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Starting a Business in Canada as a Foreigner – A Complete Guide

Are you interested in starting a business in Canada? If YES, here is a complete guide to starting a business in Canada as a foreigner.

Okay, having provided an in-depth analysis of the top 50 best small business ideas in Canada and a series of industry-specific sample business plan templates; we will now analyze in detail the legal requirements, market feasibility and every other thing it takes to start a business in Canada. So put on your entrepreneurial hat and let’s proceed.

If you intend starting your business in Canada then you have to be sure that you are ready for the rigors of entrepreneurship. Anyone can come up with a business idea, but it takes one with a business acumen and strong will to start and then build a profitable business, especially as 85% of businesses fail in the first five years.

Another thing you would need to evaluate is what kind of business will be best for you, and if it will better for you to start from the scratch or buy a franchise. Before buying a franchise in Canada, you should be knowledgeable about Canadian laws regarding buying franchises. All these should be done before you write out your business plan. Your business plan is a guide that shows how you intend to run your business.

Finally, you would need to register your business by selecting a province or territory out of the 10 provinces in the country. Your decision on a territory should be based on tax options for your company especially as regards the Goods and Services Tax (GST), and Harmonized Sales Tax (HST) which can be quite confusing for new business owners; if you have a sizeable demographic and psychographic composition of those who would go for your services; and the guiding local laws for your kind of business.

Starting a Business in Canada as a Foreigner – A Complete Guide

  • General Overview

Canada has a high figure of small operational businesses that have at least one employee on their payroll pegged at 1,138,761. As at 2005, small businesses in Canada accounted for an estimate of 42% of the GDP for the country’s private sector. Canada’s economic fundamental are strong and is supported by an independent judiciary as well as a solid protection of property rights. Canada was ranked 6th globally for its economic freedom, and 1st in Northern America.

Canada has one of the largest mining operations in the world, with over 20 active mines producing more than 60% minerals and metals. As at 2012, mineral exports totaled $92.4 billion, this accounted for 20.3% of total exports in Canada. This has made Canada to be the top destination for mineral exploration.

Canada’s internationally acclaimed postsecondary education system produces across all fields, thousands of highly skilled graduates yearly. This has resulted in a diverse workforce with the highest proportion of any Organization for Economic Cooperation and Development (OECD) country.

According to an index report from Aon Hewitt; Toronto, Montreal, and Vancouver, were among the 10 lowest-risk cities in terms of recruiting and employing workers. Canada also has in place an efficient immigration system that attracts and retains top talents from other countries.

Facts and Figures of Canada That Will Interest You as an Investor/Entrepreneur

Canada has a strong and stable financial system, low corporate taxes, and one of the highest living standards in the world. One attractive factor about Canada is its outstanding connections to top markets around the world, where in North America alone it has access to almost 500 million consumers.

Also, it is the only country that has the strongest economic connection with the United States of America. Here are other good facts about Canada;

  • Canada’s largest cities act as a united front so as to international companies the best strategies to expand their businesses.
  • Another plus for Canada is its well maintained transportation infrastructure that is perfect for moving goods, especially when it pertains to international trade.
  • Between 2008 and 2012, Canada had an average real GDP growth rate of 1.2%, leading the G-7
  • Canada has the lowest net debt-to-GDP ratio.
  • According to the World Economic Forum in 2013, Canada’s banking system was the soundest in the whole world.
  • According to the Economic Intelligence Unit, Canada is the best country amongst the G-7 to start a business in between 2014 and 2018.
  • Businesses in Canada have easy access to one of the largest consumer markets in the world due to North American Free Trade Agreement, NAFTA’s influence.
  • Canada according to survey ranks among top 10 for quality of life out of 132 countries.

Factors or Incentives Encouraging Investors to Venture into Business in Canada

Any investor looking to invest in Canada should be assured that Canada is a dynamic and prosperous country, where an investment could afford an investor the opportunity to play on the world stage. There are several incentives that attract investors to Canada and they are;

  • Strong growth record
  • Welcoming business environment
  • Highly educated workforce
  • Unparalleled market access
  • Low business tax costs
  • Financial stability
  • Competitive R&D environment

Starting a Business in Canada – Market Feasibility Research

Canada has natural landscapes, plus a multicultural population that is well educated due to its world class universities. Canada’s cities are also modern, diverse and safe with universal healthcare, which makes it one of the most stable countries to do business with.

Canada ranks well on market opportunities, due to its high level of GDP per capita, strong trade flows, as well as huge natural resources. The reason why most people are eager to do business in Canada is due to low Federal corporate tax rates that were reduced from 28% in 2000 to 15% in 2012, indicating that the country’s corporate income tax rate has decreased more rapidly than that of any country.

Apart from oil, Canada has opportunities in renewable energy, oil and gas, mining, and environmental related sectors. Other opportunities that can be expanded include travel and tourism as well as medical tourism.

Canada strong ties within North America alone where it has access to almost 500 million consumers and also its strongest economic connection with the United States of America makes it one of the best countries to do business with.

List of 10 Well Known Foreign Brands Doing Business in Canada

The brands listed below have over the years proven themselves adept in their different fields of endeavor. The list also goes to show that the stable environment for businesses in Canada has ensured that the businesses compete with local ones and become well known;

  • Google
  • Apple
  • Microsoft
  • Facebook
  • YouTube
  • Visa
  • Wal-Mart
  • Amazon
  • Samsung
  • Heinz

List of 10 Well Known indigenous Entrepreneurs in Canada

The fact that foreign brands are doing so well in Canada does not mean that there aren’t indigenous entrepreneurs that are making their mark as well. Even though Canada isn’t traditionally known for successful entrepreneurship, these indigenous entrepreneurs have started from scratch and have become well known in Canada.

Listed below are indigenous entrepreneurs doing business in Canada;

  • Mike Lazaridis – Research in Motion (R.I.M)
  • John Molson – Molson Brewery
  • Harrison and Wallace McCain – McCain Foods Limited
  • Samuel Bronfman – Distillers Company Limited
  • Joseph-Armand Bombardier – Bombardier Limited
  • Shannon Rogers – Global Relay Communication Inc.
  • Janet Stimpson – White House Design Company Inc
  • Allison Grafton – Rockwood Custom Homes Inc
  • Tonia Jahshan – Steeped Tea Inc
  • Andrea Shaw – TwentyTen Corp.

List of 10 Most Popular Indigenous Business Brands

Every country no matter how economically unstable it is have popular indigenous businesses that the people identify with, much less a stable country like Canada, who would have enough indigenous brands that are popular with the people, and with whom the people take pride in for having Canadian roots. Some of these indigenous brands have transcended the country’s boundaries into the shores of other countries. Here are 10 most popular indigenous businesses in Canada;

  • Tim Hortons
  • Metro
  • TD Bank
  • Rona
  • McCain
  • Canadian Tire
  • Bombardier
  • Shoppers Drug Mart
  • WestJet
  • Jean Coutu Group

Top 5 Best Cities to do Business in Canada

Even though Canada has been ranked as one of the best countries to do business in, this does not mean that all the cities in all its provinces will be suitable enough to start a business in. Different businesses will work better in some places/regions than in others due to the laws guiding each region and city. Here is a list of top 5 best cities and their states to do business in Canada;

  • Milton, Ontario
  • Calgary, Alberta
  • Winnipeg, Manitoba
  • Burlington, Ontario
  • Whitby, Ontario

Economic Analysis

Starting a business in any country means you would need to thoroughly carry out your research about the business, and how well it is likely to move in the city or region you intend to go into. Most business ideas might sound fantastic until you carry out an economic analysis that will show how unlikely the business will succeed.

One of the factors to consider is the economy of Canada itself. You should know how well the country fares against other G-7. Canada’s economic fundamentals are quite strong and are supported by an independent judiciary that ensures that an effective rule of law is enforced. Most large advanced economies have been struggling with the burden of high government spending that has resulted into fiscal constraints. However, that of Canada has been prudent.

Another thing that works in Canada’s favor is its climate which isn’t harsh as well as its abundance of natural resources. It shares great business and economic connections with America, Mexico, and Asia.

Possible Threats and Challenges You will Face When Starting a Business in Canada

Every country no matter how stable has volatile business environments that might be caused by a number of factors, thereby throwing challenges and threats to businesses operating in the country. When doing business in Canada, here are some of the threats and challenges you might face;

  • Geopolitical instability
  • Political environment
  • Sinking commodity prices
  • Rise in interest rates
  • Debt loads
  • Global instability and terrorism
  • Tanking oil prices
  • Multiculturalism

Starting a Business in Canada as a Foreigner – Legal Aspect

  • Business Licenses and Permits You Need to Start a Business in Canada

Starting a business in Canada is subject to laws especially laws from the federal, provincial and municipal levels of government. You would need to carry out a research to know the business licenses and permits that your business would be required to have depending on where you intend to locate your business. Some of the common licenses and permit include:

  • Municipal zoning and licensing – Municipal are responsible for issuing licenses to businesses such as vehicular businesses, stationery businesses, trades and other professions.
  • Provincial licenses, permits, and regulations – This is usually required by many industries.
  • Retail home sales business licensing regulation
  • General licensing and security regulation
  • Tobacco retail dealer’s permit

What’s The Best Legal Entity to Use in Canada?

When starting your business, you would need to choose a legal entity that best suits your business. However, depending on the kind of business you intend to run that business may be out of your hands. Here are three basic entities that should guide you into the type of legal entity that would suit your business;

  • Sole Proprietorship

In choosing a sole proprietorship, it means that you are the sole owner. It comes with tax advantages, as the tax bracket is lowered when the profits are low. This is also an easy and inexpensive legal entity as you would only be required to register your business name provincially except in Newfoundland and Labrador. However, with this kind of business entity, a creditor can lay claim on your personal and business assets to pay off debts.

  • General Partnership

If you do not intend to incorporate your business and instead have a partner who you wish to start the business with, you can use this type of entity. In a partnership, financial resources are usually combined and put into the business. Terms of the business have to be drawn up to forestall disagreements or dissolutions.

There is also the limited liability partnership that you can think of especially if you wish to limit your management of the business. This means that you are only liable for debts to a specified extent.

  • Incorporation

This kind of business entity can be done at the Federal or provincial level. Incorporating your business means that the business is considered as a separate legal entity from you, and you will not be held personally liable for the debts and obligations of the corporation. However, before taking the step to incorporating your business, you should seek legal advice so as to be properly guided.

List of Legal Documents You Need to Run a Business in the Canada

Every business needs legal documents in place before it can start off so that you don’t run afoul of the law. The documents listed below are by no means comprehensive but they are the basic documents that you would need to start your business in Canada;

  • Business Licenses and permits
  • Business plan
  • Certificate of incorporation
  • Insurance policy
  • Contract documents
  • Operating agreement

List of Government Agencies and Parastatals that are In-charge of Registering Businesses and Issuing Licenses and Permits in Canada

Different licensing bodies exist in Canada that handles the businesses and the permits and licensing that they might seek. These are the agencies you would need to visit if you expect to be fully licensed. The list includes;

  • Canada Revenue Agency (CRA)

The CRA is responsible for assigning a Business Number (BN) to a business or other non-profit organizations such as a charity, so as to help with tax matters that are related to business in Canada. The BN ensures that your business dealings with other businesses, organization, and government agencies are made easy.

  • Ministry of Community Safety and Correctional Services

This agency is responsible for regulating the private security industry in Ontario. This includes the licensing of private investigators and agencies, security guards, as well as the registration of employers that directly employ in-house security staff.

  • Canadian Environmental Assessment Agency

This agency is in charge of delivering high quality environmental assessments, and is also expected to be an expert on the subject matter within the Canadian government.

  • Canadian Food Inspection Agency

This is a science-based agency that is responsible for protecting the Canadian people from health risks related to food and zoonotic diseases that can be preventable. The agency is within the health portfolio and works to eradicate risks to food safety by working in partnership with relevant partners in the private and public sector.

  • Canadian Intellectual Property Office

This agency is a part of Innovation, science and Economic Development Canada. They are responsible for administering and processing of Intellectual Property (IP) in Canada.

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