Business: Starting A Business And The Law
by Gordon Crann and Alan Redway, Q.C.
Gordon Crann and Alan Redway, Q.C. are Toronto lawyers. They provide legal advice and assistance in all areas of the law, except criminal law. Prior to his retirement in 2010, Alan was a former Federal Housing Minister, MP for Don Valley East and former Mayor of East York. Gordon is a former East York Councillor.
Business class immigrants must start a new business, buy an existing business or buy a franchise in Canada. Many other newcomers, however, who become discouraged about getting a job due to their lack of “Canadian experience”, also find that starting a new business may be the best way to gain a livelihood.
Registering A Business Name
Unless you carry on business using your own name, then you must register your business name within 60 days of starting your business.
Before registering, you must decide on the legal form of your business between:
- sole proprietorship – you have to pay tax on the business net income, and the debts of the business are your personal debts;
- partnership – where two or more “partners” personally own the business, and any business debt becomes personal debts of each partner; and
- incorporation – an independent entity separate from its “shareholders”, so shareholders are not personally responsible for the company’s debts in most cases.
If you are considering a partnership or incorporation, then you should seek advice from both a lawyer and an accountant because there may be income tax advantages depending upon the net income of your business.
Registering for Sales Taxes
The federal Goods and Services Tax (commonly known as the GST) is charged on almost all goods and services. It is important to find out if your goods or services are GST exempt or not.
If your annual sales are below $30,000, GST registration is optional. Once registered, you must collect 7 percent GST on all sales and your must keep track of all GST paid on expenses. You deduct the amount of GST paid on expenses from the amount of GST collected to determine whether you receive a refund or must pay an amount owing to the Canada Revenue Agency.
If your business is outside of Alberta, you may also have to charge Provincial Sales Tax (commonly known as PST) and apply for a Vendor Permit. In Ontario, almost all goods are taxable, while most services are not taxable. Check with your provincial Ministry of Finance as to whether or not you must collect PST.
Licensing, Zoning and Leasing
- Many businesses require a municipal licence. The following are some examples of businesses where you must get a licence from city hall:
- driving school instructors, catering truck owners, and taxicab owners;
- bowling allies, parking lots, pet shops, and drug stores; and
- plumbing, heating and electrical contractors.
Municipalities regulate what uses are permitted at a specific location through zoning. Before buying a property or signing a lease, you should check with city hall to make sure the type of business you want to operate is allowed.
The laws governing rental of commercial space protect the landlord more than the tenant. If your business will be renting space, it is generally better to ask for a lease. If the lease is lengthy and complicated, it is often worthwhile to have a lawyer review it prior to signing.
Hopefully, your business will be a success. As the business grows and you start hiring employees, then you will have to face new legal issues, such as workplace insurance and payroll taxes.