Starting a sole proprietorship in Ontario can be personally and financially rewarding, but there are also pitfalls to avoid and regulations to satisfy on the road to success. It’s smart to thoroughly understand what’s required, and devise a detailed plan of attack for launching an enterprise. Continue reading to learn about planning, registering, funding, and growing a sole proprietorship in Ontario.
What is a Sole Proprietorship in Ontario?
An Ontario sole proprietorship is the most basic business structure that you can set up in the province. In a nutshell, a sole proprietorship is an entity in which a single owner is responsible for all legalities, liabilities, assets, debts, and profits. Some of the advantages to this business structuring include:
On the downside, be aware that, as a sole proprietor in Ontario, you are responsible for all of the business’s losses and debts. Your creditors are legally obliged to seize your personal assets, if needed, to satisfy your debts. That’s why it’s crucial to begin operations with a well-thought plan.
So, let’s quickly review some other business structuring options before detailing the sole proprietorship.
Other Types of Business Structures in Ontario
In Ontario, there are four types of businesses you can form, including Sole Proprietorships, Partnerships, Corporations, and Co-operatives. Let’s briefly look at each one now.
A partnership is a business that’s owned by at least two people. This business structure is still simple to set up, but the fact that there’s more than one owner can offset the expenses to make it more affordable for each.
Partners contribute their unique skill sets and financial resources, and also share debts and losses. Choose your partner very carefully if you elect to form this type of business structure in Ontario.
Corporations are legal entities that separate businesses from their owners. A corporation may be registered provincially, or federally, and both options have their own set of pros and cons.
You can register a business as a provincial corporation, initially, and then, register it as a federal corporation at a later date.
Aside from limiting owner liability, corporations have greater access to grants and capital from the government. Also, federally registered corporations have business name protection.
Co-operatives are special types of corporations that are democratically controlled by their members. Each member gets an equal vote on decisions to be made, but decision making typically takes longer. Co-ops can be for profit or not-for-profit, and can be registered either federally or provincially. Members of co-operatives are not responsible for losses or debts of the entity.
Pros & Cons of a Sole Proprietorship in Ontario
Pros of a Sole Proprietorship in Ontario
Cons of a Sole Proprietorship in Ontario
Starting a sole proprietorship can be a cost-effective option for individuals who want to start a small business. However, it also has its own challenges, such as unlimited liability and limited access to capital, which should be considered before starting this type of business structure.
Cost of Starting a Sole Proprietorship in Ontario
The cost of starting a sole proprietorship in Ontario can vary widely depending on several factors, such as the type of business, location, and legal and regulatory requirements. However, there are some costs that are common to most sole proprietorship businesses in Ontario, including:
To sum up: the cost of starting a sole proprietorship business in Ontario can vary widely depending on numerous factors and can range from several hundred to several thousand dollars.
Starting a Sole Proprietorship in Ontario: Step-by-Step
OK, so, now, let’s dig deeper into the specific tasks you’ll need to complete in order to start a sole proprietorship in Ontario. We’ll consider six individual steps, including:
If you’re one of the millions of Canadians who have been putting off launching your business ideas due to lack of time, fear of failure, hesitance to commit to the finances, or any other reason, maybe it’s time to give it some new, serious thought.
When you’re ready to begin, take the following steps and forge your dreams!
Step 1: Brainstorm the basics
Think about the specific industry or niche within an industry that you want to serve. Will you offer a product or a service? And what type of offers will you present to prospective customers to attract them and make them willing to open their pocketbooks? Will you operate online, offline, or both?
You’re going to need a business name. Once you have narrowed your list of potential names down to a top two or three, it’s a good idea to check the New Upgraded Automated Name Search (NUANS).
NUANS is the Official Canadian database of trademarked and incorporated businesses. You’ll want to make sure that the name you’re considering isn’t already taken by an incorporated entity.
Step 2: Understand government requirements
Unless you are going to operate under your own legal name, then you will need to register your sole proprietorship in Ontario. You can learn about important regulations that may apply to your business by visiting Accessibility to Ontario Businesses, Employment Standards, and Workplace Health & Safety.
How to register your sole proprietorship
The fastest and easiest way to register your sole proprietorship in Ontario is to visit the Ontario Business Registry. You’ll be able to complete more than 90 separate online transactions, including registration, updating your information in the future, incorporating, plus a lot more.
Federal business number and tax accounts
Your sole proprietorship will most likely require a federal business number (BN). It’s a 9-digit identification number, issued by the Canada Revenue Agency (CRA), for tax-related purposes.
Be aware that the Ontario business registry does not issue business numbers. You will need to deal with the CRA separately. Find out everything you need to know about getting a Business Number Here.
You’ll need your federal business number to communicate back and forth with the CRA and other governmental agencies. You’ll also use it to register for program accounts and manage changes to your business’s information.
Licenses & permits you’ll need to operate your business
BizPaL is a governmental service provided to help entrepreneurs understand which permits and licenses they need to operate their unique businesses.
You can search for licenses and permits based on industry, location, and typical business activities, and then save the ones you’re required to complete to ensure local, provincial, and federal compliance. Visit BizPaL Here.
Insurance to protect your business
While sole proprietorships are not required to maintain business insurance in Ontario, it’s still a smart practice and highly recommended. This is true even if you operate your business from home.
Business insurance offers protection for you, your property, operations, assets, and your future ability to generate income. Contact three or four local insurance companies and compare their rates.
Step 3: Research & estimate your start-up costs
Research your market so that you understand what it will take to launch, sustain, and grow your operations. One good place to start is Business Development Canada (BDC). And if you want to learn about target markets or customer demographics, check out the data available at Statistics Canada.
Plus, at the Government of Canada’s Small Business Services’, Introduction to Market Research, you can learn about:
Finally, you can research your competition and find out about which products and services are trending right now in your area at the Business Improvement Association (BIA).
Step 4: Write a business plan
Expand on the thinking you did earlier when brainstorming your business and develop a cohesive business plan that clearly defines your short-term and long-term goals. Lay out which resources you have available to launch and operate your sole proprietorship. Be as inclusive as possible.
If you need help developing your business plan, reach out to your local Ontario Small Business Enterprise Centre.
And if you are an innovation or technology enterprise, contact your Regional Innovation Centre for assistance.
Step 5: Get funding (grants, loans, etc.)
The Governments of Canada and Ontario provide various resources for small businesses to get financial help. You can check on federal-level financing and grants for businesses HERE.
Also, you can find very helpful resources about funding and programs that support businesses all across Ontario at Digital Main Street.
Further, if you wish to apply for a grant in order to integrate digital tools for your sole proprietorship, reach out to the helpful folks at Canada Digital Adoption Program (CDAP).
Additionally, if you’re considering starting a side business, you might be able to get up to $15,000 of loan financing through Futurpreneur.
And finally, you can find a complete list of all of the business funding opportunities throughout Ontario by visiting the Ontario Government’s page HERE.
Step 6: Find business advice and support
As your business grows, you may find that you need occasional advice or assistance from mentors and professionals, like accountants, advertising specialists, online marketing experts, business coaches, and lawyers. This is to be expected and is a natural part of sustaining long-term, profitable operations.
As a sole proprietor in Ontario, you can get free legal advice for small businesses on the Pro Bono Ontario Hotline. And the Small Business Enterprise Centre (SBECS ) is an excellent all-in-one support resource for any Ontario-based entrepreneur.
Additionally, you can apply for mentoring, training, and specialized grants at Ontario’s Starter Company Plus. You’ll also find loads of other helpful resources for sole proprietorships in Ontario on the Province’s main Business Registry Page.