Setting up a business in a competitive arena, such as Canada, can be both exciting and gruelling.
Canada has a powerful market, a stable economy, and low corporate tax rates. That is exactly what you need to launch a business that will be rewarding.
If you are a foreign entrepreneur looking to set up a business or expand your business in Canada, this article will give you comprehensive details on all you need to know.
Step-By-Step Guide on How To Set Up A Business In Canada
As a foreign entrepreneur, setting up a business in a place whose dynamics you don’t understand, can be daunting. It does not have to be. Here is a step-by-step guide to help you become a successful entrepreneur in the Canadian market.
1. Research The Canadian Market
The first step towards starting a Canadian business is conducting thorough research on the Canadian market. You should be able to identify viable reasons for setting up a business in Canada. What can the Canadian market offer you?
Target points for Canadian market research include:
● Demographics per territory and province: Canada has three territories and ten provinces. Find out which businesses do better in which territories and provinces. That way, you can pick a business and a province that will help you realize good profits and gains.
● Competitive businesses: Find out about the types of competitive businesses you qualify to transact in Canada, their services and products, and their customer base. Afterwards, determine and evaluate additional advantages your business will have over them.
● Local and corporate laws: Get to know all the laws and standards guarding entrepreneurship in each territory and province. Understand Canadian corporate laws as well.
2. Analyze Canada’s Economic And Financial Prospects
Covid 19 has affected the global market, including the Canadian market. But, according to OECD, Economic Forecast Summary (May 2021), the Canadian economy will recuperate and grow by 6.1% by 2021 and 3.8% by 2022.
Despite this being an optimistic forecast, you shouldn’t rely on it solely. You should also perform your analysis of Canada’s economic and financial prospects on:
● Costs of operation
Explore expenses of operation for business choices in your consideration list. They may include facilities, labour, transportation, taxes, and utilities.
● Tax incentives
Tax incentives will make your business profitable. You must find out about incentive programs for different territories and provinces.
● Currency
Knowledge of the existing currency and exchange rate of the Canadian dollar is vital. A country’s currency exchange determines its relative level of economic health.
3. Craft A Business Idea
Once you’ve identified eligible businesses that you can start up in Canada, it’s time to come up with an ultimate business idea or a few if you wish to launch multiple businesses. You’ll need to craft a business idea that will stand out from the rest or be at least among the best. Generating a good business idea is among the first steps towards a successful business.
4. Choose A Business Structure
Your choice of a business structure affects the amount of taxes you’ll pay, your ability to raise funds, paperwork, and personal liability.
As a foreign entrepreneur who wants to invest in Canada, you have four types of business entities to pick from:
● Sole Proprietorship
This form of business entity is owned by one person, meaning that all decisions regarding the business will depend on you solely. You’ll also receive all the profits and claim losses singlehandedly.
It is the simplest and most affordable form of business structure to start up as a foreigner.
● Partnership
As the name suggests, a partnership form of business entity is a business shared by multiple entrepreneurs. Canada offers two types of partnerships to foreigners, general partnerships and limited partnerships.
With general partnerships, partners manage the business, make business decisions, and share the business liabilities.
A limited partnership has silent partners who serve solely as investors and don’t participate in the day-to-day management of the business. This implies that the investment of these silent partners equals their extent of liability.
Partnerships are the ultimate business structures to set up for entrepreneurs who don’t wish to obtain permanent residence in Canada.
● Corporation
Through incorporation, the owner of the company creates a separate legal entity to transact business. Corporations can sign contracts, acquire property, file lawsuits, make profits, be taxed, and be held legally liable.
With corporations, if a shareholder leaves, the organization sells their shares, and the corporation goes forward undisturbed. The costs of forming corporations are high but worth it because it offers strong protection against personal liability.
● Co-operative
A cooperative structure seeks to satisfy typical market demands like access to products or services, employment, and the sale of products or services.
It’s created for the benefit of those acquiring services or products. User owners share profits and gains from co-operatives.
5. Formulate a Business Plan
A business plan will bring your business idea to life. It will allow you to critically examine all the aspects of the business you intend to set up. An up-to-standard business plan is precise, clear, sound, and realistic.
6. Select A Business Name
Naming an entity requires both legal and marketing considerations. Thus, you’ll need to design a unique name that communicates the purpose of your business according to Canadian legal issues of business naming. The Canadian government imposes more naming restrictions on corporations than sole proprietorships.
7. Register Your Business And Get Business Permits and Licenses
After picking a winning name for your business, you’ll need to register it with the Canadian government as well as apply for a business number or tax account. Before you register your business, you’ll need to decide whether to create a provincial or federal company.
Federal incorporation is ideal for establishing businesses in multiple provinces, while provincial incorporation is ideal for setting up an enterprise in one province. You will also need to apply for your business’s permits and licenses across the three government levels.
8. Find Financing
Financial preparation is vital when you want to set up a business in a foreign country. While some entrepreneurs can finance their business without help, most entrepreneurs need capital injections. Several funding options exist; sharing equity, government grants, and debt financing.
Understand each option clearly, and then pick the one that suits you best. If you are unsure how to do it, you can hire an immigration consultancy team like Conexa to help you source for available grants and investors (private or institutional).
9. Get Ready To Have Employees
A qualifying business to Canadian territories should create job opportunities. Hence, prepare to have employees by ensuring that you are eligible to hire employees in Canada. You should focus on getting the right employees who understand that startups are challenging and the amount of effort that goes into making them successful.
10. Market Your Business
As the final step towards opening and growing your business in Canada, you’ll need to formulate effective ways to market your business. You can translate your marketing strategy into actualization through social media, digital advertising, and media relations.
Expanding Your Business Into Canada
Expanding an already established business into Canada is straightforward. Canadian territories and provinces have similar requirements for business expansion. If you wish to expand your company into different provinces in Canada, you’ll need to register your business differently in each province.
For instance, if you are a foreigner and want to expand your business into Montreal, Canada, you must register your company as an extra-provincial corporation. And, for extra-provincial incorporation, you’ll need an agent for service who will act as a contact point between you (the foreign company) and the authorities in Canada.
Starting A Business In Canada By Immigrating
As a non-Canadian, you can only settle in Canada as an entrepreneur by applying to go there as a business immigrant. The Canadian business immigration program consists of the start-up visa program and program for self-employed persons. And, to qualify for the start-up visa program, you’ll need to:
● Have an eligible business plan that will contribute to the economic development of Canada and create jobs for Canadians
● Have a support letter from designated organizations like angel investors or business incubators
● Have the financial capacity to settle in Canada before your business picks up
● Meet Canada’s language requirements which are proficiency in English or French
If you are unsure where to begin, you can seek help from an immigration consultation team. The team will help you with the immigration process, business integration, and personal transition.
Startup a Business in Canada Without Living in Canada
As a foreigner, you can still establish a business in Canada without a permanent residence status. All you need to do is be conversant with Canadian rules on who can and who can’t set up certain types of business in the different provinces.
Each province has its set of requirements for opening a business in Canada. If the province you intend to start your business in doesn’t allow foreigners to set up the type of business you wish to launch, you can opt for partnerships with landed immigrants or Canadian citizens.
Set Up a Business in Canada With Ease
A business startup is never easy, especially for entrepreneurs who want to do so in foreign countries. Thus, if you are a serial entrepreneur who wishes to establish a business structure in Canada as a foreigner, use the guidelines above to do so successfully.
Do you still have questions? Complete our questionnaires and get tailored feedback to check your eligibility to set up a business in Canada.