The internet has opened up an immense opportunity for entrepreneurs in Canada to reach customers online.
Ecommerce sales now exceed $150 billion annually in Canada.
But with the ease of creating an online business also comes the obligation to register and operate legally.
Rules around formally registering your online business depend on the business structure you choose.
Options like sole proprietorship, partnership, and incorporation have different requirements federally and provincially.
Furthermore, you may need licenses, permits and GST/HST registration depending on your location and industry.
This guide will outline when registration is mandatory for an online business in Canada and steps for remaining compliant. Key questions we’ll cover include:
- What are the rules for sole proprietors?
- When is partnership registration required?
- What are the benefits of incorporating?
- Which licenses and permits are mandatory?
- When do you need GST/HST registration?
Read on to learn how to set up your online Canadian business correctly from the start.
Here are key takeaways on registering an online business in Canada:
- Sole proprietors don’t need formal registration but should register a business name.
- Partnerships like LP and LLP must register by filing documents and paying fees.
- Incorporating federally or provincially limits liability but has annual costs.
- Municipal licenses are required in most regions to legally operate.
- Industry permits may be mandatory based on your business activities.
- Once revenue exceeds $30K register for collecting GST/HST.
- Take time to identify and comply with all federal, provincial and municipal registration requirements.
How To Register an Online Business in Canada
1). Sole Proprietorship Registration
If starting an online business by yourself, you can operate as a sole proprietorship. Here are registration considerations:
What is a Sole Proprietorship?
A sole proprietorship means you are the sole owner operating under your own personal name or a business name. It is the simplest model.
No Formal Registration
Unlike corporations, sole proprietors are not required to formally register their business structure. No forms or documents are needed federally or provincially to start operating.
Registering a Business Name
Even though registration isn’t mandatory, it is advisable to register a unique business name. This prevents others from using your name. You can register a business name federally or provincially for a small fee.
Once registered, you can apply for a federal business number used for taxes and GST/HST. This is optional but recommended.
Check if your city needs you to file for a municipal business license to operate. Fees are usually under $100.
If your business is regulated like food services, child care, finance, etc. you may need specific provincial licenses. Check requirements.
If earning over $30,000 in worldwide revenue, you must register for GST/HST. This enables collecting sales tax.
Overall, sole proprietors have minimal registration requirements but should formally register a name and get licenses as required. Incorporation is not necessary.
2). Partnership Registration
If starting an online business with one or more partners, you can structure as a partnership. Here are key registration considerations:
Types of Partnerships
Common partnership structures:
- General partnership (GP) – Two or more co-owners share resources, profits and liabilities. No formal agreement is required.
- Limited partnership (LP) – Has at least one general partner and limited partners who have limited liability and involvement. Requires registration.
- Limited liability partnership (LLP) – Partners have limited personal liability. Owners have flexibility in management and share profits. Requires registration.
Registering Your Partnership
While GPs don’t require formal registration, LPs and LLPs must be registered by filing documents and paying fees provincially or federally. Steps include:
- Choose unique business name
- Draft partnership agreement
- File registration forms and pay fee (varies by province)
- Receive partnership registration certificate
Failure to register an LP or LLP prevents partners from benefiting from liability protections.
Business Number and Licenses
Partnerships should also register for a federal BN and any required municipal licenses.
Once worldwide revenue exceeds $30,000 register for collecting GST/HST.
File annual renewals and reports to maintain your partnership status on the record. Notify any ownership changes.
3). Incorporating an Online Business
Incorporation registers your business as a separate legal entity. Here are key considerations:
Benefits of Incorporating
Reasons online businesses choose to incorporate:
- Limited liability – Owners are not personally responsible for business debts and liabilities
- Tax benefits – Income tax rates for corporations are often lower
- Credibility – Incorporation gives a more professional impression
- Funding options – Can sell stocks and shares in the company
Where to Incorporate
Steps to Incorporate
Key requirements for incorporating include:
- Verify business name availability
- Draft articles of incorporation and corporate bylaws
- Appoint first board of directors
- File incorporation forms and pay fees (~$200)
- Get a Certificate of Incorporation
You must maintain corporate formalities like holding annual meetings and filing annual reports.
Apply for a BN from the CRA which will be used for taxes, payroll, imports/exports etc.
Check if municipal or industry-specific licenses are required for your operations.
Incorporation filing fees are generally $200-$300. Ongoing legal, accounting and admin costs are also higher for corporations.
4). Business Licenses in Canada
Depending on your locality and industry, specific permits and licenses may be mandatory to operate legally:
Municipal Business Licenses
Most cities and towns require registering for a business license. This enables operating in the area. Fees range from $100 to $500 on average. Requirements vary by region.
- Toronto – Annual $72 fee
- Vancouver – One license covers all business activities. Fee based on number of employees.
- Calgary – General annual business license $195 fee.
- Montreal – Multiple permit types required depending on business activities.
Certain industries like alcohol, cannabis, tourism, accounting, insurance, and more need provincial licenses to operate legally.
- Liquor license
- Food service permit
- Cannabis retail license
- Insurance broker license
- Tourism operator license
Consult your provincial or municipal government website to identify and obtain necessary licenses. Legal advice can also help verify obligations.
Once issued, licenses must be prominently displayed on premises as per regulations. Renew annually as required.
5). GST/HST Registration
If your online business reaches certain revenue thresholds, GST/HST registration becomes mandatory:
When Registration is Required
You must register for GST/HST if revenues from worldwide taxable supplies exceeds $30,000 CAD in the last 4 consecutive calendar quarters or in a single calendar quarter.
Even if under the threshold, you can choose to voluntarily register. This can be beneficial if you want to claim input tax credits.
How to Register
Register for GST/HST through CRA’s online portal. It takes 5-30 minutes.
- Business Number
- Business name and contact details
- Ownership information
- Fiscal year-end
- Banking information
Once registered, you’ll get a GST/HST account number and can charge GST or HST on taxable sales.
Key requirements after registering:
- Collect GST/HST on taxable goods and services
- File regular GST/HST returns (due within 1 month of your filing period)
- Remit GST/HST payments to CRA
Late filing can result in penalties of up to 5% plus 1% interest monthly. Stay compliant.
GST rate is 5% and HST rates range from 13% to 15% depending on the province.
While setting up an online business in Canada is easy, taking steps to formally register and comply with local requirements is crucial.
Rules around business structures, licenses, permits and GST/HST depend on your locality, industry and revenue.
Sole proprietors have minimal registration requirements. Partnerships need to file documents and register if structured as LP or LLP.
Incorporating limits liability but comes with annual costs. Most municipalities require basic business licenses, while certain industries need provincial permits.
Once taxable revenue exceeds $30,000, GST/HST registration becomes mandatory.
Getting informed on requirements for your specific business model and location is key.
Resources like provincial and federal government sites, legal advice and accounting guidance can help navigate obligations.
Meeting registration rules and operating transparently builds credibility. Proactively complying gives online businesses the freedom to focus on customer value.
With the proper foundations, ecommerce ventures can scale successfully in Canada’s vibrant digital landscape.