Opening up a business is one of the most thrilling experiences however, in most cases, entrepreneurs would just love to begin with the straightforward and accessible approach by registering a sole proprietorship in Ontario. Also, a sole proprietorship has advantages like easy and quick setup, very little paperwork involved, and full control over your operations. From the registration procedure to the legal and tax requirements, this guide will take you step-by-step through the Ontario sole proprietorship registration process.
What is a Sole Proprietorship?
In Canada, a sole proprietorship is a business structure where one person owns and runs the entire business. Setting up a sole proprietorship is simple and inexpensive and the owner is fully responsible for aspects of the business, including profits, losses and debts.
Advantages of Sole Proprietorship in Ontario
- Full control of business decisions
- Simplified tax reporting: all business income is reported on the owner’s personal income tax return.
- Minimum regulatory requirements
- Low Start-up Costs
That being said, these advantages come with certain risks, such as unlimited personal liability.
Steps to Register a Sole Proprietorship in Ontario
Step 1: Business Name
Selection of a business name is the first initial step in the process of registration of a sole proprietorship in Ontario. While you can run a business under your own name without registration, if you want a unique name, you need to register it to make sure no other business is running under that name.
Step 2: NUANS Name Search
You cannot register a business name until you have confirmed that no one else has already registered it. A NUANS Newly Upgraded Automated Name Search report will provide you with a listing of all business names and trademarks that may be similar to your proposed business name.
NUANS report can be obtained from the following trusted companies-
Step 3: Sole Proprietorship Registration
Once you find your business name, you may register the Ontario sole proprietorship. You may register sole proprietorship Ontario online through the Nuans Canada website. It is quite straightforward and usually takes a few minutes. You will be asked for personal and business information and payment of the registration fee.
Step 4: Obtain other Accounts and Registrations
While you are registering Ontario Sole Proprietorship, there are a few other additional steps you may want to take, depending on the nature and operation of your business. Once the business is up and running and growing, you may need to obtain various accounts and registrations, including.
- Business Number: BN is kind of a SIN number for your business. It is assigned to your business by the Canada Revenue Agency, and it may be required when filing or reporting taxes.
- HST Account: If your annual revenues exceed $30,000, you will have to register for an HST account to collect and remit sales taxes.
- WSIB Workplace Safety and Insurance Board: If you have employees, you are required to register with the WSIB to get workplace insurance for them.
- Payroll Account: If you plan to hire employees, payroll accounts are required. They show the recording of deductions made from payroll, such as EI and CPP contributions.
- Import/Export Account: You need to sign up for an import/export account if your business involves the importation of goods or their exportation with a view to ensure that the different customs legislations in Canada are complied with.
- Company Key: a personal security number for access to chosen online business services.
It can be pretty overwhelming handling all these, but Nuans Canada will help you through it all-from providing a Business Number to setting up payroll accounts and registering for HST, Nuans Canada gets you through all the legal requirements to operate smoothly.
Step 5: Licenses and Permits
Depending on the nature of your business, you may be required to get additional permits and licenses to keep you legal. For example, if you start any food-related business, you will need health and safety permits. Additionally, you check with the Ontario government for industry requirements.
Time Frame for Registering a Sole Proprietorship in Ontario
When registering a sole proprietorship, you can choose from several service options offered by NUANS Canada, depending on how quickly you need your business name search results. Below is the time frame and cost for each option:
Service Option
Express
30 Minutes
$40
Time Frame
Priority
1 Business Day
$20
Cost
Regular
10 Business Days
$0
NUANS Canada provides flexibility in processing time making sure that you can choose the service that best fits your timeline and budget.
Taxation of Sole Proprietorship in Canada
Taxation is actually simpler in the case of a sole proprietorship. The business income will be reported on the personal income tax return of the owner. No separate corporate tax filing is involved compared to other business structures. However, a sole proprietorship, since all the profit will be subjected to personal taxation rates, the tax could also turn out to be higher for the owner in the case of a sole proprietorship.
As a sole proprietorship, you will report your income on Form T2125, Statement of Business or Professional Activities. You will make a list of your revenues and expenses on the form, and pay income tax on the net profit. The plus side is that you can then deduct business expenses from your income which will reduce your overall tax liability.
Disadvantages of a Sole Proprietorship
- Unlimited Personal Liability
- Inability to raise capital
- No distinction between personal and business assets
FAQ’S: Registering a Sole Proprietorship in Ontario
Does a sole proprietorship employ people?
Yes, a sole proprietorship can have employees. You will need to register for a payroll account with the CRA, and you will have to observe all employment-related regulations, including EI and CPP deductibles.
Can a sole proprietorship be converted to a corporation?
Yes, a sole proprietorship can be converted to a corporation. Several businesses start as sole proprietorships and incorporate later in the course of their development. This has its advantages, including limited liability and access to funds even more easily.
If you’re considering incorporation, check out the following services-
Conclusion: Why You Should Incorporate a Sole Proprietorship in Ontario?
One of the best ways to start an enterprise with some minimal investment and complexities is to register a sole proprietorship in Ontario. This is ideal for people who need full control of the business and are okay with taking personal liability. The process of registering a sole proprietorship is simple, and with the right steps, you can be in business instantly. If you’re ready to open a sole proprietorship in Ontario, make sure to follow all the steps included in this guide and comply with all requirements according to the law.
In Ontario’s thriving business community, a sole proprietorship is a fantastic way to realize your goals, whether you want to start your own business or grow your existing one. With a variety of services to make the incorporation process simple and smooth, let Nuans Canada handle your sole proprietorship registration so you can focus more on growing your company.