How to start a business

Choose your business model

When you start a business, you need to understand what type of business model you’ll have. Will you have a product-based business or a service-based business? A product-based business is where you sell things like purses, masks, phone cases, etc. A service-based business sells your services, which can be anything such as design, writing, photography work, etc.

Once you have an idea of what type of business you want, dig a little deeper. You want to find the intersection of what you’re good at and what people will pay you for.

In this first stage, focus on what type of business you want and what is viable. Learning how to start a business is a bit of trial and error but it’s important to have a clear vision of what you’re doing.

Decide on a business structure

There are various business structures to consider when starting out. Your business model and ownership structure will help determine which business structure – sole proprietor, corporation, partnership or co-operative – best aligns with your business situation and the impact each structure will have on your business. Here’s a basic guide on business structures:

Sole proprietor — under this structure you are the sole owner for the business. You can work under your own name or use a business name. This is a good option if you’re just starting out.

Corporation — this structure creates a separate legal entity. This provides the advantage of limited liability, which means your personal assets are protected from lawsuits against the corporation. According to the Government of Canada, “When forming a corporation, the owners transfer money, property, or services to the corporation in exchange for shares. The owners of these shares are shareholders.”

Partnership — if you’re in business with another person, a partnership might be best. Under this structure, each partner contributes to the business and can also claim any profits.

Co-operative — this structure is for incorporated businesses that have multiple people who are working to serve a greater need. The business is owned by the various members of the co-op.

Each business structure has its own requirements and will affect how you report your income, your tax liability and many other matters. You can research the various business structures to see which one is the best fit for your business.

Think about which business structure will be most beneficial for your type of business and the types of income you have. For example, do you make money from a product, service, membership, etc.? This may influence which structure could be the most suitable fit. If you have any questions or concerns, you can always talk to a professional, such as a lawyer or tax professional, who can provide guidance and share the legalities of each business structure. To start, you can check out the Canadian Bar Association as a resource.

Think of a business name

Once you’re clear on your business model and have a plan in place, you can start thinking of a business name. If you’re a sole proprietor and just starting out, you may want to simply use your name. You also want to consider a business name that illustrates what you do, is easy to remember and spell, and has meaning to you.

Brainstorm several names. Then you want to check the Trademark database to ensure that it’s not already in use. Also, a quick Google search can help you assess what names are already in-use.

Lastly, consider the name in relation to the website URL and social media handles. You’ll need a website and social media for your business, and you’ll want to make sure your desired URL and social media handles are available.

Register your business

You want to make your business official by taking the steps to register your business. Which business structure you choose will affect the way you report your income, your tax situation and may require additional paperwork or specific licenses or permits. You can find more info on requirements from the Government of Canada. If you need further assistance, talking to a lawyer or tax professional may be helpful. You want to feel confident in your choice before registering.

This part can seem overwhelming but taking steps ahead of time can make it less intimidating. To start, gather your personal and business information such as Social Insurance Number, office address, business name and business structure.

You’ll then need to get a business number (BN), which you can do online or by mail or phone. You can also enroll in other Canada Revenue Agency program accounts.

You’ll also need to register based on your business location and can find territory-specific info to help you get started. To make sure you’re all set up with registration and legal requirements, check out this legal basics checklist and what you can do to get registered.

Set up a business bank account

Starting a business requires managing your revenue and a variety of expenses. Opening a business bank account is an important first step in launching your business. Separating your business finances so they’re not muddled with your personal finances is critical to your success and allows you to establish a business credit score.

Setting up a business bank account makes it easier to keep track of your finances. And it helps people like your accountant, banker and/or tax professional assess your business and gain a deeper understanding of it. Having a separate business bank account also makes your business look more official so when working with clients, they know you’re serious and this isn’t just a hobby.

You can choose business chequing and savings accounts, and an account plan, that best fits your banking and operating needs to get started.

In addition to a business bank account, getting a business credit card is helpful. It keeps your personal and business expenses separate, makes it easy to track your business expenses and contributes to building your company’s credit history.

Write a business plan

On top of choosing a business model as well as structure, having a business plan is an important component in getting started. Developing your business plan can help you dive into the nitty-gritty and pave a path forward. Think of it as your map to get started. The plan will include:

• the purpose and mission of your company

• the market you are targeting

• information about processes

• your operating model

• your financing requirements

• how you’ll earn a profit