The Legal Requirements to Start a Business
Starting your business can seem overwhelming. What do you need to do? Where should you start? To guide you through the process, we have developed two checklists outlining the ten basic legal requirements to start a business.
- Starting Your Business Checklist: provides the steps recommended for starting a sole proprietorship or partnership.
- Business Structures Information Sheet: this document outlines the differences between the various business structures.
The first three steps in our checklists include writing a business plan, researching your market, and finding funding to start your business.
Decide on a Business Structure
When you have determined the viability of your business concept and you’re ready to set up your business, one of the first steps is to register your name. But before doing so, you must decide if you’re going to be a sole proprietorship, a partnership, a corporation, or a society. Each has important implications for liability, taxation, and succession planning.
There are a few things to consider when setting up your business structure. The most common business structures in British Columbia include:
- Sole proprietorship. If you plan to operate the business on your own, either under a business name or your own name
- Partnership. If you plan to operate the business with one or more partners
- Corporation. If you plan to operate the business as a separate legal entity, separate from yourself and your personal assets
- Society. If you plan to operate a not-for-profit organization, in which any funds or profits will be used only for the society’s purposes
- Co-operative. If you plan to operate a business that is owned and democratically controlled by the people who use and benefit from your services
A major difference between a corporation and a sole proprietorship or partnership is that in a corporation, no individual person is responsible or liable for debts (unless specifically outlined in a contract or legal document for your business). Also if any members of your business leave or are replaced, it won’t affect the business as a whole and operations can continue, uninterrupted.
If you plan to operate a corporation, with the intent to sell shares of your business (for trade of services or investment) it is important to know the BC laws that apply. Read our Seeking Investment? Know the Rules article to find out more.
If you’re uncertain about which structure is right for your business, a lawyer or an accountant can help you choose.
For help finding a professional, refer to our Lawyer & Accountant Referral Services information sheet.
Register Your Business
When you operate your business under a name other than your own, you need to register that name because you will require proof of business registration to open bank accounts, apply for loans, and many other business start-up and business building activities.
Business registration is a two-step process:
1. Submit your business name request. The first step in registering your business is the approval of your business name by submitting your name request either online at B.C. Registry Services or in person at Small Business BC.
Name approval prevents the use of names that are so similar as to confuse or mislead people, and it provides a record allowing the public to determine ownership of the company. Names are checked against the list of registered corporations in British Columbia to ensure there is no duplication. Under the Partnership Act, proprietorship or partnership (firm) names are not protected, meaning there could be multiple companies with the same name.
Note: If you operate under your own personal name as a sole proprietor (self-employed person or independent contractor), you do not have to register your business. You can simply go ahead and register for a harmonized sales tax (HST) account, if applicable, and for your municipal business licence. In this case, the legal name of your business is your personal name.
2. Register your business. Once you have been notified that your business name has been approved, you have 56 calendar days to register your business name or complete your incorporation process.
If you do choose to register as a sole proprietorship or partnership, there are three options:
- Online at the OneStop Business Registry
- In person at Small Business BC
- By mail to the B.C. Corporate Registry
To register as a corporation, there are three options:
- Self-incorporation online at Corporate Online
- Assisted self-incorporation using lawyer-prepared material, such as the Incorporation Kit for British Columbia by Simply Legal
- Incorporation through a lawyer. If you need a lawyer, you may wish to contact the Lawyer Referral Service.
Refer to our Step-By-Step Registration Sheet for more detailed instructions on how to register your business as a sole proprietorship, partnership, or corporation.
To register as a society, there are two options:
- Refer to the B.C. Corporate Registry website to form a provincial society.
- Refer to the Corporations Canada website to form a federal society.
If you have any questions about whether or not to incorporate as a society, you should consult a lawyer and/or an accountant.
To register as a co-operative, refer to the B.C. Corporate Registry website.
Since co-operatives are developed through consensus and members must have a say in major decisions on the democratic principle of “one member, one vote”, they can be more complex to set up and to operate than traditional businesses. For more information about co-operatives, refer to the Canadian Co-operative Association (BC Region) website.
If you have any questions about whether or not to incorporate as a cooperative, you should consult a lawyer and/or an accountant.
Make Sure You Have a Business Licence to Operate
One of the most important legal requirements for starting a business is the need for a Business License. Most municipalities in BC require you to register for a business licence, which gives you permission to operate your business on your premises (whether at your home or in a commercial space) within that municipality.
In some instances, you may be required to obtain a licence in municipalities where you do not maintain premises, but do carry on business.
Contact your local city hall, as well as each community in which you’re doing business, to see which permits (including mobile business licences), might be required for your type of business.
If your business is located in an incorporated municipality (city, town, village, or district), obtain a business licence from the municipal business licence office.
Please note that additional regulations from federal, provincial, and/or municipal governments might apply to your particular business and that you should consult the appropriate authority for more information.
Refer to our Municipal & Registration Contacts List for city hall license offices in the Lower Mainland, as well as contacts for the Corporate Registry.
Consider Registering for EI Special Benefits for Self-Employed People
Under the new Fairness for the Self-Employed Act, you can now choose to register for the Employment Insurance Special Benefits for Self-Employed People.
The four types of special benefits are:
- Maternity benefits
- Parental benefits
- Sickness benefits
- Compassionate care benefits
If you register for this initiative, you will be required to pay EI premiums on your self-employment income, and you will have to wait 12 months before applying for benefits.
For more information and to register, visit the Service Canada website or call the EI Telephone Information Service at 1-800-206-7218.
Here to Help
At Small Business BC, we’ve got the resources and supports you need for your business to succeed. This November, we’re offering all webinars and Talk to an Expert Advisory sessions for FREE.
Want to grow your customer base? Add your business to our BC Marketplace and tap into a province-wide audience looking to shop local and support small businesses like yours.