Canada is unusually forgiving at the very bottom end: operate as a sole proprietor under your own legal name and there is no registration step whatsoever. The complexity shows up once you incorporate, because you are not dealing with one national system but a federal option layered on top of ten separate provincial ones, each with its own filing fee, director rules, and sales tax regime. This guide walks through the actual steps as they stand in 2026.
1. Sole proprietor, partnership, or corporation
Three legal shapes cover almost everyone starting out.
- Sole proprietorship. Legally, you and the business are one and the same. Trading under your own legal name requires no registration, and business income gets reported on your personal T1 return via Schedule T2125. It is inexpensive to run, but debts and lawsuits attach to you personally, and profit is taxed at your own marginal rate rather than a corporate rate.
- Partnership. Two or more people carrying on a business together; in a general partnership, liability is typically shared among the partners.
- Corporation. Its own legal person, separate from you, which brings limited liability and opens the door to the small business tax rate. Incorporation can happen federally under the Canada Business Corporations Act (CBCA) or through your own province's corporate statute.
Most advisors point to somewhere around $50,000 to $75,000 CAD in annual profit as the rough point where incorporating starts to pay for itself, since that is roughly where the tax deferral outweighs the cost of filing a corporate return every year.
2. Registering the business
Operating as a sole proprietor
Trading under your own legal name means there is nothing to file, federally or provincially. Want to operate under a trade name instead? You register that name with your province, and the fee depends on where you are.
Incorporating
You are choosing between two routes. Federal incorporation runs through Corporations Canada under the CBCA, filed through the Corporations Canada Online Filing Centre for $200 CAD online ($250 on paper), with online filings usually cleared within 1 to 2 business days. It buys you Canada-wide name protection and the right to do business in any province, though the corporation needs at least 25% Canadian-resident directors, and you will still need to register extra-provincially, for an extra fee, in each province where you actually operate.
Provincial incorporation runs through the province itself, and both cost and rules shift depending on where you land: Ontario charges $300 CAD through the Ontario Business Registry, British Columbia charges $350 plus a $30 name approval fee, Alberta is around $275, Saskatchewan around $265, and Quebec runs $397 through the Registraire des entreprises (REQ). A handful of provinces, Ontario and BC among them, drop the Canadian-resident director requirement entirely, which is often the deciding factor for founders incorporating from outside Canada. Skipping the name search altogether is also an option, by registering a numbered company such as 1234567 Canada Inc.
One more filing obligation kicked in back in January 2024: every CBCA corporation now has to keep an Individuals with Significant Control (ISC) register, an internal record documenting who actually owns or controls the company. Nothing to pay for it, but it has to stay current and be produced on request.
3. Getting a Business Number from the CRA
The Business Number (BN) is a free nine-digit identifier issued by the Canada Revenue Agency that ties together every federal program account your business touches, GST/HST, payroll, corporate income tax, import/export. Corporations typically get one the moment they incorporate, and in provinces like Alberta and BC, registering there triggers automatic BN issuance too.
Sole proprietors can hold off. A BN only becomes necessary once you register for GST/HST, take on employees, or start importing or exporting, whichever happens first. One change worth flagging: as of November 3, 2025, new BN and CRA program account registrations must go through Business Registration Online (BRO), since the CRA stopped taking these registrations by phone.
4. Licenses and permits
There is no single federal business license covering the whole country. What applies to you comes down to industry and municipality: most cities require a local business license, regulated professions answer to their provincial regulator, and certain industries carry additional federal or provincial permits on top of that. Given how much this varies from one municipality to the next, confirm directly with your city and provincial regulator. Selling original branding or creative work? Our guides on intellectual property basics and essential contracts for solopreneurs cover ground that applies no matter where in Canada you are based.
5. Taxes: income, corporate, and sales
Sole proprietors owe personal income tax on their profit at their marginal rate, filed via Schedule T2125 on the T1. Corporations pay corporate income tax instead, starting at a federal 15%, cut to 9% on the first $500,000 CAD of active business income for Canadian-controlled private corporations under the small business deduction. Every province adds its own rate on top of that federal number, so the combined small business rate lands somewhere between about 9% in Manitoba and 13% in the Northwest Territories, while the combined general rate above $500,000 stretches from roughly 23% in Alberta to 31% in Prince Edward Island.
Sales tax is where the provinces really diverge from each other. The federal Goods and Services Tax (GST) is a flat 5% nationwide. Five provinces fold it into a single Harmonized Sales Tax: Ontario at 13%, Nova Scotia at 14%, and New Brunswick, Newfoundland and Labrador, and Prince Edward Island at 15%. Alberta and the three territories stick with the bare 5% GST and add nothing provincial. British Columbia, Saskatchewan, and Manitoba instead layer their own provincial sales tax on top of the 5% GST (7%, 6%, and 7% respectively), and unlike GST, that provincial slice generally cannot be claimed back as a credit. Quebec runs its own system entirely: 5% GST plus a 9.975% Quebec Sales Tax (QST), both collected by Revenu Québec rather than the CRA.
GST/HST registration becomes mandatory once your taxable revenue crosses $30,000 CAD across four consecutive calendar quarters. Under that threshold you count as a small supplier and are not obligated to charge it, though registering voluntarily before you hit it lets you start claiming input tax credits on what you spend running the business.
6. Staying in good standing
Federal corporations owe Corporations Canada an annual return within 60 days of their incorporation anniversary. It is a status update rather than a tax filing, and it costs $12 CAD to file online. Provincially incorporated companies file an equivalent return with their own province, with the fee and deadline set by that province.
Separately from either of those, every corporation, federal or provincial, owes the CRA a T2 corporate income tax return each year, generally six months after fiscal year-end, even in a year with no tax owing. CBCA corporations also need to keep that ISC register up to date. The single most common way a small corporation slips out of good standing, and risks administrative dissolution, is simply missing an annual return.
Canada business costs at a glance
| Item | Cost |
|---|---|
| Sole proprietorship (own legal name) | Free, no registration |
| Business/trade name registration (if not using your own name) | Varies by province |
| Federal incorporation (CBCA) | $200 CAD online / $250 mail |
| Provincial incorporation | ~$265 to $397 CAD depending on province |
| CRA Business Number | Free |
| Federal annual return (every year) | $12 CAD online |
| Corporate income tax, small business rate (first $500K CAD) | ~9% to 13% combined |
| Corporate income tax, general rate (above $500K CAD) | ~23% to 31% combined |
| Sales tax (GST alone, AB/territories) | 5% |
| Sales tax (HST, ON/NS/NB/NL/PE) | 13% to 15% |
| Sales tax (GST + PST/QST, BC/SK/MB/QC) | 11% to 14.975% |
Frequently asked questions
How much does it cost to incorporate federally in Canada?
$200 CAD online ($250 by paper) through Corporations Canada under the CBCA, typically approved within 1 to 2 business days.
Does a Canadian corporation need Canadian-resident directors?
A federal corporation needs at least 25% Canadian-resident directors, but some provinces, including Ontario and BC, have no such requirement, which matters for non-resident founders.
What's the corporate tax rate in Canada?
A federal rate of 15%, reduced to 9% on the first $500,000 CAD of active business income for Canadian-controlled private corporations, plus a provincial rate on top that varies by location.
When do I need to register for GST/HST in Canada?
Once your taxable revenue exceeds $30,000 CAD over four consecutive calendar quarters. Below that you're a small supplier and don't have to charge it.
Does sales tax vary by province in Canada?
Yes significantly. It ranges from just the 5% federal GST in Alberta and the territories up to 15% HST in several Atlantic provinces, with British Columbia, Saskatchewan, Manitoba, and Quebec charging GST plus their own separate provincial sales tax.
Fees and rates above come from Corporations Canada, the Canada Revenue Agency, and provincial corporate registries as of 2026, and they do change over time, so double check before you file. None of this is legal or tax advice. Talk to a Canadian-licensed lawyer or accountant about your specific situation.