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How To Register A Sole Proprietorship In Ontario [Easy To Follow]

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Published by:

Aisha Patel

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Alistair Vigier

Last Modified: 2023-03-20

Are you looking to register a sole proprietorship in Ontario? If so, you’ll be glad to know that a sole proprietorship is not a complex business structure and can be a straightforward path to easing your tax burden and limiting potential liabilities that may arise in the course of doing business.

You may not know it but picking the wrong legal structure for your business could have costly personal consequences and obviously, you don’t want to lose your car and house as a result of an avoidable mistake. 

That’s why picking the proper business structure is serious business. But maybe you’re just starting out and don’t yet have any employees. It’s just you against the world, armed with your ideas, products, or services. Having the right armour is equally important to have the right tools, and we’re not just talking metaphorically about getting adequate business insurance. 

Registering as a sole proprietorship in Ontario, though, might not provide the right protection over your personal assets and shield you from liabilities that threaten the bottom lines of businesses both big and small.  Sole proprietorships in Ontario and elsewhere are an appropriate structure for someone who intends to carry on the business alone.

But that doesn’t mean they can’t have help from employees and are particularly convenient to form if limited liability is not crucial to what you’re trying to achieve. 

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How do I become a sole proprietor in Ontario?

Someone operating under a sole proprietorship from home in Ontario doesn’t have the same liability concerns as, say, a big grocery chain that gets sued every day by people slipping and falling on banana peels in the produce section. But a sole proprietorship, as the name implies, is not an appropriate business structure if you have a group of several people wanting an ownership stake in the business.

There are no registration requirements for a sole proprietorship if you’re operating under your name. They’re not a separate legal entity from their owner and “the business and the owner are considered one and the same,” according to the City of Toronto’s website

“The assets of the business are the assets of the owner and the liabilities of the business are the liabilities of the owner,” the city’s website states. “The owner does not pay employment insurance and if the business would fail, not only would the owner not receive benefits, but may lose everything owned.”

A separate legal entity from its owner

While this may seem like a harsh reality for would-be entrepreneurs, the ease of setting up a sole proprietorship in Ontario can’t be understated. In setting up the business, the individual owner simply starts operating without having to go through a formal incorporation process. In addition, if the owner wishes to shut down the business at any time, he or she can do so without the formalities and processes associated with other corporate structures. 

Unlike a corporation, a sole proprietorship is not a separate legal entity from its owner. The business and its owner are the same legal person, giving the owner the right to all the assets and profits generated by the business. But the owner is also on the hook and exposed to all the liabilities associated with the business.

You can see the graphic below to get started with a sole proprietorship in Ontario. It was created by Kalfa Law in Toronto.

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Doing a NUANS Name Search

You can see from the above graphic that the first step is to run a search to see if you can use your business name without running afoul of someone else’s trade name or trademarks. Sole proprietorships doing business under one’s own name don’t much have to worry about stepping on another business’ toes but doing a search to make sure can’t hurt. 

This is called a NUANS name search. You can easily search up business names online, and you should pick the jurisdiction in which you live. If your home province is in Ontario, choose that option from the menu as the province you wish to search for and then pick your city. We picked Toronto, Ontario for this example.

You can see the screenshot below to see what popped up. Luckily, it’s a user-friendly system and doesn’t require hacker-level computer skills. 

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Getting a Master Business License

Making sure your business name isn’t already in use is an important first step. But after you’ve done the search, the next step would be registering the name by obtaining a Master Business License, also known as a trade name.

(As an aside, it’s also worth mentioning that this name search service is a good way to find the phone numbers, contact emails, and websites of businesses, and is sometimes it’s used to track people and developments at companies.)

As illustrated above, going back to the five-step process for business registration example, registering your trade name could also coincide with registering any marks or intellectual property you intend to use in the course of business. 

How To Register A Sole Proprietorship In Ontario

Registering a sole proprietorship in Ontario can be done on your own easily enough, but make sure to hire a law firm to register your trademark in Canada, and in any other countries where you plan to do business.

If you are serious about your business, it’s worth spending a few thousand dollars from the outset to get the trademarks you want. The last thing any business person wants is to hit a snag right out of the gate and get hit with a trademark opposition notice, or worse, a trademark infringement lawsuit. 

Otherwise, in the future, you might have to spend hundreds of thousands of dollars on defending a lawsuit and then maybe millions of dollars buying the trademark from someone else in a settlement. If you’re an exterminator named Mickey, for example, you might not want your company logo to feature a cartoon mouse unless you want a lawyer from Disney knocking on your door. 

That’s why you need to make sure your company name gets registered with Nuans before going on to the next steps, which is hopefully going out and doing business and making money. 

Registering With GST- Talk to an Accountant in Ontario

The next step is less legal in nature, so we won’t go into it in great detail. But basically, if you plan to do more than $30,000 in revenue in the year as a sole proprietorship in Ontario, you need to register for a GST number with the Canada Revenue Agency. Contacting an accountant about getting a GST number for your sole proprietorship in Ontario is a smart idea if you want to avoid unnecessary attention (and bills) from the taxman. 

The next step in the process is also accounting in nature as you may need to register for payroll taxes with the CRA if you plan to hire employees. Even though your business is solely owned by you, anyone you bring on as an employee means collecting payroll taxes and making deductions, among other obligations you’re on the hook for as the boss. 

At this stage, it’s also worth mentioning that you should hire an employment lawyer in Ontario to assist with the  you plan on signing with your workers, and ClearWay Law can help with that by putting you in touch with a lawyer in your area. 

Again, you don’t want expensive lawsuits in the future. Employees are key to running your business, but you also need to protect your company’s interests as much as your own, especially if you’re running as a sole proprietorship in Ontario. 

How to Register a Business Name in Ontario

In order to register a business name, as mentioned earlier, you can start by doing a NUANS name search. (See the graphic and link at the top of this article.) 

If you are the only owner and manager of your business, then a sole proprietorship might be the best structure for you.

As mentioned in the video posted above, you might have to register your name every few years. Renewing your registration helps make sure you don’t lose the right to operate under your brand name in the face of competition, which might be stiff depending on what product or service you offer. Having your company or product confused with another business could mean lost customers and lost profits.  

Again, once you’ve registered your business name, you can start doing the things you need to get your company off the ground. This might include ordering cheques, opening bank accounts, creating a Facebook page, and printing business cards and company letterhead. 

Sole proprietorship examples

Claiming your company’s name on social media quickly is also a good idea, even before you get up and running. It doesn’t cost anything to make a Facebook or Instagram account, but if the handle you want is taken, you could be out of luck. 

The same goes for website domain names, which is one of the first things you will need to start your company’s website. If you are looking for a good website building company, contact us here at ClearWay and we can likely find the right fit for your business needs.  We can recommend a few service providers that you might want to talk to, depending on your budget.

To recap, registering and running a sole proprietorship in Ontario involves a few crucial steps to take if you want to do it right as you begin your journey hopefully on the road to success. 

You Need To Do The Below To Get Started

  • The name of the business.
  • The address for the business. (which could be your home, but be careful. You may not want your home address to be widely available online if you have privacy or security concerns.)
  • Provide your own name and mailing address.
  • Information on the nature of your business/product/service. 
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With this in mind, you might want to think about getting a mailing package with a company like Regus. This will enable you to use a third-party address, instead of providing your home address. Mailbox rental businesses, such as UPS Stores, can also provide a cost-effective means of registering your business to a mailing address that isn’t the same as your residential address. 

 It’s not a nice thing to wake up to when a  or angry customer shows up at your house after getting your address off the internet with a simple Google search. 

Sole Proprietorships vs. Corporations in Ontario

Comparatively, taxes are very simple with a sole proprietorship, as you just pay personal income tax on the revenues. Basically, the business becomes your job. This is a bit different from incorporated entities like corporations, where the corporation is its own separate legal entity with its own tax obligations and advantages. 

Going the sole proprietorship route, however, is much cheaper than registering a corporation in Ontario. It’s also an important reminder that if you don’t register a trademark associated with your business, then you won’t have good protection from others who may be looking to cash in on your hard work and innovation through imitation.

Don’t Be Concerned About Getting Sued

If you open up a business called “Smith’s Restaurant,” which isn’t distinctive and unique, then other people can also potentially open up a “Smith’s Restaurant” without fear of legal action since you don’t own the “Smith’s” marks.  

Many sole proprietors don’t register their trademarks, but most corporations do. The cost of registering trademarks can vary, but it often costs a few thousand dollars to have a law firm register a trademark for you and do all the relevant legwork for you, including worldwide searches for similar marks that could cause confusion in the marketplace and open you up to legal trouble down the road

At ClearWay, we’d say don’t bother doing it yourself because it can be super complicated and you don’t want to make a mistake. As it’s often said, anything worth doing is worth doing right, and that’s surely true when it comes to registering trademarks associated with your sole proprietorship. 

Considering Potential Liabilities Faced by a Sole Proprietorship in Ontario

One massive advantage that a corporation has over a sole proprietorship in Ontario is limited liability.

If a company gets sued, the corporation is its own legal entity, meaning that the company is liable, but the CEO or owner isn’t. The same goes for limited liability partnerships, which can include both individuals and corporations. Their liability is limited to their capital contribution to the partnership. If a project goes belly-up, individual partners don’t necessarily lose their shirts. 

When you are using a sole proprietorship model, you are personally liable for anything the company does. If someone falls and breaks their leg in your restaurant, you might have to pay for it personally. That’s why many restaurants won’t be owned by individuals, but rather companies such as “Smith’s Restaurant Ltd.” 

If it’s something even more serious and a judge orders the company to pay a million-dollar judgment, you could lose your house as the sole proprietor of the business. Your personal assets are considered fair game, unlike other corporate structures set up to avoid just that. 

Think About How to Reduce and Manage Risk

This is why you should speak to a lawyer in Ontario to see which legal structure makes the most sense for your liability situation.

The right lawyer can advise you about your company’s potential risks and liabilities. If you are starting a restaurant, there won’t be too much risk other than food safety concerns, cleanliness, and maintenance of equipment. In addition, you will have liable to pay your employees for their work, and to protect your customers from harm by ensuring the premises is safe for people to patronize. 

But if you are starting a business that operates in a grey area, like cannabis or online casino gambling, you will likely have a lot more risks to consider when deciding which corporate structure is right for you. 

Industries like construction also have significant risks. People can get hurt and buildings can fall apart. This can amount to millions of dollars in damages when things go awry and end up in court. 

A good law firm can tell you the unique risks of your industry.

Incorporate Your Business

Hopefully, the potential rewards outweigh the litany of risks faced by anyone going into business. So, if you are starting a business in Ontario or looking for a business lawyer, book a time to speak to a business lawyer. 

The lawyer can explain the Business Names Act to you and demystify the esoteric legal language it’s written in, and if you are a sole proprietor, make sure you set up the correct type of business.

There are advantages and disadvantages to being a sole proprietor. If you want to register a sole proprietorship in Ontario, book a time by clicking below.

Advantages of a Sole Proprietorship

Ease of formation – the owner of a sole proprietorship can simply start doing business without much hassle. The only requirement may be to register the business and get a licence to operate. This structure provides the greatest freedom from onerous regulations placed on incorporated entities.

Inexpensive to set up – no separate capital structure or capital formation is required to start operating a sole proprietorship in Ontario. 

Ease of dissolution – the owner of a sole proprietorship can stop doing business when they want to; there is no need to file documents with a regulatory agency if you decide to close up the shop. 

More control over the business – only the sole proprietor (the owner) has the ability to bind the business with contractual obligations. This is unless he or she authorizes an employee to act as an agent of the owner. Also, all profits go to the owner. 

Tax advantages – As long as the business was created with the expectation of making income, losses can be written off. This can happen directly against personal income.

Register a Sole Proprietorship in Ontario

The Income Tax Act requires taxpayers to declare all income, which could be from various sources and to deduct losses from those various sources.

With a sole proprietorship, profits generated from the business are taxed directly in the hands of the sole proprietor. While an owner typically plans on making profits, businesses frequently lose money in the first few years.

With a sole proprietorship, the owner is able to deduct these start-up losses from income from other sources of income. This might include part-time employment or rental income.

In contrast, the owners or shareholders of a corporation are not able to deduct the corporation’s losses from their personal income.

Business Losses and Personal Losses

This is because business losses are not personal losses. The losses will be the corporation’s losses The corporation is a separate taxpayer from its owners.

There is no double taxation with a sole proprietorship.

Corporations have a double taxation element. If a corporation makes a profit, it will be taxed in the hands of the corporation as a separate taxpayer. When that profit is paid out to a shareholder in the form of a dividend, the shareholder will also pay tax on that same profit.

Thus, the profit of the corporation is taxed twice. The Income Tax Act does contain provisions that attempt to reduce the degree of double taxation, However, these provisions do not always work.

Disadvantages of A Sole Proprietorship

No limited liability– since the business and its owner are the same legal person, the owner is responsible for all liabilities (debts), contracts entered into, and wrongdoings committed by the business.

The owner can be liable to the extent that creditors can claim against the sole proprietor’s personal assets, subject to certain limitations, such as the owner’s house, car, trust fund, furniture, etc.

Only the sole proprietor benefits- the proprietor can write off losses or gain profit.

There might be a lack of continuity in business organization in the absence of the owner. If the owner is absent from the business employees of the business may not be able to make the decisions necessary for it to continue operating.

There will be no name protection. A sole proprietorship has no statutory name protection, whereas a corporation’s name is protected to some degree under the BCBCA.

Family member employees – there are issues, particularly related to deductions from employees’ salaries when a sole proprietor hires family members.

How To Register the Name

When registering a business name, it’s important to learn how the name registry works by reading the rules below. Do not submit something to them without reading their criteria. Otherwise, you are just wasting time and money.

A business name will not be approved by the registrar if the name is:

  • Already in use by a corporation or other entity.
  • Is near or confusingly similar to the name of another corporation.
  • Is a name that the registrar disapproves of, including offensive or explicit language. 

With all that in mind, there’s no doubt that starting a business involves many risks and other factors to consider before taking the plunge as you launch yourself into the stream of commerce. But if you need help and want to avoid potential pitfalls when registering a sole proprietorship in Ontario, reach out to us here at ClearWay today and give you and your business the leg up they deserve. 

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