Starting a Business in Canada: A Step-by-Step Guide for Expat Entrepreneurs

If you value autonomy, a flexible schedule, opportunities for creativity, and a potentially unlimited income, then entrepreneurship is a good way to go.

Canada is an appealing place to start a business. Situated as the 10th largest by nominal GDP, the Canadian economy boasts stability, resilience and is rich with opportunities. Key sectors include natural resources, manufacturing, finance, technology, and agriculture. Tourism, entertainment and sustainability are strong industries as well.

In Canada, most jurisdictions require citizenship or permanent residency in order to have at least partial ownership of a company.

This article provides an outline of how to start a business in Canada as an expat entrepreneur. Read about:

• Understanding the Canadian market

• Legal requirements for expats starting a business in Canada

• Immigration as it relates to business ownership, work permits and visas

• Funding options and investors

• The Canadian tax system for business owners

The first step is understanding the Canadian market

You will want to invest time in researching the Canadian market in order to identify opportunities and gaps. Once you have narrowed down which sector or industry you want to enter, spend some time analysing potential competitors.

Develop a strong understanding of Canadian consumer behaviour and preferences. For example, ever since COVID-19 transformed the world, more consumers prefer to shop online for goods versus in-store, compared to the years preceding the pandemic. These types of insight can help you understand Canadians on a deeper level, and plan your business model accordingly.

Legal requirements for starting a business in Canada as a foreign entrepreneur

After you have chosen the right structure for your business, there are a handful of legal steps to take in officialising it.

Unless you are a sole proprietor or operating your business under your legal name, you will need to register your business name. To do this, go to the registry of the jurisdiction(s) where you plan to do business. Registry names differ by province/territory:

• Alberta: Register a Business Name (cannot be done online)

• British Columbia: Name Approval

• Manitoba: Business Name Registration

• New Brunswick Online: Registration of a Business Name

• Northwest Territories: Business Name Registration

• Nova Scotia: Reserving a Business Name

• Nunavut: Business Registration

• Ontario: Business Name Registration

• Prince Edward Island: Business Name Registration

• Quebec: Reserve a Business Name (French only)

• Saskatchewan: Name Reservation

• Yukon: Reserve a Name

You will need specific permits and licences based on a few factors. Bizpal is a government tool that helps to narrow down the exact permits and licences you will need based on your location, industry and business activity.

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Immigration, work permits and visas

There are a few different avenues for foreigners wanting to start a business in Canada:

• Entrepreneur work permits - Canada's Entrepreneur Work Permit program is designed for foreign entrepreneurs who own at least 50% of the shares in a Canadian business. You must be able to demonstrate that your business will contribute to Canada's economic development and result in job creation. After you’ve established your company in Canada and have managed it for at least one year, you may become eligible to apply for permanent residence under various immigration programs in Canada.

• Start-up Visa - Founders of innovative and beneficial start-ups (and up to 5 of their family members) can gain permanent residency in Canada through the SUV program. Know that this program has very high requirements. To be eligible for the program, you must:

• Get a letter of support from a Designated Organization in Canada

• Incorporate your business within the country

• Individually hold a minimum of 10% voting rights in the company together with a Designated Organisation

• Collectively, you and the Designated Organization must have over 50% of voting rights

• Actively manage the business, with main operations in Canada during and after the application process

• Fulfil language proficiency at Canadian Language Benchmark Level 5 in English or French

• Have adequate settlement funds and operational capital, ideally over $200,000

Other avenues for immigration through entrepreneurship in Canada include the Intra Company Transfer, the Provincial Nominee Programs, and the Quebec Immigrant Investor Program.

Exploring funding options and attracting potential investors

The Canadian government and various financial institutions are supportive towards entrepreneurs and offer a handful of options for funding a business endeavour, if your personal savings won’t cover the initial expenses:

• Private business loans - These loans are offered by Canadian banks, credit unions, and other financial institutions, and come in several forms including term loans, lines of credit, and equipment financing.

• The Canada Small Business Financing Program makes it easier for businesses to obtain loans from financial institutions by sharing the risk with lenders. Various program enhancements provide lenders and small businesses with additional financing, new classes of loans, larger loan amounts and terms, improved loan conditions and fewer administrative hassles.

• Venture capital is private equity financing provided by investors to startups and small businesses with lots of potential for growth. Venture capitalists (VCs) in Canada typically provide funding in exchange for equity or an ownership stake in the company. This type of financing is incredibly helpful for businesses that may not have access to other forms of funding like bank loans due to a high risk profile or lack of substantial operating history

• Government grants and funding can be extremely helpful for small business owners looking to level up. The Benefits Business Finder creates a tailored list of programs and services for business including funding, advice etc. See a complete list of grants and funding here.

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You can also Increase your chances of obtaining private investments by formulating a solid business plan. The plan should include an attractive value proposition, an outline of your market strategy, financial projections and growth potential. It’s also important to highlight the experience and expertise of your team.

Beyond funding and programs, you can access additional resources from important organisations such as the Business Development Bank of Canada and the Canada Business Network. Additionally, there are a countless amount of free resources and training programs for business owners in Canada.

A quick overview of the Canadian tax process for business owners

Canada’s progressive tax system (both provincial and federal) involves individuals and corporations paying income tax based on earnings, with higher incomes taxed at higher rates.

Sales taxes include the federal Goods and Services Tax (GST) and provincial sales taxes (PST)/Harmonized Sales Tax (HST). Once you have registered for a business number, you can register for a GST/HST account.

To report your business’ income, claim deductions and credits, and determine the amount of tax you owe or the refund you are entitled to receive, file your annual tax return here. Note that business owners have until six months after the fiscal year to complete their return.

Businesses can benefit from tax incentives and credits designed to encourage investment, innovation, and growth. They can take advantage of investment tax credits for purchasing new machinery and equipment, and provincial credits that support regional economic development. Other incentives include small business deductions that reduce the corporate tax rate for qualifying small businesses, and environmental incentives that promote sustainable practices.

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