BUSINESS

This section addresses the financial, tax, and regulatory framework applicable to businesses carried on in Canada. It is organised by form of business organisation, with each form examined in respect of its legal characteristics, bookkeeping, payroll, and taxation, followed by subject pages that apply to all businesses. Federal rules are stated for all of Canada, and the variations among the ten provinces and three territories are identified on each page. Figures are stated for the 2026 taxation year unless otherwise indicated.

STRUCTURE OF THIS SECTION

Types of Businesses

• Types of Businesses: an introduction to business structures and the factors relevant to the choice of structure.

• Sole Proprietorship, with Sole Proprietorship: Bookkeeping, Payroll, and Tax.

• Partnership (general, limited, and limited liability partnerships), with Partnership: Bookkeeping, Payroll, and Tax.

• Corporation (federal and provincial incorporation, governance, and compliance), with Corporation: Bookkeeping, Payroll, and Tax.

Subject pages applicable to all businesses

• Federal and Provincial Jurisdiction: the constitutional division of powers and a profile of each province and territory.

• Compliance Requirements: registrations, recurring filings and remittances, and the compliance calendar.

• Bookkeeping Fundamentals: the accounting cycle and subpages on the accounting equation, journal entries, the general ledger and trial balance, the income statement, the balance sheet, the cash flow statement, and record keeping.

• Payroll: statutory deductions, employer contributions, remittances, year-end reporting, provincial payroll taxes, workers' compensation, and minimum wages.

• CRA: business numbers and program accounts, online services, assessment, audit, objections, appeals, and relief programmes.

• Small Business Deduction: eligibility, calculation, the business limit and its reductions, and provincial small business rates.

COMPARISON OF THE PRINCIPAL BUSINESS STRUCTURES

• Legal personality: a sole proprietorship and a partnership (in the common-law provinces) have no legal personality separate from their owners; a corporation is a separate legal person.

• Liability: unlimited for a sole proprietor and for general partners; limited to their contribution for limited partners not participating in control; limited for shareholders, subject to personal guarantees and statutory exceptions; LLP partners are shielded from the negligence of other partners.

• Income tax: the sole proprietor reports business income on Form T2125 with the T1 return; partnership income is computed at the partnership level and allocated to partners; a corporation files a T2 return and pays corporate tax, with shareholders taxed on salary and dividends received.

• Tax rates in 2026: personal rates (combined federal and provincial) for sole proprietors and individual partners; combined small business rates of approximately 9% to 12% on the first $500,000 of active business income of a CCPC; combined general corporate rates of approximately 23% to 30%.

• Payroll: owners of unincorporated businesses are not employees and pay CPP on self-employment earnings; shareholder-managers of a corporation may be employees and receive salary subject to source deductions.

• Continuity: a sole proprietorship ends with its owner; a partnership may dissolve on a change of partners unless the agreement provides otherwise; a corporation has perpetual existence.

• Compliance burden: lowest for a sole proprietorship; intermediate for a partnership; highest for a corporation, which must maintain corporate records and file annual corporate and tax returns.

PRINCIPAL FEDERAL AND PROVINCIAL AUTHORITIES

• Canada Revenue Agency: federal income tax, GST/HST, CPP and EI contributions, and most provincial income taxes.

• Revenu Québec: Quebec income tax, QST, Quebec source deductions, and the GST/HST for most Quebec registrants.

• Corporations Canada and the provincial and territorial corporate registries: incorporation, business names, and annual filings.

• Provincial ministries of finance: provincial sales taxes, payroll taxes, and, in Alberta, corporate income tax.

• Provincial and territorial workers' compensation boards and employment standards branches.