Starting a Sole Proprietorship

Business tip

Starting a sole proprietorship: five first steps

The order that keeps the paperwork, and the tax bill, from surprising you later.

Step one

Check and register your business name.

If you'll operate under anything other than your own legal name, search for existing names first, then register the trade name with your province. Using your own name only? You may not need to register anything.

Step two

Open a separate bank account.

It isn't a legal requirement for a sole proprietor, but mixing personal and business money makes bookkeeping and tax time much harder. One account just for the business keeps the records clean.

Step three

Track every dollar in and out.

Keep receipts, invoices, and a mileage log if you drive for the business. CRA generally expects you to keep records for six years after the tax year they relate to.

Step four

Set tax money aside as you get paid.

No one withholds tax from your income. Many self-employed people move a percentage of every payment into a separate savings account. The right share depends on your income, so ask an accountant to help pick yours.

Step five

Look at insurance.

General liability and, for some trades and professions, professional liability. As a sole proprietor your personal assets are on the line, so insurance is your main buffer.

Watch the line

Track your revenue against $30,000.

GST/HST registration stops being optional once your taxable revenue passes $30,000 in a single calendar quarter or over four consecutive quarters. Track it as you go.

Tickle & Compass

Save this, then keep going.

Next up: what you can deduct, and how GST/HST works.

What you can deduct →

General information, not tax, legal, or financial advice. Rules vary by province and change — confirm with an accountant.