How to start a sole proprietorship

Compared to starting a business via a corporation (company), starting a sole proprietorship is legally and administratively simple. Indeed, while the corporation is a separate legal entity that requires the completion of various corporate formalities, the sole proprietorship is a business operated by the natural person who is the owner.

If the owner of the business operates the business only under his or her first and last name, other than by a trade name, there is no obligation to register with the Registraire des entreprises, thus avoiding paying annual registration fees. There is, however, an exception for a business selling tobacco or tanning salons: in these cases, registration is mandatory.

When the individual operates his business under a commercial name, the Act respecting the legal publicity of enterprises requires the registration of the business. Once the application for registration is received and processed, the Enterprise Registrar assigns a business number (NEQ). The business is then registered in the Enterprise Register.

Several pieces of information are required in the registration form. This information includes the activities of the company, the address of the establishment, the number of employees and the name and address of the owner of the company.

The entrepreneur will be able to register with the GST and QST files in order to pay Revenu Québec the taxes collected on the sale of taxable goods and services, and also to claim the input tax credits to which he is entitled. This registration is mandatory, in particular, when the threshold of $30,000 in sales of taxable supplies over four consecutive quarters is exceeded. If the entrepreneur has employees and must collect source deductions, he must also register with Revenu Québec and the Canada Revenue Agency for source deductions.

Since the sole proprietorship is not a separate legal entity, the entrepreneur does not have to register for income tax accounts, unlike corporations.