Starting a business in Ottawa: the legal checklist

People starting a business in Ottawa often begin at City Hall. For most of them it is the wrong building. The City’s Licensing By-law names the businesses it licenses, and a consultancy, software company, design studio or trades business that does not fall into one of those categories needs no municipal licence at all. The rules that do apply come from Queen’s Park, from Ottawa in its other sense, and from Quebec City.

The checklist at a glance

Sole proprietorship, Ontario corporation or federal corporation

A sole proprietorship is you, trading. It costs nothing to start, and $60 to register a business name with Ontario if you trade under anything other than your own name; the registration lasts five years. You carry the business’s debts personally and pay tax on its profits at your personal rate.

An Ontario corporation costs $300 to incorporate through the Ontario Business Registry. It separates the business’s liabilities from yours, lets profits be taxed at the small business rate while they stay in the company, and makes it possible to bring in partners or investors cleanly. The incorporate or stay a sole proprietor guide works through when the switch pays for itself.

A federal corporation costs $200 through Corporations Canada and gives you name protection across the country. It does not let you skip Ontario: a federal corporation carrying on business here files an initial return with Ontario. For a business that will trade mainly in Ontario, the choice between the two is usually about the name, not the law. The incorporation service page explains how the firm handles either.

Does your business need a City of Ottawa licence?

Section 9 of the City’s Licensing By-law lists the businesses that must hold a City licence. As of the City’s 2024 guide, the list includes food premises, mobile canteens and refreshment stands, second-hand goods shops and flea markets, pet shops and kennels, payday loan establishments, rooming houses, driving schools, snow plow contractors, public garages, amusement places, tobacco vendors, adult entertainment, body-rub parlours, salvage yards, itinerant sellers, and private parking enforcement agencies.

If your business is not on the list, you do not need a City business licence. If it is, the licence usually comes with inspections — fire, health or zoning — and has to be in place before you open. Some activities are also licensed provincially, such as alcohol sales through the AGCO, so a restaurant may need both.

Zoning: the rule people forget

Zoning decides whether your business can operate at a given address, and it applies whether or not you need a licence. Before you sign a commercial lease, confirm that the zone permits your use; a landlord’s assurance is not the same as the zoning by-law.

Working from home is allowed, within limits. Ottawa’s long-standing home-based business rules permitted one on-site employee who does not live in the home, capped the space used at the greater of 25% of the dwelling’s floor area or 28 square metres, prohibited outdoor storage, and excluded most businesses that need a City licence. City Council adopted a new city-wide Zoning By-law 2026-50 in 2026, so check its current home-based business provisions for your property before you hire or start seeing clients at home.

Tax and payroll registrations

HST. You must register for HST once your taxable revenue passes $30,000 in a single quarter or over four consecutive quarters. Many businesses register earlier so they can claim back the HST they pay on start-up costs.

Payroll. When you hire your first employee, open a CRA payroll account to remit income tax, CPP and EI deductions.

WSIB. Most businesses in Ontario with workers must register with the Workplace Safety and Insurance Board within 10 days of hiring their first worker. Some industries are not covered, and some owners choose optional coverage for themselves.

Employer Health Tax. Ontario’s EHT applies to payroll, but eligible private employers with Ontario payroll under $5 million are exempt on the first $1 million. Most new businesses owe nothing for years.

The Gatineau question

Many Ottawa businesses have clients, staff or a job site across the river in Gatineau, and Quebec has its own rules.

A corporation formed outside Quebec must register with the Registraire des entreprises if it carries on an activity in Quebec. Quebec treats any one of these as carrying on activity there: a Quebec address, an establishment or post office box in Quebec, a Quebec telephone line, or doing anything in Quebec for profit. A Gatineau project, office or employee will usually trigger it. Corporations incorporated in Ontario are exempt from Quebec’s registration fees, but the exemption covers the fees only — the registration and the annual updating declaration are still required.

Registration is not the only Quebec obligation. Quebec’s language law sets French-language requirements for businesses operating there, including for contracts, signage and customer communications, and Quebec has its own payroll, employment standards and occupational health regimes. If Gatineau is part of the plan, sort out the Quebec side before the first contract is signed.

The documents that come after

An incorporated business needs organizing resolutions, a share register and a minute book from the start, and an annual return filed each year. If there is more than one owner, a shareholder agreement is the document that decides what happens when the owners disagree, one wants out, or one dies — it is far easier to write on day one than in year three. If you are still employed while you start, read starting a business while employed before you use anything you learned at your day job.

Ottawa is a good place to start a business. Just not, for most people, at the licensing counter.