Successful online ecommerce startups almost always can attribute their success to an ability to find and target new markets and audiences for their products. They are able to do this because they have the ability to differentiate themselves from competitors and more importantly they are able to successfully establish themselves in the new markets they have identified.
For many of these startups, once they realize they have maxed out the potential in the local market and then the entire US market they inevitably look to international markets. China and Asia are often the first market they think of because of the sheer size of the market; however, with that large population comes:
- barriers to some products
- logistical complexities
- different culture and languages
You would think that Canada would be at the top of the list due to:
- its close proximity
- similar culture and language (French speakers the exception)
- for most products there is an open border with few tariffs or barriers to entry
Canada is often overlooked because of bad border experiences by US merchants who don’t understand why there were long waiting periods to clear customs and the big one that GST/HST is payable upon entry and in the worse-case scenario the customer ends up paying the tax.
3 Steps to Doing Business in Canada
The 3 steps to entering the Canadian market can range in difficulty from extremely easy requiring little or time and a small amount of money to requiring several hours and the fees of lawyers, accountants. The reason for this is it depends on which business structure you want to use to enter the market.
The steps are the same regardless of the business structure you choose.
- Choose a Business Structure
- Arrange an address and required professionals
- Set up legal entity
Available Business Structures
U.S. and foreign-based startups have an array of options to choose from for a business structure to carry on business in Canada. The types of business include:
- Joint Ventures
- Licensing Agreements
- Non-Resident Importer
For most startups the first 2 business structures are often too costly or more then they require for the amount of business they are currently doing in Canada. The next 5 structures in the list require an established resident to partner with or enter into a legal obligation. The Non-Resident Importer requires the least amount of time and costs as most of the process can be done online with no lawyer costs.
The structure you choose can depend on many things including:
- Having a Canadian resident participant in ownership or management
- Your current type of business
- Whether you are planning to set up physical operations in Canada
- Tax implications involved in the choice of your business
Larger startups would have a lawyer involved in the incorporation and or writing legal agreements for the other options with the exception of Non-Resident Importers who would require a book keeper or accountant to file GST/HST payments and calculate rebate (GST/HST you pay in the course of doing business is deductible). The tax collected isn’t corporate or personal tax only GST/HST collected and paid.
Once you have chosen the business structure your next task will be to meet the requirements of the type of business you want to use to do business in Canada. In order to setup one of these business entities requires an address and involvement of a resident.
Arrange an Address and Required Professionals
In “Business Centers Make a Perfect First Office,” I discussed why a business center is the perfect first office. Part of the reason for this is the flexibility of a business center provides. In this circumstance the business center is more suited because they often provide virtual address which provides a local address and the virtual office solution providing a phone number with the ability to forward calls to you during your business hours.
The flexibility in the terms of rental and the ability to grow without changing addresses are 2 key factors in why a business center is best suited for startup businesses that are unsure of growth and future need for offices and business equipment. A business Center provides everything including support staff if needed!
Setup Legal Entity
The last step is the actual setup of the business entity to begin selling into Canada. At this point most of the structures you could choose from would require a lawyer to draw up Incorporation or to write the legal agreements to facilitate the creation of the structure. The lone exception is the Non-resident Importer which only requires registration of the business in the jurisdiction you choose to work from and registering with Revenue Canada.
I mentioned Ecommerce startups specifically in the title because by becoming a registered business in Canada you can purchase a Canadian domain (enables you to continue using US host) which enables you to compete in Google’s Canadian SERPs. For those not in the know a site must be either hosted in Canada or have a .ca domain in order to enter Google’s Canadian Index which in most cases has less competition and therefore cheaper PPC and easier entry into the top positions.
Author: Terry Van Horne has been developing and marketing websites since the early 90’s. In 2007 Terry developed a YouTube Marketing Strategy for WorldMusicSupply and to date those 300+ videos have received over 30,000,000+ downloads.
In 2010 Terry and David Harry founded the award winning SEO Training Dojo, voted by TopRank users as the Top Private SEO Community. Terry is currently the Community and Online Marketing Manager for Telsec Business Centres. He is enjoying sharing small home based business information in the community and elsewhere.