Setting up a business in Ontario is fast and easy, and although some additional procedures are required by the federal government, Canada is ranked by the World Bank as the second-easiest country in the world in which to start a business. Investors have many options, including incorporation, sole proprietorship, partnership (general or limited), and joint venture. There are various tax implications and investors are advised to seek professional legal or accounting counsel.

Download booklet - Establishing a Business in Ontario

A corporation is a legal entity separate and apart from its individual shareholders; debts and obligations are liabilities of the corporation, not the individual shareholders.

A business may incorporate in Ontario under either federal or provincial law. Incorporating under Ontario provincial law means that a corporation can carry on business only in Ontario and must usually make separate arrangements to do business in any other province. Incorporating under federal law allows a corporation to carry on business throughout Canada, although it may be required to register or obtain a license in any province in which it does business.

To incorporate provincially, a company must file Articles of Incorporation with the Ontario Ministry of Government Services. This can be done either in person, by mail, or electronically.

To incorporate federally, a company must file Articles of Incorporation with Corporations Canada. For more information call Industry Canada at 1-866-333-5556 or the Canada-Ontario Business Service Centre at 1-800-576-4444.

A business established in another Canadian province, or incorporated federally, does not need to be licensed in Ontario in order to begin doing business in Ontario, but must submit certain information. Businesses from jurisdictions outside Canada have some further requirements. The Ministry of Government Services sets out what is required. For more information contact the Ontario Business Connects Helpline at 1-800-565-1921.

A sole proprietorship is a business carried on by an individual. It may employ others. The proprietor is entitled to all profits from the business and is personally liable for all its debts and obligations. The individual's liability is not limited to the assets in the business, but extends to personal assets. A sole proprietorship is not required to be registered if the business is carried on under the owner's name.

Under the Business Names Act, partnerships must be registered with the Ontario Ministry of Government Services (1-800-268-1142). A partnership formed in Ontario may, as a rule, carry on business only in Ontario. However, most provinces provide for the registration of extra-provincial partnerships which will entitle such a partnership to carry on business in other provinces as well.

In a limited partnership, partners are liable only to the extent of the capital they have contributed. Limited partners become general partners when they participate in the management of the business.

A joint venture is a business activity carried out by two or more persons. There is no legislation which specifically regulates joint ventures in Ontario, and there is no precise legal definition or status for a joint venture. When a new corporation is formed to carry on the joint venture business, it is sometimes referred to as an incorporated joint venture.

A non-resident corporation or individual can also carry on business in Ontario by means of a partnership or joint venture arrangement. Corporations can enter into such an arrangement either directly or through a Canadian subsidiary. It is not uncommon for a foreign corporation, either directly or through a wholly-owned Canadian subsidiary, to form what amounts to an incorporated joint venture with another corporation. Typically, such arrangements involve the licensing of specific technology or know-how to the Canadian joint venture corporation.

A branch must be licensed or registered in Ontario and any other province in which the foreign company wishes to carry on business. Legally, the branch has no separate status from the foreign company itself, but is merely carrying on business in Ontario. The foreign company will be liable to the employees and creditors of the branch for the actions of, and debts contracted by, its managers and agents on behalf of the branch.

A subsidiary can be incorporated (under either federal or Ontario law) or an existing Canadian corporation can be acquired. A number of factors are relevant in considering whether to use a subsidiary or a branch for Canadian operations. Tax considerations and the ease of raising capital may play a major part in the decision.