When does a business need a licence, permit or registration?
It’s hard to always know what your business needs for it to legally operate. Do you require a permit, do you need to register something, pay for a licence?
While businesses need to follow proper regulations and have the authorization to do what they’re doing, start-ups do not automatically have to declare their operations to the government.
When do I need to register a new business in Canada?
There is no federal or provincial licensing system for businesses except for a few isolated cases, usually involving broadcasting or telecommunications. Provincially, there are businesses subject to licensing or certification from professional organizations. And, on a municipal level, applying for a licence depends on your activities.
As your business grows, you may need to register, get a licence or a obtain a permit to conduct your activities. Here are the most common ones.
Types of licences, permits and registrations
If a business opens an office or performs an activity that might disrupt residential neighbours, it will likely have to do so in a designated area and will require a municipal business licence.
Municipalities issue business licences to ensure that companies comply with zoning requirements. In many cases, such as home-based businesses, business licensing is not strictly enforced.
Environmental and zoning permits
Your business will need federal and provincial permits if the activities affect the environment, or you work with hazardous materials. All operators of new businesses must understand their area of business well enough to recognize what permits are required.
Some municipalities require zoning and building permits for certain kinds of projects, most notably construction. Road signs and access to areas often need municipal permits, as well.
Business name registration
A registration will also help protect your business name when those representing similar or identical business names and trademarks do online searches for potential conflicts.
When companies incorporate, they are given a government charter to operate, so these functions are automatically performed.
In most provinces, businesses must register for provincial tax regimes, with some regulation requiring them to register in other provinces where they conduct business, or require a certain income level to collect provincial sales tax.
Businesses earning less than $30,000 a year usually do not have to register for federal and provincial sales taxes (GST/HST). However, most businesses do have to register with the Canada Revenue Agency (CRA). Before registering for any federal government program, a business must obtain a business number from the CRA. You will also need to register with the CRA if you have employees.
How do you find out what permits, licences and registrations you need?
There are several ways to find out what kind of authorization your business requires. Online tool BizPal allows Canadian businesses (except for those in Nunavut, who can find information on their government website) to research authorizations based on location, industry, and business activities and provides insights on permit and licencing requirements.
There is also federal government information where local businesses can find support networks with information on licensing, as well as Futurpreneur, which supports young entrepreneurs in a variety of ways.
Acclr Business Services of the Chamber of Commerce of Metropolitan Montreal (CCMM) offers free consultations to new businesses looking for the authorizations they require to set up shop.
“We can research all the necessary and useful authorizations as one of our many services to the entrepreneur,” says Linda Boisvert, an advisor in the Business Support Programs at Acclr Business Information Services.
Her colleague Cindy Desmarais, who oversees the business information division at the Chamber of Commerce of Metropolitan Montreal (CCMM), says it’s important to do your research early. “Consult with us as soon as possible, even at the business idea stage.”
Boisvert echoes that sentiment. “Many entrepreneurs find out about permit requirements after having committed resources to the business,” she says. "And surprises can be painful.”
Fees and processing times are another reason for you to consult early. Costs can range from hundreds to thousands of dollars and may be renewable annually. If you have a start-up or small venture, you need to factor these into your budget.
How to apply for permits, licences and registrations: a checklist
- Find out what authorizations are required at the federal, provincial, or municipal levels as applicable
- Contact the issuing authorities to ask any relevant questions
- Obtain the necessary forms
- Gather the required documents and, if needed, obtain additional certifications
- Fill out the relevant applications
- Submit according to the indicated procedure(s)
- Pay applicable fees
- Submit your application
Does a home business need a licence to operate?
If you’re setting up a business out of your house, you may or may not need a licence. It depends on your industry. For example, if you run a daycare, you’ll fall under provincial laws that cover childcare services or if you own a home-based catering company, among the obligations are provincial food permits to obtain through MAPAQ. But many sole proprietors, like freelance writers, business consultants or interior designers, do not need a licence to operate.
What are the consequences of operating a business without the required registrations, permits and licences?
Permits and licences are government mandated. Operating a business without all the required registrations, permits and licences is akin to breaking the law and invariably has consequences. Those can range from a warning or fine all the way to the loss of your business. There may even be prosecutorial action taken against the owner in the case of malicious intent.
Licences and permits are usually compulsory. They are granted by the relevant authorities and conform to norms of operation, safety rules, legality of the product or jurisdictional rules (as in the case of alcohol distribution), as well as availability.
What is the difference between a licence and a permit?
Governments use the words “licences” and “permits” interchangeably.
Governments also grant businesses the ability to operate and reserve the right to limit the number of licensees in a given sector.
“That was the case for a while with daycare centres [in Quebec], as the authorities were intent on maintaining healthy competition,” says Boisvert.
Cindy Desmarais encourages entrepreneurs to communicate with relevant authorities directly. “Meanwhile, we can help guide them.”
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