How to Register as a Sole Proprietor or Partnership

Introduction
Understanding how to register as a sole proprietor or partnership is essential for entrepreneurs starting a new business in Canada. Sole proprietorships and partnerships are the simplest business structures, offering easy setup, full control and minimal administrative requirements. However, many entrepreneurs misunderstand the legal obligations, tax requirements and registration steps involved. In Québec, business registration rules are different from those in the rest of Canada because the province uses its own registry system and separate tax authorities. Whether you are starting a consulting practice, opening a retail operation, offering services or launching a home-based business, learning how to register as a sole proprietor or partnership ensures compliance, protects your legal rights and prepares your business for future growth.

Legal and Regulatory Framework
How to register as a sole proprietor or partnership depends on federal and provincial legislation. A sole proprietorship is an unincorporated business owned by one individual. Legally, the owner is the business. You are fully responsible for debts, liabilities and income reporting. A partnership is an unincorporated business owned by two or more people who share profits and responsibilities. Partnerships may be general partnerships or limited partnerships, depending on liability structure.

Key requirements include:
• registering the business name (except if using your legal name)
• obtaining a CRA Business Number (BN)
• registering for GST/HST when exceeding the small supplier threshold
• registering for QST in Québec when applicable
• setting up payroll accounts if hiring employees
• filing income tax under T1 personal returns with business schedules

In Québec, registration is done through the Registraire des entreprises (REQ), where both sole proprietors and partnerships must file registration declarations. Understanding how to register as a sole proprietor or partnership properly ensures compliance with both CRA and Revenu Québec rules.

Key Court Decisions
Court decisions related to how to register as a sole proprietor or partnership often involve liability, partnership agreements and income attribution. Courts have ruled that:

• sole proprietors have unlimited personal liability for business debts
• partnerships must have clear agreements outlining profit-sharing and responsibilities
• partners can be held liable for each other’s actions in general partnerships
• income earned jointly must be reported according to actual participation
• failing to register does not exempt taxpayers from CRA reporting obligations

Québec courts have also confirmed that operating an unregistered business does not shield an owner from legal or tax consequences. These rulings reinforce the importance of properly understanding how to register as a sole proprietor or partnership.

Why CRA Targets This Issue
CRA and Revenu Québec often review unincorporated businesses because they are more likely to:

• underreport income
• misunderstand GST/HST or QST obligations
• treat personal expenses as business expenses
• lack proper documentation
• misapply partnership allocation rules
• incorrectly report home-office and vehicle expenses

Audits frequently arise when revenue grows quickly, when cash-based operations exist or when self-employed taxpayers repeatedly claim losses. Because learning how to register as a sole proprietor or partnership involves understanding federal and Québec compliance rules, CRA ensures strict enforcement.

Mackisen Strategy
Mackisen CPA provides a complete, practical approach to how to register as a sole proprietor or partnership. Our process includes:

• determining whether a sole proprietorship, partnership or corporation is best for your situation
• registering your business name with the Registraire des entreprises in Québec or provincial registries elsewhere
• setting up CRA Business Numbers and corresponding accounts (GST/HST, payroll, import/export)
• registering QST accounts for Québec-based businesses
• preparing partnership agreements outlining roles, responsibilities and profit-sharing rules
• creating bookkeeping systems to track revenue, expenses and compliance documentation
• structuring GST/HST and QST filing frequencies
• advising on income splitting, home-office deductions, vehicle expenses and allowable business deductions

Our guidance ensures entrepreneurs understand not only how to register as a sole proprietor or partnership, but also how to operate legally and tax-efficiently.

Real Client Experience
Many new entrepreneurs come to Mackisen after making early mistakes. One client operated as a home-based business but did not register for QST despite surpassing the threshold. Revenu Québec issued a review letter. Mackisen registered all accounts, filed retroactive returns and avoided penalties.

Another individual formed a partnership with a friend but failed to create a partnership agreement. When disputes arose, income reporting became inconsistent. Mackisen created a formal agreement and corrected tax filings.

A sole proprietor underreported income because of poor recordkeeping. CRA initiated an audit. Mackisen reconstructed revenues, corrected business expenses and resolved the review. Another Québec client believed that registering the business name alone fulfilled all tax obligations. We registered their CRA BN, GST/HST, QST and payroll accounts to ensure full compliance. These examples highlight the value of proper guidance when learning how to register as a sole proprietor or partnership.

Common Questions
New entrepreneurs frequently ask whether they need to register if using their own name. In most provinces, no registration is needed if using your exact legal name. Québec requires registration for most activities regardless.

Others ask when they must register for GST/HST or QST. Registration is required once the small supplier threshold is exceeded or immediately for certain industries. Many ask whether a partnership requires a written agreement. Legally, it is not required—but highly recommended to avoid disputes.

Entrepreneurs also ask whether a sole proprietor can hire employees. Yes, but payroll accounts must be set up. Understanding these questions makes how to register as a sole proprietor or partnership clearer.

Why Mackisen
With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses stay compliant while recovering the taxes they’re entitled to. Whether you’re filing your first GST/QST return or optimizing multi-year refunds, our expert team ensures precision, transparency and protection from audit risk. When learning how to register as a sole proprietor or partnership, Mackisen provides complete setup, compliance guidance, bookkeeping support and tax optimization strategies to help entrepreneurs start strong.