Starting a Business in Ontario (2025 Step-by-Step Guide)
Starting a business in Ontario is exciting, but let’s be real: it’s also paperwork-heavy and full of fine print. Many new entrepreneurs race to register their name and open shop, only to find themselves knee-deep in CRA letters, HST confusion, and bookkeeping messes within months.
This guide will walk you through every step of starting a business in Ontario in 2025, from choosing your structure to setting up bookkeeping and taxes. Unlike many guides that stop at incorporation, this one will help you actually stay compliant, avoid CRA penalties, and build a business that lasts.
Step 1 – Choose Your Business Structure
Your first decision is how your business will be legally structured. Each option has different implications for liability, taxes, and long-term flexibility.
Sole Proprietorship
Easiest and cheapest to set up.
Profits reported on your personal tax return (T1).
Unlimited personal liability—your personal assets could be at risk.
Partnership
Two or more people carry on business together.
Can be a general partnership (all partners share liability) or a limited partnership/LLP (liability limited for some partners, often used by professionals like lawyers or accountants).
Requires a partnership agreement to define roles, responsibilities, and profit sharing.
Each partner reports their share of income/loss on their own tax return.
Corporation
Separate legal entity.
Limited liability for shareholders.
More tax planning opportunities (lower small business tax rate, ability to defer income).
More expensive to set up and maintain (annual return, corporate tax filing).
Trust
Less common for startups, but sometimes used for estate or tax planning, or to hold assets.
Can operate a business if set up properly, but requires professional legal/tax advice.
Non-Profit Organization (NPO) or Charity
For groups formed to operate without profit motive (community, religious, educational, cultural, etc.).
Must apply for non-profit or registered charity status.
Different tax treatment: NPOs are generally exempt from income tax but must still file certain information returns (T1044).
👉 Tip: Many Ontario businesses start as a sole proprietorship or partnership, then incorporate once revenue and risk grow. FalconSight can guide you in choosing the right path, and we partner with licensed lawyers when incorporation or specialized structures (trusts, non-profits) are needed.
Step 2 – Register Your Business Name & Number
If you’re a sole proprietor operating under your legal name (e.g., “Erika Hoang”), you don’t need to register a business name. But if you want to use something like FalconSight Accounting Inc., registration is required.
Where to register: Ontario Business Registry (online).
Cost: $60–$80 for a sole proprietorship, $300+ for a corporation (plus legal fees if using a lawyer).
Business Number (BN): Once registered, CRA assigns you a 9-digit BN. This is your key ID for taxes (HST, payroll, corporate income tax).
Step 3 – Open a Business Bank Account
Keeping personal and business money separate is not optional, it’s essential !
Makes bookkeeping clean.
Simplifies CRA audits.
Builds credibility with lenders.
Most banks will try to bundle incorporation services (often through OWNR) with your account. Be cautious: these packages cover incorporation but not ongoing bookkeeping. That’s where many businesses stumble.
Step 4 – Set Up Your Bookkeeping System
This is the step most guides skip. But it’s the one that makes or breaks your first year.
Options:
Spreadsheet (Excel/Google Sheets): Cheap but manual and error-prone.
Cloud software (QuickBooks Online, Wave, Xero): Automates bank feeds and invoices. For many new entrepreneurs, using accounting software can be a cost-saving way to handle bookkeeping yourself. But even with automation, transactions can still be mishandled. Especially if you’re not familiar with accounting rules.
Professional bookkeeper: Ensures accuracy, compliance, and provides advice.
At FalconSight, every new client gets:
Cloud bookkeeping setup.
Ongoing monthly reconciliations.
A complimentary financial health review each month, where we walk you through your numbers in a way that’s easy to understand.
This helps you spot risks and opportunities early before they snowball.
Step 5 – Register for Taxes
When you register your business with CRA, your Business Number (BN) becomes the base. From there, you may need to add specific program accounts depending on your structure and how you’ll pay yourself or others:
RT (GST/HST Account): Required if your business earns over $30,000 in a rolling 12-month period. Many owners register earlier to claim Input Tax Credits.
RP (Payroll Account): Needed if you’re paying employees or yourself through salary. This is how you remit income tax, CPP, and (sometimes) EI.
If you control more than 40% of the voting shares, CRA considers you not insurable for EI, you don’t pay EI premiums and can’t collect EI through that role.
As a self-employed owner drawing salary, you must pay both the employee and employer portions of CPP(“double CPP”).
EI is optional for self-employed. To access maternity, parental, or sickness benefits, you must opt in through Service Canada.
RZ (Dividend Account): If you plan to pay yourself or other shareholders via dividends, you need an RZ account so CRA can track and you can issue T5 slips properly at year-end.
WSIB (Workplace Safety and Insurance Board): If you hire employees in Ontario, you may need WSIB coverage depending on your industry. This is not part of CRA, you must register separately with WSIB within 10 days of hiring staff.
👉 Tip: Choosing between RT, RP, and RZ depends on how you’ll structure compensation (salary, dividends, or both) and whether you’ll hire. FalconSight helps new entrepreneurs get the right setup from day one, so they stay compliant and avoid costly CRA or WSIB surprises.
Step 6 – Understand Ongoing Obligations
Starting is just the beginning. Ongoing compliance is where many small businesses fail.
Bookkeeping: Monthly reconciliations keep your records clean.
Taxes:
Sole proprietorship → file T1 with T2125 (business income).
Corporation → file T2 corporate return.
Deadlines:
GST/HST → quarterly or annually, depending on setup.
T1 → April 30 (June 15 if self-employed, but any balance still due April 30).
T2 → 6 months after fiscal year-end.
Penalties: CRA charges interest and late penalties, even if you didn’t know.
This is where a proactive bookkeeper saves money by making sure nothing slips.
Free Checklist Download
👉 [Download our Starting a Business in Ontario Checklist (2025) – free PDF]
This one-page checklist summarizes every step above, so you can track progress.
How FalconSight Helps New Businesses
Unlike one-click incorporation tools like OWNR, FalconSight Accounting supports entrepreneurs beyond the paperwork.
We offer:
Incorporation through our partnered law firm.
Bookkeeping setup and automation.
Transparent fixed-fee pricing (no surprises).
Monthly financial health reviews helping you understand your numbers, not just record them.
Whether you’re freelancing, investing, launching a startup, or a newcomer to Canada starting a business in Ontario, we can set you up with bookkeeping and tax solutions so you can grow with confidence.
👉 Book a free 15-minute consultation today
FAQs
How much does it cost to start a business in Ontario?
A sole proprietorship can be registered for under $100. Incorporation costs $300+ in government fees, plus legal/accounting fees.
Do I need to register for HST right away?
Not unless your revenue exceeds $30,000/year. But registering early can let you claim input tax credits.
Should I incorporate or stay a sole proprietor?
If you want liability protection, lower corporate tax rates, or plan to reinvest profits, incorporation often makes sense. If you’re testing a side hustle, sole prop may be easier.
What bookkeeping system should I use?
Cloud bookkeeping software is best. FalconSight sets this up for clients so they’re tax-ready from day one.
Final Word
Starting a business in Ontario in 2025 is simpler than ever. But also riskier if you skip the financial foundation. Registration is only step one. Without proper bookkeeping, tax accounts, and compliance, your dream business can become a CRA headache.
FalconSight Accounting Inc. helps Ontario entrepreneurs launch with clarity: incorporation, bookkeeping, and financial health reviews all in one place.