The internet provides an amazing avenue for entrepreneurs across Canada to reach customers globally. Canada’s mature ecommerce market, widespread broadband access, and technology workforce make it a great place to launch and grow an online business.
In 2021, retail ecommerce sales in Canada surpassed 112 billion CAD and are projected to reach 149 billion by 2025.
But with the opportunities also come legal and regulatory considerations.
Operating an online business in Canada requires following various rules around registration, taxes, marketing, payments, and more. The requirements depend on your business model, target market, and province.
This guide will provide an overview of key steps and considerations for starting an online business legally in Canada. We’ll look at:
- Types of online business models
- Registration and incorporation
- Accepting payments
- Marketing and advertising laws
- Shipping and fulfillment
Let’s explore how you can take advantage of Canada’s digital landscape to build a thriving online enterprise.
Here are some key takeaways about starting an online business in Canada:
- There are many online models to choose from including ecommerce, affiliate marketing, blogging, consulting and more. Align with your skills and interests.
- Take steps like registration, licenses, incorporation and GST/HST filing to operate legally depending on your model.
- You’ll need payment processing through a merchant account and payment gateway to sell online and comply with regulations.
- Follow all marketing, advertising and CASL regulations around obtaining consent, disclosures, unsubscribes etc. Fines for non-compliance are steep.
- For physical product delivery, optimize shipping carriers, packaging and order management to provide smooth fulfillment across Canada.
- Partnering with the right tools and platforms can greatly simplify compliance, taxes, payments and shipping for your online venture.
Types of Online Businesses in Canada
Canada provides a thriving ecosystem for all types of digital entrepreneurship. Some top online business models include:
Selling physical products directly to customers through a website or marketplace. Options include:
- Dropshipping – Selling products stored and shipped by suppliers
- Wholesale/retail – Purchasing inventory to resell at a markup
- Handmade goods – Selling arts, crafts, clothing created by you
Earning commissions by promoting other companies’ products on your website through affiliate links. Popular niches include tech, travel, fashion, and more.
Building a blog around a hobby, passion or expertise and monetizing through ads, affiliates, products, or services.
Selling your skills and expertise online to assist businesses and clients worldwide. This could be in tech, marketing, design, writing, and more.
Creating digital products to sell like online courses, ebooks, templates, membership sites. Leverage your knowledge into passive income.
Offering online services in areas like tutoring, fitness coaching, design, marketing, and more. Leverage technology to sell skills.
Canada’s diversity and large addressable market supports a wide range of online models. Choose one that aligns with your interests, skills, and target customers.
Registration and Legal Steps
To operate legally in Canada, you must comply with federal and provincial requirements for registration, licenses, taxes and more. Here are key steps:
Register Your Business
Even as a sole proprietorship, you need to register your business name. This ensures no other business is using the same name. You can register a business name federally or just in your province.
Cost is $30-$200.
Obtain Relevant Licenses
Depending on your business activities, you may need licenses and permits. For example, ecommerce companies selling food, pharmaceuticals, or regulated products require specific licenses. Check with your province.
File for a GST/HST Number
If your worldwide revenue exceeds $30,000 per year, you must register for GST/HST.
This enables you to charge sales tax and remit it to the government.
Filing is free but charges apply if revenue exceeds the threshold.
Incorporate Your Business (optional)
Incorporation creates a separate legal entity and requires registering provincially or federally. It limits personal liability but has filing fees ($200-$300) and administration costs. Common structures:
- Sole proprietorship – No formal registration needed
- Partnership – Shared ownership between partners
- Corporation – Separate legal entity, requires formal registration
Obtain Business Licenses
Most municipalities require a general business license to operate. Fees are typically $100-$500 depending on location. Specific industries like alcohol, gambling, or insurance require additional provincial licenses.
Register for Taxes
You must collect GST/HST if applicable and depending on profit, may need to register for corporate income tax. Consult an accountant to ensure tax compliance. Deductible expenses can significantly lower tax burden.
A key step in preparing your online business in Canada is setting up payment processing. Accepting payments online requires:
High Risk Merchant Account
To accept credit card payments directly on your site, you need a merchant account with a provider like Chase Paymentech, Moneris or PayPal. Fees range from 2.4% – 4% per transaction.
Online businesses are considered “high risk” and require a security deposit for a merchant account. Cost is usually $100 – $500.
In addition to a merchant account, you need payment gateways like Stripe or PayPal to process transactions from your website. Cost is about 2.9% + $0.30 per transaction.
Alternatives to Merchant Accounts
If you cannot secure a merchant account, alternatives like PayPal, Square or TransferWise allow you to accept payments. Fees range from 2.9% – 5%.
Comply with Regulations
You must comply with regulations like:
- PCI compliance for secure transactions
- Collecting tax where required
- Providing receipts and terms of service
Use services like Visa Fraud Detection to screen transactions for fraud.
Require signatures, CVV, and billing addresses to verify customers.
Accept Recurring Payments
For subscription services, use platforms like Chargebee and Recurly integrate with payment gateways to easily accept recurring payments.
To sell globally, use providers like Payoneer to accept payments from customers worldwide in various currencies.
Follow best practices around security, compliance and fraud prevention. Partner with reputable providers like Shopify Payments and Stripe to streamline the process.
Marketing and Advertising Laws
Online marketing activities in Canada must comply with federal and provincial regulations around advertising, email marketing, telemarketing, and privacy.
Canada’s Anti-Spam Legislation (CASL)
Canada has strict anti-spam laws (CASL) to protect consumers from unsolicited communication. Key requirements:
- Express consent – You must have explicit opt-in consent before contacting prospects. Pre-checked boxes or inactivity don’t qualify as consent.
- Identify yourself – Commercial emails and messages must contain your business name and contact info.
- Unsubscribe option – Provide a clear one-click unsubscribe function in every message.
- CASL penalties – Violating CASL can lead to massive fines up to $10 million CAD. Even inadvertent non-compliance can result in steep fees.
Truth in Advertising
Advertisements in Canada must be truthful, accurate, and not misleading. All claims must be provable. Disclaimers should be clear.
Quebec’s Language Laws
Businesses in Quebec must offer communications and contracts in French as per provincial language laws. English can also be provided.
Do Not Call List
Canada has a National Do Not Call List (DNCL).
You cannot contact anyone who has opted out of receiving telemarketing. Fines apply for violations.
Marketing laws change frequently. Subscribe to blogs like Canadian Marketing Association to stay current on requirements.
When in Doubt, Check First
If ever unsure about legalities, consult a lawyer or organizations like the Competition Bureau Canada for clarification before proceeding.
Shipping and Fulfillment
For ecommerce businesses, shipping and fulfillment can be one of the most complex parts of operations. Here are tips for managing shipping from Canada:
Major carriers like Canada Post, UPS, FedEx, Purolator offer discounted business rates. Compare rates across different providers.
Using fulfillment centers with warehouses across Canada can greatly simplify shipping. Some options:
- Shipify – Fullfillment network across Canada
- Deliverr – Integrates with Shopify, Amazon
- Shipbob – AI-powered fulfillment software
Invest in high quality branded packaging material – boxes, bubble mailers, tape, labels. Make unboxing an experience.
Use software like Shopify, Skubana, or Freightcom to easily manage, package, and ship orders. Integrates with major carriers.
Provide accurate timelines based on origin and destination. Offer express shipping for time-sensitive items.
- Ontario to BC takes 6+ days
- Within same province takes 2-5 days
- Rural locations take longer
Offer free shipping on bigger orders to incentivize larger basket size. This drives up order value.
Offer flat rates by destination and discounted rates on bigger orders. Ensure rates cover fulfillment costs.
Share live tracking info and send proactive updates to improve customer experience.
Provide insurance options to cover loss or damage, especially for high value items.
Offer hassle-free returns and provide shipping labels upfront for maximum convenience.
Find the right tools and partners to optimize fulfillment timelines, costs and experience.
Canada provides a thriving landscape for online businesses to grow and thrive. With the proper research and preparation around legal obligations and operational logistics, it is entirely possible for online entrepreneurs to build highly profitable ventures.
The most important steps are to understand and comply with relevant federal and provincial regulations from the outset.
Requirements around registration, taxes, marketing permissions, payment processing, and shipping need to be handled properly.
At the same time, look to partner with and leverage the abundance of ecommerce platforms, marketing tools, logistics providers and software solutions tailored for the Canadian market.
Finding the right partners and tools for your needs can greatly smooth operations.
While there are certainly legal complexities to running an online Canadian business, the opportunities far outweigh the challenges.
By getting informed and setting up a compliant operation, entrepreneurs can benefit from Canada’s vibrant digital landscape and reach customers across the country and worldwide.
With the right business model and execution, the possibilities for growth are endless.