How to Start a Construction Business in Canada
Original Post Date: Dec 10, 2017
The Canadian construction industry is booming, and the demand for skilled entrepreneurs within this industry is incredible. One of the most asked questions we receive here at Ontario Business Central is, “How do I start a construction company in Canada?”
If you are interested in transitioning into ownership within the construction industry, now is a terrific time to get started. The economy continues to grow, and where there is growth, there is opportunity! Owning a business in Ontario in the construction sector has never been easier.
This blog lists ten of the primary considerations that will help you in this new journey of starting a Canadian construction business.
10 Considerations Before Starting a Construction Business in Canada
There are several items to consider when starting any business in Canada. Within the construction industry, there are unique considerations aside from the overall business start-up process. Let’s start with the universal requirements when starting a Canadian construction business.
1- Type of Business Registration
Setting up a Canada Construction Business
Congratulations! You have decided to become a new business owner! One of the first items you will focus on is establishing the business license legally, so it is recognized by the government of Canada and the Canada Revenue Agency.
You can either register a small business or incorporate. There are pros and cons to each option. Listed below is a simple comparison between the two options. It’s worth noting that some of the largest construction companies in Canada choose incorporation for the reasons detailed below.
Limited Personal Liability
With a Business Licence, you are personally liable for the actions of the business you own. That means that any liabilities your business incurs can be charged to you personally, including any costs from litigation.
With an Incorporated company, the business itself is a separate entity from you and has its own liability risk separate from you as an individual. It can sue and be sued, enter binding contracts and get into debt, all independent from the company owners.
A business license does NOT have name protection. If another business chooses to operate an identical or similar name to your business name, they can do so with no opportunity for you to seek infringement recourse.
With an incorporated company, you do have name protection for the same business name. If someone incorporates or registers a similar business name after you have incorporated, you may be able to seek infringement. If this occurs, it is always beneficial to obtain an opinion from a lawyer on infringement.
A business license is taxed at a personal income level. When you register a Business Licence, the business is automatically considered part of your personal tax account. This can be disadvantageous when personal tax is usually charged at a higher rate than corporate tax.
With an incorporated company, because the corporation is a separate entity from you as an individual, the corporation has its own tax account independent from yours. This requires you to complete both a personal and corporate tax return each year. Incorporation also provides access to lower corporate tax rates and other tax concessions.
Length of Registration
In Ontario, a Business Licence is valid for five years. When the end of 5 years is approaching, you can renew the license for your construction business in Ontario for an additional five years, or the Province of Ontario will automatically cancel the registration.
In Alberta and British Columbia, the Business Licence is valid indefinitely and remains active unless dissolved.
In Saskatchewan and Manitoba, the Business License is valid for three years. When approaching the 3-year mark, it can be renewed for another three years, or the Province will automatically cancel the business license registration.
Once you register an Incorporation, it is continual. In Ontario, the corporation has no yearly filings. An Alberta Incorporation, Saskatchewan Incorporation, Manitoba Incorporation, as well as British Columbia Incorporations, and Federal Corporations must file an annual return to remain active. Annual returns are different from tax filings and are typically due on the anniversary date of the incorporation.
2- Industry Regulations and Licensing
In the Canadian building and construction sector, there are specific licensing requirements for certain skilled trades or types of construction. In each Province, you can check with the College of Trades or their equivalent to gain insights on the regulations for construction companies with operations in Canada.
In Ontario, specific trades called compulsory trades need licenses or certifications to operate legally within the region, while others do not need any certifications or licenses.
The table below shows some of the trades that require licenses/certifications and which ones do not.
|Electrician||YES (Licence required)|
|Gasfitter||YES (Certificate of Qualification required)|
|Refrigeration/AC||YES (Certificate of Qualification required)|
|Sheet Metal Worker||YES (Certificate of Qualification required)|
|Floor Covering Installer||NO|
|Oil Burner Mechanic||YES (Certificate of Qualification required)|
|Plumbing||YES (Certificate of Qualification required)|
Visit the various trades licensing and certifications websites for different provinces below to find out the exact requirements you will need before engaging in building renovations or any other construction project:
In certain cities, you may also require municipal licensing to carry out any construction activities. To ensure you are meeting the city requirements, you can verify with your town hall to make sure you are following their guidelines for construction companies.
3- Health and Safety Obligations
When registering your business, you want to make sure that you and your construction workers are protected. With many trades, registering with provincial Workers Safety Boards is mandatory. It is recommended to contact them to ensure compliance.
In addition, you might have to consider workplace safety regulations as outlined by the Ministry of Labour, Training and Skills Development.
Specifically, the regulations offer a long list of safety requirements for construction companies in Canada covering areas like fall prevention, hazardous substances, scaffolds, mobile equipment, and more.
Although you might not need to cover all these areas when starting, familiarizing yourself is a good idea as it lets you know what is coming down the road.
A beneficial tool in the construction industry for top contractors is to join relevant trade associations locally, regionally, and nationally.
You can join the Canadian Home Builders’ Association, Ontario General Contractors Association, and the Canadian Construction Association.
Joining a trade association offers many benefits, especially to anyone getting started in the construction industry in Canada, including:
- Saving money: You might have to pay for the membership, but you will quickly recoup these costs in the tools and knowledge they offer for free to members.
- Gaining regulatory guidance: For tightly regulated construction niches like electrical and plumbing, joining a trade association can offer ongoing advice on remaining compliant.
- Educational opportunities: Associations host conferences and other professional events to help members upgrade their skills or learn of advancements in their profession.
- Maintaining and reinforcing best practices: As a new construction business owner, you will need as much help and information as possible to ensure you are following industry best practices.
- Networking and exchanging ideas: As you learn the ropes of running a Canada construction company, the networks trade associations build can be an excellent opportunity to seek insights and exchange ideas.
- Reputational perks: As a member of a prominent trade association, you can proudly display a membership badge on your website or marketing materials to build trust and credibility around your new construction company.
As you start your construction business, you will need to figure out how to protect your business from the risks associated with running a construction business.
Without any protection, you would be directly liable for any costs associated with doing business like workplace injuries, broken machinery, and litigation. Also, you might not secure business from companies that require that you have insurance before doing business with you.
To protect yourself as a business owner and to protect your business, it is recommended to contact an insurance company and obtain construction liability insurance covering things such as general, vehicle, and property liability.
Some clients will require additional insurance covers such as contractor insurance, workers’ compensation insurance, unemployment insurance, and disability insurance. In some instances, you might be required to issue a Surety Bond to guarantee the completion of the project.
An insurance agency will assist and advise on which insurance products you will require for your specific business.
6- Goals for the Business
Have business goals! This helps envision a future and motivates you to work towards those goals. Don’t be afraid to re-evaluate as you go.
A simple goal may be to start with residential construction to gain some experience to eventually transfer over to commercial buildings and infrastructure projects where the profit margins may be higher.
Another goal may be to start with a small crew and work your way to managing many construction workers or becoming a construction management company. There are many different avenues you can take or adjust as you grow with your business.
Here are some quick steps you can take when setting goals for your new construction business:
- Outline quantifiable goals: Saying you want to grow your company isn’t a very practical goal. Quantify what growth means, whether the number of employees, the dollar value of projects, or the number of overall projects.
- Commit to your goals: Achieving goals isn’t easy, and you will likely encounter some challenges along the way. Sticking it out is the surest way of achieving success.
- Share your goals: Secret goals are the hardest to achieve! Consider sharing your goals with family, business partners, or friends.
- Have a deadline for each goal: Although you might not beat every deadline, they help you plan and have agency when working.
- Create a reward system: Celebrating small victories and milestones is central to ensuring you have the energy and momentum to keep going. Don’t wait too long to celebrate either, as it might cost you more to do a big celebration than multiple smaller ones.
Have a marketing plan and budget!! Many businesses do not consider this, and it can really affect your business. A good start is to understand your industry and define your optimal client base. From this information, you will be able to put a marketing plan in place and work on how to bring those clients in.
Here’s what you can do to create an impactful marketing plan:
- Do market research: Before you start a business, market research can help you understand the industry and market and show you how to set up your business for success.
- Identify a target market: Pick out your most likely customers and determine what sets them apart from the rest of your potential customers.
- Positioning: Figure out the best way to position your business so you avoid significant competitors but differentiate from smaller ones. For example, you can focus on energy efficiency programs or green building.
- Competitive analysis: Find out who your most significant competitors will be, what makes them formidable, and what gaps in their strategy you might be able to exploit.
- Budget: Word of mouth marketing is fantastic, but you might need to pay for marketing and advertising to get the word out initially. Online ads are a great way to reach more people affordably.
- Track your marketing efforts: If you send out flyers, how will you know they were effective? The same goes for online ads, organic marketing, and others. Use tracking tools like Google Analytics to track your online marketing efforts.
8- Business Plan/Growth Plan
Setting yourself up for success includes having a business plan. This can consist of reviewing schedules, strategy summaries, responsibilities of all employees, financials (sales, cash flow, costs, and expenses), project management, type of construction work, and milestone. This plan can change organically as the business grows or can be revised when you wish.
Some of the advantages of having a business plan are:
- Better perspective: A business plan helps you connect all the dots of your business, so you have a cohesive narrative that brings everything under one unified strategy.
- Set priorities and maintain strategic focus: As you start, you’ll quickly realize there’s a lot you can do, but it does not mean you should do it all immediately. A business plan tells you what to focus on, so you stay focused.
- Milestones and accountability: It’s easy to be busy but not productive. Business planning helps you set milestones and ensure you remain accountable to achieve them.
Choosing a location will depend on your needs. You may wish to operate out of a home office or from a rented or purchased building(s). Additional things to consider will be:
- Do you need additional space for storage (ex: materials)?
- Do you need space to create or for machinery?
- Do you need a public office for customers to walk into?
- Is it easily accessible?
- Is it safe/clean?
Although the exact location of your office does not matter much for a Canadian construction company, the geographical location is critical. For example, suppose your Canadian construction business is in an area seeing tremendous construction growth.
In that case, it is easier to win new business compared to an area with a stagnated construction industry. Instead of just picking a location close to where you live, consider the construction industry’s health in the area before setting up shop.
A commonly overlooked aspect of having a Canadian construction business is ensuring all records stay up to date as the business grows and changes. Whenever you have changes like address or director changes, it is mandatory to file a notice of change within 15 days. It is crucial to keep all records up to date. If you have a small business registration, it is also important to update any address changes as needed.
These are exciting and great times to start a construction business! Starting your own business in the construction sector can be extremely rewarding and profitable. Remember, a mighty tree starts from a seed.
At Ontario Business Central Inc., we have been assisting clients for 25 years to complete new businesses and incorporations. If you wish to proceed, click the links below.
If we can be of assistance, please feel free to reach out to our staff for any clarification or assistance you may require.
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Ontario Business Central Inc. is not a law firm and cannot provide a legal opinion or advice. This information is to assist you in understanding the requirements of registration within the chosen jurisdiction. It is always recommended, when you have legal or accounting questions that you speak to a qualified professional.