Starting a business in Ontario can be an exciting adventure. The prospect of being in control of your time and possibly earning more money than being an employee can feel very appealing. 

Before you even accept your first customer, there is a lot of work that goes into setting up a business first. For example, you’ll have to decide if you want to operate as a sole proprietorship, partnership, or coporation. These different business models can have profound impacts on your financial safety. Maybe you’ve heard that corporations can help you protect you from losing your personal assets if your business gets into trouble. If you do choose to incorporate, you’ll have to decide whether you want a provincial corporation or a federal corporation. Those are the two types of corporations in Canada, and Canada does not have the various other types of American corporation styles that you may have read about online.

Ontario's "Business Names Act"

If you are doing business under any name other than the name on your birth certificate, or under your registered corporation’s name, then you’ll have to register your business name through the Province of Ontario. This is required by the Business Names Act. If you do not register, then you will lose certain rights, such as the right to sue in court or defend yourself in court. 

A lot of people make the mistake of registering a business name without first considering the benfits of registering a corporation first. If you register a business name in Ontario without first creating a corporation, you could be held personally liable for the debts (and lawsuits) that your business becomes involved in. Obviously, if you can avoid it, it’s better to protect your personal assets, such as your car, house and savings accounts, by using a corporation.

Federal Corporations

There are many benefits to incorporating at the federal level. Additionally, there are several federal business structures to choose from, including the following:

  • ​business corporation under the Canada Business Corporations Act (CBCA)
  • not-for-profit corporation under the Canada Not-for-profit Corporations Act (NFP Act).

Provincial Corporations

Provincial corporations are also a good option, but cost slightly more to register. Some industries do not permit you to incorporate federally. For example, dentists, lawyers and other similar traditional professions are not permitted to register their businesses federally, and must use a provincial corporation if they decide to incorporate at all.