay pre-tax rather than after-tax dollars on some major expenses and the possibility of sheltering personal assets from legal proceedings against the company, to name a few. However, incorporation also requires far more ongoing paperwork, including keeping and updating the Articles of Incorporation and filing a T2 tax form, among others.
• Cooperative. Cooperatives are best for groups of people who share similar social or economic needs and want to operate a business democratically. In Canada, all cooperatives must be incorporated, either at the federal or provincial level. Cooperatives can be set up as for-profit, not-for-profit or charitable organizations.

Once you decide on your business structure, you need to check with local and federal agencies to determine what licences are required. For instance, Canadian businesses, regardless of their structure, that expect to earn more than $30,000 per year, must register for a Goods & Services Tax (GST) number. Some provinces also require business owners to register and pay for a provincial license (usually a one-time fee), while other jurisdictions will require business owners to also establish and apply for necessary licenses, such as an electrician’s license.

Step 3. Set up your workspace

Many business owners are able to work without having to rent office space. Still, if you need dedicated office space, there are a few cost-cutting options available. Look into getting a virtual office, co-working space or a serviced office. Typically, these are all cheaper than renting traditional office space.

Most businesses will also create an online presence — a website that offers potential clients access to the company, at a bare minimum. To create an online presence, you need to set up:

• A domain host and website development that will give your business a website with a unique, domain name
• Social media profiles (if you plan on using social media to connect with your clients)
• A presence on Google Maps and other listing websites in your niche (if you are a local business, looking to attract local traffic).

Step 4. Open a business bank account

A business bank account works similarly to a personal account – the main difference is that it’s dedicated to your company’s finances. That means payments made out to your company can be deposited and funds used to pay for business expenses can come out of this business account.

To pick the right bank account for your business, consider the features you require. In most cases, the features of a business bank account are very similar to the features of a regular bank account. For example, a business bank account will come with a debit card, access to online banking and options to link business credit cards and business loans directly to your business bank account.

However, fees and costs can differ dramatically for business bank accounts. For instance, the cost of a business chequebook can be twice or even five times the cost you might pay to order a book of personal cheques.

One good feature to consider is a business bank account with overdraft protection. Another good option is to find a business bank account provider that offers payments in foreign currencies. In Canada, good options include Vault and Loop — two fintech providers that specialize in providing Canadian businesses with cost-effective banking solutions.

Remember many business expenses are tax-deductible like business vehicle expenses, interest paid on business loans and interest paid on business expenses charged to a credit card, but cash flow can often be a problem and knowing your bills are covered will give you peace of mind.

Learn more about your business banking options

Step 5. Get financial support when starting your own business

It may cost you a fair amount to launch your business, especially if you have a lot of equipment to buy. For many business owners, this means finding business financing. Business financing means borrowing money for the sole purpose of using it to build and grow the business. In many cases, a business loan is much harder to obtain than a personal loan, since the lender often requires proof that the business is profitable. Still, there are two situations where getting a business loan is either critical or helpful.

The first situation is when a business is incorporated. As its own legal entity, this business needs to obtain financing on its own, separate from the person who may have started or still owns the corporation. The second situation is when a business would benefit from developing its own credit history. Regardless of the business structure, any loan or credit extended to a business helps the business profile to develop a credit history and score. The longer and better this history, the more opportunities a business will get to borrow more at lower rates.

Find out what business loans offer the best rates

Step 6. Explore business insurance options

Some types of businesses may be required to have insurance. For example, in some provinces, janitors and professional cleaners must have janitorial bonds to cover damages related to employee theft and bad work performance. In some cities like Toronto and Vancouver, commercial dog walkers must have liability insurance to cover the cost of damage to people and property, and they must list the municipality as an insured party.

Even if you aren’t required to have insurance when starting your own business, there are still several types of coverage you may be interested in getting to avoid being out-of-pocket for large, unexpected expenses down the road. These types of coverage include:

• General liability (or Third Party Liability). This protects you and your employees if legal action is brought against your business for damages done to a client’s person or property.
• Business contents insurance. This protects any professional assets you keep in your place of business regardless of whether you rent, own or work out of a home office. Coverage can potentially extend to computers, office furniture, inventory, machinery and equipment.
• Commercial property. Provides coverage for lost, stolen or damaged equipment.
• Personal injury. Helps cover costs associated with recovering from a work-related injury.
• Commercial auto coverage. Get car insurance for vehicles you use for business including supply vans, trucks and regular passenger vehicles.

Step 7. Hire employees (if necessary)

If you need extra help and can afford the long-term expense of paying other people, post job ads online, in print publications and on job boards at your local library, city hall, church(es), school(s) and anywhere else you might attract the right talent. Finding qualified people through word-of-mouth references is one of the most powerful ways to sift through feedback from your job posting. So, be sure to check with your friends and family to see if they know anyone who might be right for the position(s) you’re filling.

Regardless of the type of business structure you have, your responsibilities as an employer include:

• Making sure your employee(s) complete Form TD1, Personal Tax Credits Return.
• Deducting taxes, CPP and EI from employees’ wages and remit these amounts to the government
• Creating a hiring agreement, either verbal or written, for each of your employees
• Complying with employment laws in your jurisdiction including minimum wage, work hours, sick pay, vacation pay, statutory holidays, parental leave, pension plan enrollment and more.
• Adhering to workplace health and safety requirements

You might have to fulfil other requirements as well depending on the type of business you have, the classification of your employees’ jobs and other factors. Connect with a local business lawyer or tax professional to find out exactly what you need to do.

Step 8. Begin marketing your business and make a profit!

With an effective marketing strategy outlined in your business plan, there should be no reason not to start marketing from the day you launch your enterprise. An effective strategy should start attracting customers immediately. Consider the following ideas:

• Flyers. Since you’re most likely only targeting customers in your local area, it makes sense to put up flyers around your neighbourhood. Target supermarkets, shops, parks, churches, schools, vet clinics and anywhere else where your customers are most likely to be. Make sure you have permission to post in public places or on private property.
• Business cards. Get a few hundred business cards printed. Have them in your wallet ready to give to any potential clients you come across. Hand them over to your friends and family members to give to pet owners they know. Give some to your customers, so they can easily refer you to their friends.
• Have a blog or online portfolio and establish best practices for applying search engine optimization (SEO). Draw people to your business by optimizing your web content to rank highly for the keywords and search terms prospective customers are using.
• Paid social media advertising. On social media, it’s really easy to target specific demographics. You can restrict advertising to certain populations in specific regions.
• Have a referral scheme. Happy customers will be pleased to refer you to their friends, especially when prompted to do so. Perhaps you could even introduce an incentivized referral system.
• Cross-promotion. Set up cross-promotional deals with other professionals with whom you can share clientele. For example, if you’re a wedding photographer or event planner, you could collaborate with other companies that work at weddings such as venues, DJs, florists, etc.

This article originally appeared on finder.com/ca and was syndicated by MediaFeed.org.

About the Author

Stacie Hurst is a former associate editor at Finder, specializing in a wide range of topics including stock trading, money transfers, loans, banking products, online shopping and streaming. She has a Bachelor of Arts in Psychology and Writing, and she completed one year of law school in the United States before deciding to pursue a career in the publishing industry. When not working, Stacie can usually be found watching K-dramas or playing games with her friends and family.