How to Start a Small
Business in Ontario.

By Jonathan Kleiman, Barrister & Solicitor · Published June 2026

Before you start

Starting a small business in Ontario is one of the most important financial decisions you will ever make. It is also one of the most regulated.

Ontario has specific rules about how you register your business, what structure you choose, how you collect and remit taxes, how you hire and pay employees, and what ongoing compliance obligations you carry from the day you open your doors. Get any of these wrong and you face penalties, personal liability, or worse — having to unwind months of work and start over.

This guide walks you through every step of starting a small business in Ontario in 2026, from the initial decision about business structure all the way through to the annual filings and deadlines you will need to meet once you are up and running. Every fact is grounded in current Ontario and federal legislation, government regulations, and official sources.

This is not a motivational article about following your passion. It is a practical legal roadmap for anyone who is serious about starting a business in Ontario and wants to get it right the first time.

Two professionals you should engage early: a business lawyer and an accountant. The lawyer handles structure, contracts, and compliance. The accountant handles bookkeeping, tax planning, and CRA filings. Many of the most expensive mistakes new businesses make — choosing the wrong structure, missing a tax deadline, signing a bad lease, operating without a partnership agreement — are problems that cost far more to fix after the fact than they would have cost to get right from the start.

Step 1: Choose your business structure

Ontario recognizes three main business structures — sole proprietorship, partnership, and corporation — and your choice sets your personal liability, how you are taxed, and how much paperwork you carry. This is the first and most consequential decision you will make. It also determines how easy or difficult it is to bring in partners, raise capital, or sell the business down the road.

Each of the three has distinct legal implications, walked through below.

Sole proprietorship

A sole proprietorship is the simplest form of business. There is no legal separation between you and the business — you are the business. You own all the assets, keep all the profits, and bear all the risk.

The key implication is unlimited personal liability. If the business incurs debts or gets sued, creditors can pursue your personal assets — your home, your savings, your car. There is no corporate shield protecting you.

From a tax perspective, all business income and losses are reported on your personal tax return using CRA Form T2125. You are taxed at your personal marginal rate (combined federal and Ontario rates), and you pay both the employer and employee portions of Canada Pension Plan contributions on your net self-employment income.

The advantage is simplicity. If you use your own legal name, you do not even need to register the business. If you use a different business name (for example, "Smith Consulting"), you register it through the Ontario Business Registry for $60. That registration is valid for five years.

Partnership

A partnership involves two or more people carrying on business together with a view to profit. Ontario recognizes three types:

• General partnership: All partners share management responsibilities and unlimited personal liability for the partnership's debts. Each partner is liable for the actions of the other partners taken in the course of business.
• Limited partnership: Has at least one general partner (with unlimited liability) and one or more limited partners whose liability is capped at their investment. Limited partners cannot participate in management — if they do, they lose their limited liability protection.
• Limited liability partnership (LLP): Used primarily by regulated professionals such as lawyers and accountants. Each partner is protected from personal liability for another partner's professional negligence.

Partnership income flows through to the individual partners and is reported on their personal tax returns. The partnership itself does not pay income tax. If you do not have a written partnership agreement, the default rules under the Partnerships Act, R.S.O. 1990, c. P.5 apply — and those defaults may not match your intentions. For example, profits and losses are shared equally regardless of how much capital each partner contributed.

A written partnership agreement is not legally required, but operating without one is one of the most common and most costly mistakes new business owners make.

Corporation

A corporation is a separate legal entity from its shareholders. It can own property, enter into contracts, incur debts, sue, and be sued — all in its own name. Shareholders generally risk only their investment. This limited liability protection is the single biggest reason most growing businesses eventually incorporate.

Corporations are taxed separately. The combined federal and Ontario small business tax rate on the first $500,000 of active business income is currently 12.2% for eligible Canadian-controlled private corporations (CCPCs) — that is 9% federal plus 3.2% Ontario. Effective July 1, 2026, Ontario is reducing its small business rate to 2.2%, bringing the combined rate down to 11.2%.

Income above $500,000 is taxed at the general corporate rate of approximately 26.5% combined. Shareholders then pay personal tax on dividends when they withdraw profits, so the total tax burden is ultimately comparable to personal rates — this is called the integration principle.

Corporations come with more complexity: articles of incorporation, corporate by-laws, a minute book, annual returns, and separate tax filings. But for businesses with meaningful revenue, multiple owners, or significant liability exposure, the benefits of incorporation typically outweigh the administrative burden.

It is worth noting that the small business deduction is reduced for Canadian-controlled private corporations with taxable capital employed in Canada exceeding $10 million, and is fully eliminated at $50 million or more. The Ontario small business limit, however, is not subject to the federal passive income business limit reduction — a meaningful advantage for Ontario-incorporated CCPCs that hold passive investments.

You do not have to start as a corporation. Many businesses begin as sole proprietorships and incorporate later once revenue, liability exposure, or the need for multiple owners makes incorporation worthwhile. The transition can be done through a Section 85 rollover under the Income Tax Act, which allows you to transfer assets to a new corporation on a tax-deferred basis.

For a detailed comparison of sole proprietorships and corporations, including when it makes sense to incorporate, see Sole Proprietorship vs. Incorporation in Ontario.

Ontario incorporation vs. federal incorporation

If you decide to incorporate, you must also choose between incorporating under Ontario law (the Ontario Business Corporations Act) or federal law (the Canada Business Corporations Act).

The key differences: federal incorporation gives you nationwide name protection and the right to carry on business in any province. Ontario incorporation has no Canadian director residency requirement (federal requires at least 25% of directors to be resident Canadians), and Ontario-incorporated companies do not need to file a separate annual return with Corporations Canada.

For a full comparison, see Federal vs. Ontario Incorporation — Which Should You Choose?

Step 2: Choose and register your business name

If you operate under any name other than your own full legal name, you must register that name under the Business Names Act — a sole proprietor using their own legal name does not need to register. Your business name is more than branding; it carries legal implications in Ontario. Any other name — a trade name, a "doing business as" name, or anything other than your full legal name — must be registered under the Business Names Act, R.S.O. 1990, c. B.17.

Business name rules

Ontario's O. Reg. 399/21 sets out specific restrictions on business names:

• The name must not be obscene or scandalous.
• It must not suggest a connection with the Crown or any level of government.
• You cannot use "Limited," "Incorporated," "Corporation" (or abbreviations like Ltd., Inc., Corp.) unless you are actually incorporated.
• You cannot use "college," "institute," or "university" suggesting a post-secondary institution without written consent from the Ministry.
• The name must be in the Roman alphabet. Names in other scripts must be transliterated.

NUANS name search

If you are incorporating (either provincially or federally), you will need a NUANS (Newly Upgraded Automated Name Search) report to ensure your proposed name does not conflict with existing corporate names or registered trademarks.

For Ontario incorporation, the report must be Ontario-biased — a federal or Canada-biased report will not be accepted. NUANS reports are obtained from private search companies (not directly from the Ontario government) and are valid for 90 days.

If you choose a numbered company (for example, "1234567 Ontario Inc."), no NUANS search is required.

Registering through the Ontario Business Registry

All business name registrations, sole proprietorship registrations, and Ontario incorporations are filed through the Ontario Business Registry (OBR) at ontario.ca/businessregistry. You will need an Ontario.ca account with identity verification.

The process is straightforward: select your registration type, provide the required information (business name, business address, activity description, and owner or director details), and pay by credit or debit card. Processing is immediate for online filings.

Step 3: Register your business

What you file and what it costs depend on your structure: a sole proprietorship or general partnership name registers for $60, an Ontario incorporation costs $300, and a federal incorporation costs $200. The registration process and cost depend entirely on the business structure you chose in Step 1.

Sole proprietorship registration

If you are operating under a name other than your own legal name, register through the Ontario Business Registry. The government fee is $60. You will receive a Master Business Licence (MBL) and an Ontario Business Identification Number (BIN).

The registration is valid for five years. ServiceOntario will send a renewal notice approximately 90 days before expiry. The renewal fee is $60. If you miss the expiry and the 60-day grace period, you must file a new registration — and your business name becomes available for others to register.

Partnership registration

A general partnership is registered as a business name registration through the Ontario Business Registry. The fee is $60, valid for five years.

A limited partnership is filed as a Declaration under the Limited Partnerships Act, R.S.O. 1990, c. L.16. The fee is $210, valid for five years. The declaration must include the names and addresses of all general partners, a registered office address in Ontario (a physical address, not a P.O. box), and the general nature of the business.

Ontario incorporation

Filing Articles of Incorporation through the Ontario Business Registry costs $300. The articles must include:

• The corporate name (or number designation)
• The registered office address (must be in Ontario)
• The number of directors (or a minimum and maximum range)
• The names and addresses of first directors
• The share structure — classes of shares authorized, and the rights and restrictions attached to each class

If the corporation has only one class of shares, those shares must carry the right to vote at shareholder meetings, receive dividends declared by the directors, and receive the remaining property of the corporation on dissolution.

Ontario has no Canadian residency requirement for directors. A corporation can have all non-resident directors — a significant advantage for businesses with foreign ownership.

Federal incorporation

Filing online with Corporations Canada costs $200. A NUANS name search is included in the federal filing process at no additional charge, though it takes approximately 10 business days.

Federal incorporation requires at least 25% of directors to be resident Canadians (or at least one, if fewer than four directors). If you plan to operate in Ontario, you must also register the federal corporation extra-provincially in Ontario.

For more detail on choosing between Ontario and federal incorporation, see the full comparison guide.

Step 4: Set up your corporate minute book

If you incorporated, section 140 of the OBCA requires you to keep a minute book of your corporate records at your registered office or another location the directors designate. Organizing those records is your very next step. The minute book holds the documents banks, investors, landlords, and purchasers routinely ask to see.

Your corporate minute book must contain:

• The Articles of Incorporation and any amendments
• Corporate by-laws (governing internal management, meetings, and officer appointments)
• Any unanimous shareholder agreement
• Minutes of all shareholder and director meetings
• Written resolutions signed in lieu of meetings
• A register of directors and officers (current and historical)
• A securities register listing all shareholders and their holdings
• A register of share transfers
• Stated capital accounts for each class of shares

Register of Individuals with Significant Control

Since January 1, 2023, all private Ontario corporations must also maintain a Register of Individuals with Significant Control (ISC). This register must identify every individual who holds 25% or more of the voting rights, 25% or more of the fair market value of shares, or who otherwise has significant influence over the corporation without holding shares.

The register must be updated within 15 days of any change and reviewed for accuracy at least once per financial year. Non-compliance carries serious penalties: up to $5,000 for the corporation, and up to $200,000 and six months imprisonment for directors or officers who knowingly permit non-compliance.

Do not treat the minute book as something you will "get to later." Banks, investors, landlords, and purchasers routinely ask to see your corporate records. An incomplete or non-existent minute book creates problems at exactly the moments when you can least afford them.

Step 5: Get your Business Number and register with the CRA

Your Business Number is a nine-digit CRA identifier you need to deal with the CRA for tax purposes — assigned automatically when you incorporate, or when you open your first CRA program account as a sole proprietor or partnership. You use it for every tax interaction with the Canada Revenue Agency.

If you incorporated, a BN and corporate income tax account (RC) are automatically assigned when your articles are filed. If you are a sole proprietor or partnership, you register for a BN when you need to open your first CRA program account.

CRA program accounts

Depending on your business activities, you may need one or more of the following accounts attached to your BN:

• GST/HST account (RT): Required when you exceed the $30,000 small supplier threshold (see Step 6). You can also register voluntarily.
• Payroll account (RP): Required when you hire employees and must deduct CPP, EI, and income tax at source.
• Corporate income tax account (RC): Automatically assigned upon incorporation.
• Import/Export account (RM): Required if you import commercial goods into Canada or export goods internationally.

As of November 2025, the CRA no longer accepts BN or program account registrations by phone. You must register online using Business Registration Online (BRO).

Step 6: Understand your HST obligations

Ontario's HST is 13% — the 5% federal GST plus the 8% Ontario portion — and you must register and collect it once your taxable revenue crosses the $30,000 small supplier threshold. If your business sells taxable goods or services in Ontario, you need to understand when you must collect it, when you can recover it, and when you are exempt.

The $30,000 small supplier threshold

You are considered a "small supplier" and are not required to register for HST if your total taxable revenue is below $30,000 over four consecutive calendar quarters.

The moment you cross the threshold, you must register:

• Exceeding $30,000 in a single calendar quarter: You must register immediately. You must charge HST on the very sale that pushed you over the threshold.
• Exceeding $30,000 across four consecutive quarters (but not in any single quarter): You cease being a small supplier at the end of the month following the quarter in which you crossed $30,000. You then have 29 days to register.

If you fail to register on time, the CRA can reassess you for all the HST you should have been collecting but were not.

Voluntary registration

Even if your revenue is below $30,000, you can voluntarily register for HST. The benefit is input tax credits (ITCs) — you can recover the HST you pay on business purchases and expenses. The trade-off is that you must charge and remit HST on all of your taxable sales, which may make your services more expensive relative to unregistered competitors.

Whether voluntary registration makes sense depends on your business. If you have significant startup costs (equipment, renovation, inventory) and your clients are other businesses who can claim their own ITCs, registration is almost always worthwhile. If you sell directly to consumers and your expenses are low, the math may be different.

HST filing periods and deadlines

The CRA assigns your filing frequency based on your annual revenue:

• Annual filing: Taxable sales under $1.5 million. Return due three months after your fiscal year end.
• Quarterly filing: Taxable sales between $1.5 million and $6 million. Return and payment due one month after each quarter ends.
• Monthly filing: Taxable sales above $6 million. Return and payment due by the last day of the following month.

The quick method of accounting

Small businesses with annual taxable revenue (including HST) of $400,000 or less may be eligible to use the quick method of accounting for HST. Instead of tracking the actual HST paid on every business purchase to calculate input tax credits, you remit a flat percentage of your HST-included revenue (the rate varies by business type and province — for most service businesses in Ontario, it is 8.8%).

The quick method simplifies bookkeeping considerably and, in many cases, results in a lower net HST remittance than the regular method. You still charge clients the full 13% HST, but you keep the difference between what you collect and what you remit at the quick method rate. To use it, you must elect by filing Form GST74 with the CRA.

What is exempt from HST

Some supplies are zero-rated (you charge 0% HST but can still claim ITCs): basic groceries, prescription drugs, medical devices, agricultural products, and exports.

Other supplies are exempt (no HST charged, and you cannot claim ITCs on related expenses): most health and dental services by licensed practitioners, long-term residential rent, sales of previously occupied residential property, insurance premiums, and most financial services.

Step 7: Obtain the permits and licences your business needs

There is no single provincial business licence in Ontario — whether you need one, and from which level of government, depends on your municipality, your industry, and your specific activities. For the details, see our guide on whether there is a business licence in Ontario. The most efficient way to map your requirements is BizPaL, below.

Municipal business licences

Many Ontario municipalities require a general business licence for businesses operating within their boundaries. Requirements vary significantly from one municipality to another. Common examples of businesses that typically require a municipal licence include restaurants, personal service providers, pet shops, taxi and rideshare operators, and home renovation contractors.

Industry-specific permits

Certain industries are subject to additional provincial or federal regulation:

• Food premises: Public health inspection and food handler certification through your local public health unit.
• Liquor service: A licence from the Alcohol and Gaming Commission of Ontario (AGCO).
• Construction: Building permits from the municipality.
• Licensed childcare: A licence from the Ministry of Education.
• Healthcare services: Registration with the applicable regulatory college (for example, the College of Physicians and Surgeons of Ontario, the Royal College of Dental Surgeons of Ontario, etc.).
• Real estate: Registration with the Real Estate Council of Ontario (RECO).

Zoning

Before you sign a lease or start operating from a particular location, confirm that your business activity is permitted under the municipal zoning by-law for that address. Running a business from a zone that does not permit commercial activity can result in fines, orders to cease operations, and the inability to obtain a business licence.

If you plan to operate from home, most municipalities allow home-based businesses subject to restrictions on signage, customer traffic, the number of employees working on-site, and the percentage of your home used for business purposes. Contact your municipality's planning department for the specific rules.

Finding your requirements

The most efficient way to identify every permit and licence your business needs is BizPaL. This free online tool generates a customized list of required federal, provincial, and municipal permits based on your municipality, industry, and specific business activities. Ontario also provides a licence and permit search tool on ontario.ca.

Step 8: Open a business bank account

Keep your business money in a separate account — mandatory for a corporation, because mixing personal and corporate funds can undermine your limited liability protection. Separating your finances matters for legal protection, tax compliance, and your own sanity at year-end.

If you are incorporated, this is not optional. A corporation is a separate legal entity and its money must be kept in a separate account. Mixing personal and corporate funds can undermine your limited liability protection — a concept known as "piercing the corporate veil." If a court finds that you treated the corporation's bank account as your personal piggy bank, it may hold you personally liable for the corporation's debts.

Even if you are a sole proprietor, a separate business account simplifies bookkeeping, makes it easier to track deductible expenses, and looks more professional to clients and suppliers.

What you need to open a business bank account

Sole proprietorships and partnerships:

• Master Business Licence (MBL) or business registration documents
• Partnership agreement (if applicable)
• Two pieces of valid government-issued ID for each owner
• Business Number (BN) from the CRA
• Your Social Insurance Number (SIN)

Corporations:

• Certificate of Incorporation or Articles of Incorporation
• Two pieces of valid government-issued ID for authorized signatories
• Business Number (BN) from the CRA
• A corporate resolution authorizing the opening of the account and naming the authorized signatories

Requirements can vary between banks and even between branches. Call the specific branch beforehand and ask for their exact document checklist.

Step 9: Protect your business with the right contracts

Written contracts are the legal infrastructure of your business — a shareholder or partnership agreement, service agreements, NDAs, a reviewed commercial lease, and employment agreements — and starting without them is a leading reason new businesses end up in litigation. Each defines who owes what to whom, what happens when something goes wrong, and how disputes are resolved.

Shareholder agreement

If your corporation has more than one shareholder, a shareholder agreement is the most important document you will sign after your articles of incorporation. It governs the relationship between shareholders and addresses critical issues that the articles and by-laws do not.

A well-drafted shareholder agreement covers share transfer restrictions (right of first refusal, tag-along, drag-along), buy-sell provisions (including shotgun clauses), dividend policy, decision-making authority, non-competition and confidentiality obligations, and what happens on the death, disability, or departure of a shareholder.

Without a shareholder agreement, the default rules of the OBCA govern — and those defaults rarely reflect what the parties actually intended. For a complete checklist, see What to Include in a Shareholders' Agreement.

Partnership agreement

If you are operating as a partnership, a written partnership agreement serves the same essential function. Without one, the Partnerships Act defaults apply. Those defaults include equal sharing of profits and losses regardless of capital contribution, and any partner can dissolve the partnership at any time by giving notice.

Your partnership agreement should address capital contributions, profit and loss sharing, management authority and decision-making, the process for admitting or removing partners, dispute resolution, non-competition, and dissolution procedures.

Service agreements and terms of service

Every business that provides services to clients needs a written service agreement. This is not about distrust — it is about clarity. A good service agreement defines the scope of work, deliverables, timelines, payment terms, intellectual property ownership, limitation of liability, and termination provisions. For a clause-by-clause breakdown of what to include, see service agreements for Ontario small businesses.

When disputes arise — and they will — the existence and terms of a written agreement can mean the difference between a quick resolution and months of expensive litigation. For more on the consequences of poorly drafted or missing contracts, see Breach of Contract: What to Do When an Agreement Falls Apart.

Non-disclosure agreements

A non-disclosure agreement (NDA) protects confidential information shared between parties — business plans, client lists, financial data, proprietary processes, or trade secrets. NDAs can be unilateral (one-way) or mutual (both parties bound).

To be enforceable in Ontario, an NDA must be reasonable in scope, duration, and the type of information it covers. It must also be supported by consideration — something of value exchanged between the parties.

Commercial leases

If you are leasing commercial space, the lease will likely be the largest financial commitment your business makes. Commercial leases in Ontario are governed primarily by the terms of the signed lease itself, not by statute. The Commercial Tenancies Act, R.S.O. 1990, c. L.7 provides a basic framework, but the principle of freedom of contract applies — almost every term is negotiable.

This is fundamentally different from residential tenancies, where the Residential Tenancies Act provides extensive tenant protections. Commercial tenants have far fewer statutory protections, which makes the negotiation of the lease terms critically important.

Key terms to negotiate include rent amount and escalation, lease term and renewal options, the permitted use clause, maintenance and repair obligations (who is responsible for what), assignment and subletting rights, any rent-free fixturing period, and insurance requirements.

Having a commercial lease lawyer review the lease before you sign is one of the highest-value investments you can make as a new business owner. Our commercial lease review checklist walks through the specific clauses to check first.

Employment agreements

If you plan to hire employees, written employment agreements protect both parties. A well-drafted employment agreement addresses compensation, benefits, working hours, probationary period, termination provisions (including a properly drafted termination clause that complies with the Employment Standards Act), intellectual property assignment, confidentiality, and any restrictive covenants.

On that last point: since October 25, 2021, non-compete clauses are unenforceable against employees in Ontario (with a narrow exception for C-suite executives). Non-solicitation clauses remain enforceable if they are reasonable in scope and duration. For the full picture, see Non-Compete and Non-Solicitation Agreements in Ontario.

Whether you need a shareholder agreement, partnership agreement, service agreement, NDA, commercial lease review, or employment contract, working with a contract lawyer at the outset helps you avoid the far greater expense of resolving disputes after they arise.

Step 10: Get business insurance

Carry the coverage your business needs — commonly commercial general liability, professional liability, and property insurance — and register with WSIB, which is mandatory for most Ontario employers. Insurance is one of the least glamorous but most important parts of starting a business: a single uninsured claim can wipe out everything you have built.

Commercial general liability (CGL) insurance

CGL insurance covers third-party claims of bodily injury and property damage. If a client slips and falls at your office, or if your product damages someone's property, CGL is what responds.

Most commercial leases and many business contracts require you to carry a minimum of $2 million in CGL coverage. This is the most common and most broadly applicable form of business insurance.

Professional liability / errors and omissions (E&O) insurance

If your business provides professional services or advice — consulting, accounting, IT services, marketing, design — professional liability insurance covers claims of negligence, errors, or failure to deliver on a professional obligation. Some regulatory bodies require this coverage as a condition of practising.

Other types of business insurance

• Commercial property insurance: Covers your physical business assets (equipment, inventory, furniture) against fire, theft, and other perils.
• Business interruption insurance: Covers lost income if a covered event (fire, flood, natural disaster) forces temporary closure.
• Cyber liability insurance: Covers data breaches, ransomware attacks, and associated costs including notification, credit monitoring, and legal fees. Increasingly important for businesses that handle customer data.
• Directors and officers (D&O) insurance: Protects directors and officers against personal liability for decisions made on behalf of the corporation. Relevant for any corporation with a board of directors.

Workers' compensation (WSIB)

Workplace Safety and Insurance Board (WSIB) coverage is mandatory for most employers in Ontario. This is not traditional insurance — it is a statutory no-fault system. Injured workers receive benefits without needing to prove their employer was at fault, and employers are protected from lawsuits by workers for workplace injuries.

You must register with WSIB within 10 days of hiring your first employee. The average premium rate for 2026 is $1.23 per $100 of insurable payroll, though your rate will depend on your industry classification. The maximum insurable earnings ceiling for 2026 is $121,700 per worker.

You must report any workplace injury or illness to the WSIB within three business days of becoming aware of it. Failure to register or report can result in penalties and retroactive premium assessments.

Automobile insurance is mandatory for any vehicles used in business, including personal vehicles used regularly for business purposes. If employees use their personal vehicles for business, your standard commercial auto policy may not cover them — speak with your insurance broker about extending coverage.

Step 11: Hire employees (and understand your obligations)

Hiring your first employee makes you an employer, triggering Employment Standards Act minimums, source deductions (CPP, EI, and income tax), the Employer Health Tax, and Occupational Health and Safety Act duties. It transforms your business from a solo operation into one carrying a significant set of legal obligations under Ontario and federal law.

Employment Standards Act (ESA)

The Employment Standards Act, 2000 sets the minimum standards for most Ontario workplaces. These are minimums — you can exceed them, but you cannot contract below them. Key provisions include:

• Minimum wage: $17.60 per hour (general rate, effective October 1, 2025). Increases to $17.95 on October 1, 2026.
• Hours of work: Daily limit of 8 hours (or the established regular work day if longer). Weekly limit of 48 hours. Excess hours require the employee's written or electronic agreement.
• Overtime: Kicks in after 44 hours in a work week at 1.5 times the regular hourly rate. The right to overtime pay cannot be waived by the employee.
• Vacation: Less than five years of employment: two weeks vacation time and 4% vacation pay. Five or more years: three weeks and 6%.
• Public holidays: Ontario has nine public holidays. Employees who qualify are entitled to a paid day off or premium pay (time and a half plus their regular day's wages) if they work.
• Termination: Minimum notice periods and, in some cases, severance pay. A properly drafted termination clause in the employment agreement can limit your obligations to the ESA minimums — but a poorly drafted clause can be struck down by a court, leaving you liable for common law reasonable notice (which is typically much higher).

As of July 1, 2025, employers with 25 or more employees must provide new hires with written information before their first day, including the employer's legal name, contact information, workplace description, starting wage, pay period, and anticipated work hours.

Payroll deductions

As an employer, you are responsible for deducting and remitting the following from each employee's pay:

• Canada Pension Plan (CPP): Employee rate of 5.95% on pensionable earnings up to $74,600 (2026). You match the employee's contribution. Maximum employee contribution: $4,230.45.
• CPP2 (second ceiling): An additional 4% on earnings between $74,600 and $85,000. You match this as well. Maximum: $416 each.
• Employment Insurance (EI): Employee rate of $1.63 per $100 of insurable earnings. Employer rate: 1.4 times the employee rate ($2.28 per $100). Maximum insurable earnings: $68,900.
• Income tax: Deducted at source based on the employee's TD1 form and CRA payroll deduction tables.

Employer Health Tax (EHT)

The Employer Health Tax is a payroll tax paid by employers on total Ontario remuneration. Private-sector employers with combined Ontario payroll under $5 million are exempt on the first $1,000,000 of payroll (this exemption applies through at least 2028). Above that exemption, rates are progressive — from 0.98% on payroll up to $200,000 to 1.95% on payroll over $400,000.

The annual EHT return is due March 15. Monthly instalments are required if annual Ontario payroll exceeds $1.2 million.

Occupational Health and Safety Act (OHSA)

The Occupational Health and Safety Act requires employers to take every reasonable precaution to protect workers. Obligations include maintaining a safe workplace, providing required safety equipment and training, and reporting workplace injuries and illnesses to the WSIB within three business days.

Effective January 1, 2026, under the Working for Workers Seven Act, 2025 (Bill 30), inspectors now have the authority to issue administrative monetary penalties (AMPs) for OHSA contraventions. Construction projects expected to last three or more months with 20 or more workers must have automated external defibrillators (AEDs) on site, and washroom cleaning records must now document the dates and times of the two most recent cleanings.

Independent contractors vs. employees

Misclassifying an employee as an independent contractor is one of the most common and most expensive mistakes a new business can make. If the CRA or the Ministry of Labour determines that someone you treated as a contractor is actually an employee, you may owe back payroll deductions (CPP, EI, income tax), WSIB premiums, vacation pay, and penalties.

The distinction depends on the nature of the working relationship — not what you call it in the contract. Key factors include the degree of control you exercise over the worker, whether they provide their own tools and equipment, whether they can hire helpers, whether they bear financial risk, and whether they work exclusively for your business.

Step 12: Protect your intellectual property

Ontario businesses protect intellectual property through trademarks (registered federally with CIPO), copyright (which arises automatically on creation), and trade secrets (protected only by maintaining secrecy). IP may be among the most valuable assets your business creates, so understanding the basics helps you avoid giving away rights you should keep and lets you enforce the rights you do have.

Trademarks

A trademark protects words, designs, symbols, sounds, or combinations that distinguish your goods or services from those of others. You can acquire limited trademark rights through common law simply by using a mark in commerce, but registration provides much stronger protection — nationwide exclusivity, a presumption of ownership in court, and the ability to prevent others from registering confusingly similar marks.

Trademarks are registered federally with the Canadian Intellectual Property Office (CIPO). A registration is valid for 10 years and is renewable indefinitely. The timeline from application to registration varies, but CIPO's target for first examination is currently approximately 7 to 18 months.

For a more detailed discussion of trademarks and IP in Ontario, see Trademarks and Copyright Law in Toronto, Ontario.

Copyright

Copyright arises automatically upon creation of an original work. No registration is required. It protects literary works, musical works, artistic works, dramatic works, computer programs, photographs, and sound recordings.

In Canada, copyright lasts for the life of the author plus 70 years (extended from life plus 50 years on December 30, 2022). While registration with CIPO is optional, it provides evidentiary benefits in court — including a presumption of ownership and eligibility for statutory damages of up to $20,000 per work.

If your business creates original content, software, or creative works, ensure that your employment agreements and service contracts clearly assign IP ownership to the business. Without an explicit assignment clause, ownership may remain with the individual creator in many circumstances.

Trade secrets

Trade secrets — proprietary formulas, processes, client lists, pricing strategies — have no formal registration process. Protection depends entirely on maintaining secrecy. You must take reasonable steps: use non-disclosure agreements, limit access to confidential information on a need-to-know basis, implement security measures, and mark confidential documents appropriately.

Unlike trademarks and copyright, trade secret protection lasts indefinitely — as long as the information remains secret. But if secrecy is lost through carelessness or inadequate safeguards, the protection disappears and cannot be recovered.

Step 13: Set up proper record keeping

The CRA requires you to keep business records and books of account in English or French, in Canada, and to retain them for six years from the end of the tax year they relate to. Records must be kept at your place of business or residence in Canada, unless the CRA grants written permission to keep them elsewhere.

What records to keep

• Sales and purchase invoices
• Bank statements and cancelled cheques
• Cash register tapes and receipts
• General ledger and journals
• Contracts and agreements
• Payroll records (T4s, T4 Summaries, TD1 forms)
• HST/GST records (returns, invoices showing HST, ITC calculations)
• Vehicle logs (if claiming business use of a vehicle)
• Home office expense records (if applicable)

How long to keep them

The general rule is six years from the end of the last tax year to which the records relate. For example, records for the 2026 tax year must be kept until at least December 31, 2032.

Exceptions:

• Late-filed returns: Six years from the date the return was actually filed.
• Property and share records: Keep indefinitely, as they are needed for future capital gains calculations.
• Objections or appeals: Keep until the later of the objection or appeal being resolved, the appeal period passing, or the standard six-year period ending.

The CRA accepts electronic records, including scanned receipts and digital invoices, as long as they are legible and properly backed up. Destroying records without written CRA permission (obtained by filing Form T137) may result in prosecution.

Step 14: Understand Ontario-specific regulations

Beyond registration and tax, Ontario businesses must also comply with regulatory frameworks including the Consumer Protection Act, the federal privacy law PIPEDA, and the accessibility rules under AODA. These province- and country-specific requirements apply on top of the standard obligations covered above.

Consumer Protection Act

The Consumer Protection Act, 2002 applies to business-to-consumer transactions. Key provisions:

• Consumer agreements over $50 must be in writing.
• Internet agreements over $50 must comply with specific disclosure requirements (price, delivery date, description of goods or services, supplier contact information, cancellation and refund rights).
• Ambiguity in consumer agreements must be interpreted in favour of the consumer.
• Door-to-door sales: consumers have a 10-day cooling-off period.
• Suppliers cannot charge for unsolicited goods or services.

A new Consumer Protection Act, 2023 (Bill 142) received Royal Assent on December 6, 2023, but has not yet been proclaimed in force. Until it is, the existing CPA 2002 remains the governing statute.

PIPEDA (federal privacy law)

The Personal Information Protection and Electronic Documents Act (PIPEDA) is the federal privacy law governing private-sector collection, use, and disclosure of personal information in commercial activities.

If your business collects any personal information from customers, employees, or other individuals — names, email addresses, phone numbers, payment information, purchase history — PIPEDA applies. You must:

• Obtain meaningful consent before collecting personal information.
• Limit collection to what is necessary for the identified purpose.
• Protect the information with appropriate security safeguards.
• Report data breaches that create a "real risk of significant harm" to the Office of the Privacy Commissioner and to affected individuals.
• Maintain breach records for at least two years.

Penalties for knowing violations (failure to report a breach, failure to maintain records, obstructing an investigation) can reach up to $100,000 per offence.

AODA (accessibility)

The Accessibility for Ontarians with Disabilities Act, 2005 (AODA) applies to all Ontario organizations with one or more employees. The obligations scale with your organization's size:

• 1–19 employees: You must provide accessible customer service, train staff on accessible service and the Ontario Human Rights Code, and provide accessible information and communication on request.
• 20–49 employees: Same as above, plus you must file an accessibility compliance report every three years. The next deadline is December 31, 2026.
• 50+ employees: Same as above, plus you must create and post a multi-year accessibility plan (reviewed every five years), keep written training records, create individual accommodation plans for employees with disabilities, and make all public websites conform to WCAG 2.0 Level AA.

Non-compliance penalties: up to $100,000 per day for corporations and up to $50,000 per day for individuals and unincorporated organizations.

Step 15: Know your annual obligations and key deadlines

Once you are operating, recurring obligations apply — the corporate annual return, T2 corporate tax return, HST filings, the Employer Health Tax return, and business name renewal every five years. Starting a business is not a one-time event, and missing these filings, renewals, and deadlines can mean penalties, loss of corporate status, or loss of standing in court proceedings.

Corporate annual return

Every Ontario corporation must file an annual return under the Corporations Information Act within six months of its fiscal year-end. This is filed through the Ontario Business Registry.

There is no filing fee for the Ontario annual return. However, failure to file can lead to administrative dissolution of your corporation and loss of standing in court proceedings. Since 2021, the Ontario annual return is filed separately — it is no longer bundled with the T2 corporate tax return.

If you are federally incorporated, you must also file an annual return with Corporations Canada within 60 days of your anniversary date. The fee is $12 online.

Corporate tax return (T2)

Due six months after the end of the corporation's tax year. For a corporation with a December 31 year-end, the filing deadline is June 30 of the following year.

However, the tax payment deadline is earlier — generally two months after the tax year-end (March 1 for a December year-end). CCPCs that qualify for the small business deduction and whose taxable income did not exceed the small business limit in the current or previous year have three months to pay (March 31 for a December year-end).

Personal income tax (sole proprietors)

If you are a self-employed sole proprietor, your personal tax return filing deadline is June 15. However, any balance owing is due April 30 — you do not get the extra time for payment, only for filing.

HST filing deadlines

Depend on your assigned filing frequency (annual, quarterly, or monthly — see Step 6 above). Missing an HST deadline results in interest charges and potential penalties.

Employer Health Tax return

Due March 15 of each year. Monthly instalments are required if your annual Ontario payroll exceeds $1.2 million.

Business name renewal

Sole proprietorship and partnership name registrations must be renewed every five years. The renewal fee is $60. ServiceOntario sends a reminder 90 days before expiry, with a 60-day grace period after.

ISC register review

The Register of Individuals with Significant Control must be reviewed for accuracy at least once per financial year.

AODA compliance report

Organizations with 20 or more employees must file an accessibility compliance report every three years. The next deadline is December 31, 2026.

Key Ontario and federal statutes referenced in this guide

• Ontario Business Corporations Act (OBCA), R.S.O. 1990, c. B.16
• Canada Business Corporations Act (CBCA), R.S.C. 1985, c. C-44
• Business Names Act, R.S.O. 1990, c. B.17
• Partnerships Act, R.S.O. 1990, c. P.5
• Limited Partnerships Act, R.S.O. 1990, c. L.16
• Employment Standards Act, 2000, S.O. 2000, c. 41
• Occupational Health and Safety Act (OHSA), R.S.O. 1990, c. O.1
• Consumer Protection Act, 2002, S.O. 2002, c. 30, Sch. A
• Personal Information Protection and Electronic Documents Act (PIPEDA)
• Accessibility for Ontarians with Disabilities Act, 2005 (AODA)
• Commercial Tenancies Act, R.S.O. 1990, c. L.7

Frequently asked questions

What is the cheapest way to start a business in Ontario?

The cheapest way is to operate as a sole proprietorship under your own legal name — no registration is required and there is no cost. If you use a different business name, registering a sole proprietorship through the Ontario Business Registry costs $60 and is valid for five years. Sole proprietorships require no annual corporate filings, and business income is reported on your personal tax return.

Do I need to register my business in Ontario?

If you operate under any name other than your own legal name, you must register the business name under the Business Names Act. Sole proprietorships and general partnerships register through the Ontario Business Registry for $60. Corporations must be incorporated, which is a separate process. Operating under an unregistered business name is an offence under the Act.

How much does it cost to incorporate in Ontario?

The government filing fee to incorporate under the OBCA is $300, filed through the Ontario Business Registry. If you want a named corporation (rather than a numbered company), you will also need an Ontario-biased NUANS name search from a private search company. Federal incorporation under the CBCA costs $200 online.

Do I need a business licence in Ontario?

It depends on your municipality and industry. There is no single provincial business licence in Ontario. Many municipalities require a general business licence, and specific industries — food service, childcare, construction, liquor — require additional permits. Use BizPaL to generate a customized list of required permits for your specific business and location.

When do I need to register for HST in Ontario?

You must register for HST when your total taxable revenue exceeds $30,000 over four consecutive calendar quarters. If you exceed $30,000 in a single quarter, you must register immediately and begin charging HST on the supply that pushed you over the threshold. You can also voluntarily register below this threshold to claim input tax credits on business purchases.

Can I run a business from home in Ontario?

Yes, but you must comply with your municipality's zoning by-laws. Most municipalities allow home-based businesses with restrictions on signage, customer traffic, employees working on-site, and the percentage of your home used for business. Contact your municipality's planning department or check the local zoning by-law for the specific rules that apply to your address.

Do I need a lawyer to start a business in Ontario?

You are not legally required to hire a lawyer to register a sole proprietorship or incorporate a business. However, a business lawyer can help you choose the right structure, draft shareholder or partnership agreements, set up your corporate minute book, review commercial leases, and ensure compliance with Ontario regulations. Many business owners find that getting legal guidance early prevents far more costly mistakes later.

What is the difference between a sole proprietorship and a corporation in Ontario?

A sole proprietorship and its owner are legally the same entity — the owner has unlimited personal liability for all business debts and obligations. A corporation is a separate legal entity with limited liability, meaning shareholders generally risk only their investment. Corporations are taxed separately at a combined small business rate of 12.2% on the first $500,000 of active business income, while sole proprietorship income is taxed at personal marginal rates. Corporations require more ongoing paperwork, including articles of incorporation, corporate by-laws, a minute book, and annual returns.

Questions about starting a business in Ontario?

If you have any questions about starting a business in Ontario, feel free to contact Jonathan Kleiman, a business lawyer based in Toronto.

Call 416-554-1639 or book a free 30-minute consultation.