How to Register and Structure Your New Business in Canada: Sole Proprietorship, Partnership, or Corporation 

Starting a new business in Canada is exciting, but before you open your doors, you’ll need to choose the right legal structure and complete the proper registrations. Your decision will affect how you pay taxes, how much paperwork you need to file, and how much personal risk you carry.

This guide explains the three most common business structures in Canada—sole proprietorship, partnership, and corporation—and outlines the steps to register each one.

Step 1: Understand the Main Business Structures

Sole Proprietorship

A sole proprietorship is the simplest form of business. You are the sole owner and are personally responsible for all aspects of the business.

Pros:

• Easy and inexpensive to set up.
  
  

• Full control over decision-making.
  
  

• Business income is taxed as your personal income.
  
  

Cons:

• Unlimited personal liability: your personal assets can be used to settle business debts.
  
  

• Limited ability to raise capital.
  
  

• Business income may push you into a higher personal tax bracket.
  
  

Partnership

A partnership involves two or more people (or companies) running a business together. In Canada, there are general partnerships and limited partnerships.

Pros:

• Shared startup costs and management responsibilities.
  
  

• Business income flows through to partners’ personal tax returns.
  
  

• Simple to set up compared to a corporation.
  
  

Cons:

• General partners have unlimited personal liability.
  
  

• Potential for disputes between partners.
  
  

• Each partner is legally responsible for the actions of the others.
  
  

Corporation

A corporation is a separate legal entity from its owners (shareholders). It can own property, enter contracts, and be taxed independently.

Pros:

• Limited liability: shareholders’ personal assets are generally protected.
  
  

• Potential tax advantages: small business corporate tax rates are usually lower than personal rates.
  
  

• Easier to raise capital through investors or issuing shares.
  
  

• Continuous existence: the corporation continues even if ownership changes.
  
  

Cons:

• Higher setup and ongoing administrative costs.
  
  

• More regulatory requirements (annual filings, corporate records).
  
  

• Income splitting and dividend strategies require careful planning.
  
  

Step 2: Register Your Business Name

Unless you operate under your exact personal name as a sole proprietor, you must register your business name with the appropriate government agency:

• Federal name registration: through Corporations Canada if incorporating federally.
  
  

• Provincial name registration: through your provincial or territorial business registry.
  
  

• Conduct a NUANS name search to ensure your desired name is unique.
  
  

Tip: Also secure a matching website domain name to strengthen your brand.

Step 3: Obtain Necessary Licences and Numbers

Regardless of structure, most businesses need some or all of the following:

• Business Number (BN) from the CRA. This is required to open payroll, GST/HST, import/export, or corporate income tax accounts.
  
  

• GST/HST account if your taxable revenues exceed $30,000 in a single calendar quarter or over four consecutive quarters.
  
  

• Municipal or industry-specific licences, depending on your location and business type.
  
  

Step 4: Register Based on Your Structure

Registering a Sole Proprietorship

1. Register your business name with the province or territory (if not using your personal name).
   
   

2. Apply for a CRA Business Number if you need a GST/HST account or will have employees.
   
   

3. Track your business income and expenses and report them on your T1 personal income tax return using Form T2125 (Statement of Business or Professional Activities).
   
   

Registering a Partnership

1. Draft a partnership agreement detailing each partner’s contributions, profit-sharing, decision-making, and exit strategy.
   
   

2. Register the partnership name with the provincial registry.
   
   

3. Obtain a CRA Business Number. Partnerships file a T5013 Partnership Information Return each year in addition to each partner reporting their share of income on their personal tax return.
   
   

Incorporating a Corporation

1. Decide whether to incorporate federally (allowing you to operate across Canada under one name) or provincially/territorially (simpler if you operate in one province).
   
   

2. File Articles of Incorporation through Corporations Canada or the relevant provincial registry.
   
   

3. Prepare corporate records: articles, bylaws, share registers, and minutes of meetings.
   
   

4. Obtain a CRA Business Number and set up a T2 corporate income tax account.
   
   

5. Maintain annual corporate filings and keep your minute book up to date.
   
   

Step 5: Consider Tax and Legal Advice Early

Choosing the right structure can have long-term consequences for taxes, liability, and growth. For example:

• A sole proprietorship might be ideal for a low-risk side business or early-stage startup.
  
  

• A partnership requires a clear agreement to avoid disputes and to manage liability.
  
  

• Incorporation can offer significant tax deferral opportunities but introduces more complexity.
  
  

Consulting a Chartered Professional Accountant (CPA) or business lawyer early ensures you select the structure that matches your goals and protects your interests.

Step 6: Stay Compliant Year-Round

After registration, keep accurate records and meet all CRA filing deadlines:

• Sole proprietorships and partnerships: file a T1 personal return by June 15 if self-employed, though any balance owing is due by April 30.
  
  

• Corporations: file a T2 return within six months of the end of the fiscal year.
  
  

• Remit payroll and GST/HST as required.
  
  

Keeping organized and working with a CPA will help you avoid penalties and keep your business running smoothly.

The Bottom Line

Registering and structuring your business is more than a legal requirement—it lays the foundation for future success. Whether you operate as a sole proprietor, partnership, or corporation, understanding your options and following the proper registration steps will help you start strong and stay compliant.

Need guidance on choosing the right structure or registering your business? Our team of Canadian CPAs can help you evaluate your options and handle the paperwork so you can focus on growing your business.