Starting a Second Business in Canada: Same Company or New?

Can I run a second activity under my existing sole proprietorship?

Yes. A sole proprietorship is you carrying on business, so starting another activity does not by itself create another legal person. You can use different trade names, but the owner remains the same individual. The CRA's GST/HST registration guidance gives an example of one proprietor running two businesses under separate trade names with one registration.

A trade name is the name customers see; your legal name is still the owner's name. Tell the CRA when you add or change an operating name on its records (CRA: operating names). A trade name may also need registration under the province or territory's rules. In Québec, declare an assumed name in the enterprise register through a current updating declaration within 30 days of the change. Check those rules and any licence required for the new activity before you trade. The proprietor personally owes both activities' income tax and, where applicable, GST/HST and employer remittances; a trade name does not shield personal assets. Federal income-tax and GST/HST collection periods generally run for 10 years from their statutory starting dates, but can restart or be extended (Income Tax Act section 222; Excise Tax Act section 313).

If someone else becomes an owner, the structure may change to a partnership or corporation. The CRA treats a change in the number of owners of a sole proprietorship as a change of legal status; check the accounts and registrations before taking on the new owner.

Can my consulting corporation also run an online shop under another name?

Usually yes. The existing corporation can run consulting and an online shop if its articles permit the new activity and the business meets any applicable name registration or licensing rules. An operating name is separate from the corporation's legal name; registering one does not create another corporation (CRA: operating names).

Read the corporation's articles first. For federal corporations, restrictions on business activities must appear in the articles, and changing such a restriction requires an articles amendment. A corporation incorporated under provincial law must check that province's rules. Keep the corporation's legal name on contracts and invoices where required, so the legal party is clear even when the shop uses a different public name.

Should the second venture stay in the same corporation or go in a new one?

One corporation is simpler when the owners can keep both activities and their obligations together. A new corporation creates a separate legal person when the venture needs different owners, separate obligations, or a separate future sale. An operating name cannot do that (CRA: separate corporate person for GST/HST).

Separate incorporation is a legal separation, not a guarantee against every claim or personal obligation. If the new venture will have a partner, valuable property, significant contractual exposure, or a likely separate sale, get business formation advice before signing or transferring assets. If you are considering a parent company above operating companies, see holding and investment corporations.

Directors can still owe a corporation's unremitted income-tax withholdings under Income Tax Act section 227.1, CPP contributions under Canada Pension Plan section 21.1, EI premiums under Employment Insurance Act section 83, and GST/HST net tax under Excise Tax Act section 323, subject to collection conditions and a due-diligence defence. Income-tax, CPP, and EI recovery proceedings and GST/HST assessment must start within 2 years after the person last ceased to be a director.

Associated Canadian-controlled private corporations allocate one federal $500,000 small business limit on Schedule 23, subject to reductions; see how corporations are taxed for the rules.

Do I need another business number or GST/HST account?

Adding an activity does not itself require a new business number (BN). If you already have one, keep it and add any needed CRA program account under it. An unincorporated owner with no BN generally needs one only when registering for a CRA program account. A new corporation needs its own BN; it may receive one during incorporation or need to register separately.

In Québec, Revenu Québec handles GST/HST and QST registration; check QST for the second activity or new corporation too.

When GST/HST registration covers both activities, the proprietor normally reports them on the same return. The CRA can authorize separate returns for qualifying branches or divisions under the same BN. Adding an activity can also call for updating operating names or opening a program account, such as payroll, if needed. See what to do after incorporation for the new company's account setup.

Do sales from my two sole proprietorship activities count together for GST/HST?

Yes. The same proprietor combines taxable sales from both activities against one $30,000 GST/HST small-supplier threshold; separate trade names do not create separate limits (CRA: required registration). See when to register for GST/HST for the included sales and registration timing.

Taxi and commercial ride-sharing activity requires registration from the first fare, even below the threshold. While the proprietor is still a small supplier, that mandatory registration covers only the fare activity unless extended to other activities.

Separate corporations calculate their own registration position, but the small supplier rules include supplies of associated persons. The GST/HST meaning of association can include an individual and a corporation the individual controls. A new corporation therefore may not start with a fresh threshold. For the timing of registration and the sales that count, see when to register for GST/HST.

Does each activity need its own T2125 or T2?

A sole proprietor files a separate Form T2125 for each distinct business or professional activity, but still files one federal personal income tax return. In Québec, Schedule L combines the businesses and each needs a separate TP-80 or financial statements on the provincial return. A corporation generally files one federal T2 for all its activities; it can show different lines of business in supplementary financial statements (CRA: Form T2125; CRA: GIFI). A corporation with a Québec establishment also files Form CO-17 with Revenu Québec within 6 months after year-end.

The CRA requires a T2 from a resident corporation even when inactive. If one activity loses money, see business losses before assuming how that loss affects another activity or taxpayer.

Can I use a dormant corporation for the second venture?

An inactive corporation may be usable if it still legally exists and its articles permit the new activity. Inactivity does not erase filing duties: resident corporations file a T2 even when inactive.

Before issuing invoices, confirm the corporation's registry status, articles and annual filings, ownership records, CRA accounts, prior T2 returns, GST/HST returns if registered, payroll accounts, debts, and contracts. An old corporation may carry old obligations into the new venture. If it has been dissolved, the decision is different; see reviving a dissolved corporation.

Can I move one activity to a new corporation later?

Yes, but the activity and its property must actually be transferred. A change of operating name or a new BN does not move inventory, equipment, goodwill, or contracts to another legal person. A transfer can have income tax and GST/HST consequences (CRA: property transfers; CRA: sales of business assets).

If assets have risen in value, moving them can create income tax even without an outside buyer. An eligible transfer to a taxable Canadian corporation may use a joint Form T2057 election to choose a tax amount, but the transferor must receive at least a share or fraction of a share in the recipient corporation (CRA: section 85 transfers). The transferor and recipient corporation sign the election; it is due by the earliest income tax return filing deadline of either party for the transfer year (Income Tax Act section 85(6)). A late T2057 is allowed within 3 years after that deadline if an estimated penalty is paid when filed: the lesser of 1/4 of 1% of fair market value above the elected amount per month or part, or $100 per month or part, capped at $8,000. Later relief is discretionary (section 85(7)–(8)). The election does not move licences or contracts or settle GST/HST.

If the old corporation transfers property for less than fair market value to a non-arm's-length owner or related company, that recipient can owe the old company's income tax under Income Tax Act section 160 and GST/HST under Excise Tax Act section 325, generally capped by the value shortfall. The CRA may assess the recipient at any time.

If the new corporation acquires a qualifying business or separable part, the parties may jointly use Form GST44 so GST/HST is not payable on eligible supplies. Individual asset sales do not qualify. A registered seller needs a registered buyer; an unregistered seller can elect with either. Both sign GST44, and a registered buyer files it by the due date of its GST/HST return for the first period in which tax would otherwise have been payable; if both are unregistered, the buyer keeps it (CRA: selling a business). Get business formation advice before transferring assets. Bring their costs and current values, contracts, ownership records, and tax filings. A federal corporation also needs shareholder approval if it transfers all or substantially all its property outside ordinary business.

Example

Illustrative amounts in Canadian dollars. A sole proprietor sells consulting services and starts a small online shop under a second trade name. Over four consecutive calendar quarters, consulting makes C$24,000 of taxable sales and the shop makes C$12,000. The proprietor's combined taxable sales are C$36,000, so the shop cannot claim its own C$30,000 small supplier threshold. The proprietor reports the two distinct businesses on separate T2125 forms. Once GST/HST registration applies, it generally covers taxable sales from both activities under one account. See when to register for GST/HST for when collection begins.

If the owner instead puts the shop in a newly incorporated company, that company has its own BN and T2. The owner must still test whether the owner and company are associated for the GST/HST threshold. If the owner also controls an existing consulting corporation, the two corporations may have to share the federal small business limit.

Different for you?

• You own two corporations and want the small business rate: association and limit allocation depend on control and other facts. See how corporations are taxed.
• You want a holding company above the ventures: see holding and investment corporations.
• One venture has losses: see business losses.
• The new activity is in another province: registration and income allocation may change. See operating in more than one province.
• Your existing corporation was dissolved: see reviving a dissolved corporation.
• You will move appreciated assets or add a new owner: bring the articles, ownership chart, contracts, asset list, and past returns to business formation advice before transferring property.