How to Register a Sole Proprietorship in Canada

Working as a sole proprietor in Canada gives you full control over your business, the freedom to pick your clients, and a simpler setup compared to forming a corporation. Many freelancers, consultants, tradespeople, and independent contractors prefer this route.

It’s relatively easy, but not without effort. You’ll deal with registrations (at federal and provincial levels), tax filings, possibly GST/HST, and keeping up with your financial records. The variances across provinces or territories mean you’ll want to check local rules.

The main challenges are managing tax obligations (which include income tax and sometimes sales tax), making sure you have any required permits or licences, and handling fluctuating income. The main benefits are lower startup costs, simpler reporting, flexibility, and direct control of profits.

Disclaimer: This article is for informational purposes only and is not a substitute for legal advice. Please always check official sources or seek professional guidance before taking action.

What is a sole proprietorship in Canada?

In Canada, a sole proprietorship is an unincorporated business owned by one individual. Also referred to as self-employed or an independent contractor. These terms all mean essentially the same thing: you run a business on your own, profits and losses go to you, and you’re personally liable for debts and obligations.

How does a sole proprietorship work in Canada?

Here are the core features of setting up and operating as a sole proprietor in Canada.

Sole proprietorship vs corporation in Canada

Here’s how going solo compares to forming a corporation or partnership.

Step-by-step guide: How to register a sole proprietorship in Canada

Step 1: Check if you are eligible to become a sole proprietor

You just need to be a legal adult and have valid identification. No special residency requirement for many provinces, though non-residents may face additional rules. If your business activity is regulated (e.g., a profession), you may need to prove credentials or licences.

Step 2: Choose your business name

You can use your own legal name or choose a trade or business name. If choosing a trade name, check with your provincial/territorial registry to ensure it’s available and doesn't infringe trademarks.

Step 3: Gather required documents

Typical documents include:

• Valid ID (passport, driver’s licence, etc.)

• Address for your business (could be home or other business address)

• Description of business activity (what you’ll sell or what services you’ll offer)

• If using a trade name, registration, or permit for that name (if required by your province)

• Any permits or licences required for your specific field

Step 4: Register with the federal & provincial authorities

• Get a Business Number (BN) from the Canada Revenue Agency (CRA) if you need federal tax accounts (income tax, GST/HST, payroll) for your business.

• Register your sole proprietorship (or trade name) with your province or territory where required.

• Register for a GST/HST account if your revenue will exceed the small supplier threshold, or if you want to claim input tax credits.

Step 5: Pay registration fees and contributions

• Provincial fees: depending on your province, for registering a business or trade name.

• CRA: No registration fee for getting a BN, but there may be fees for permits or licences.

• If you exceed revenue thresholds, collect, file, and remit GST/HST. Pay income tax on profits; pay any payroll deductions if hiring staff.

Step 6: Complete post-registration obligations

• File annual income tax return (T1) reporting business income and expenses.

• If registered for GST/HST, file returns and remit tax collected, claim input tax credits if eligible.

• Maintain accounting records and receipts for all income and expenses.

• Renew or maintain any permits or licences; update registry if changing business name, address, or structure.

Financial and tax obligations for sole proprietors in Canada

• Income taxes: You pay personal (federal + provincial/territorial) income tax on your net business income. Rates depend on your total income level and where you live.

• Social security/pension contributions: You must contribute to the Canada Pension Plan (CPP) (or Quebec Pension Plan if in Quebec) on net business earnings above a set threshold. Also, pay into the Employment Insurance (EI) programs if you opt in or under certain conditions.

• GST/HST obligations: You only need to register if your revenue exceeds $30,000 CAD over four consecutive calendar quarters (the “small supplier” threshold). If registered, you collect GST/HST from clients, file a return, remit tax, and may claim input tax credits.

• Record-keeping requirements: Keep clear records of all income, expenses, invoices, and receipts. Track business-related expenses and bank statements. Good records are essential for taxes, audits, and claiming deductions.

Launch your contracting career and stay compliant with Deel

Registering as a sole proprietor gives you independence, but it also means handling taxes, invoices, and records on your own. Deel’s all-in-one platform helps you manage obligations without the stress. With Deel, you can:

• Automate invoicing and expense tracking with essential Bookkeeping tools
• Create, send, and sign localised work agreements
• Keep accurate records for tax season
• Access expert tax advice and compliance support
• Get paid through multiple payment and withdrawal methods
• Spend your earnings in USD with the Deel Card
• Access funds early with Deel Advance
• Enjoy contractor perks from 150+ partners

Stay independent, without the admin overload. Sign up to Deel for free today.

FAQs

What is the minimum capital required to start a sole proprietorship in Canada?
There is no minimum capital required. You can start with just the tools or equipment needed for your trade or service.

Do sole proprietors need to register for GST/HST?
Only if your revenue exceeds $30,000 CAD over the last four calendar quarters. If below that, you are considered a “small supplier” and registration is optional.

How much are the standard contributions for CPP?
You pay CPP contributions on your net earnings above a basic exemption amount. You pay both the employee and employer portions (since you are both) for the self-employed portion. The rate changes year-to-year.

Can a sole proprietor hire employees?
Yes. If you hire people, you’ll need to set up payroll deductions for source deductions (income tax, CPP, EI) and get a payroll account with CRA.

How long does it take to register as a sole proprietor in Canada?
Often, it takes just days to a few weeks, depending on your province or territory and how quickly you file all necessary documents. If everything is ready and online registrations work smoothly, it can be fast.

Can foreign nationals register as sole proprietors in Canada?
Generally yes, but there may be extra steps for non-residents (e.g., tax status, bank account, proof of address). Some provinces require you to have a business address in the province. You’ll also need to determine how your country of residence and Canada’s tax treaties affect your tax obligations.

Do sole proprietors need a separate business bank account?
Not strictly required everywhere, but strongly recommended. Having a separate account makes accounting, invoicing, and tax reporting much easier and helps maintain clarity for your business finances.

What happens if I stop operating as a sole proprietor?
You should cancel any GST/HST account if you have one, close your CRA business number obligations, notify provinces or territories if you registered a trade name, stop renewing licences/permits, and file final tax returns for your last year of business.

Are there any government incentives or reduced rates for new sole proprietors?
Canada offers various supports: small business deductions, credits, and sometimes grants, depending on sector and region. Also, being a “small supplier” means you avoid GST/HST registration until revenue passes the threshold, reducing overhead.

Can I use Deel as a sole proprietor in Canada to get paid by international clients?
Deel allows you to invoice and receive payments from clients around the world. As long as your invoices meet CRA requirements and you keep accurate records, you can comply with Canadian rules.

Does Deel generate compliant invoices for sole proprietors in Canada?
Deel’s invoicing tools include the fields you’ll need — business name, CRA business number or name, appropriate tax fields (GST/HST if applicable) — so invoices align with Canadian regulations.

Can Deel help me with taxes as a sole proprietor in Canada?
Deel provides clear transaction and payment reports, tracks earnings and expenses, and helps organize your financial info. It doesn’t replace an accountant, but it makes your tax time much easier.

Does Deel offer contracts for freelancers and sole proprietors?
Deel includes contract templates compliant with Canadian law, giving you protection and clarity when dealing with clients.

Can I access benefits through Deel as a sole proprietor in Canada?
Depending on your plan, Deel supports optional benefits, tools, and add-ons so your freelance life is more secure and business-friendly.