Chapter 1: Business Registration and Federal Requirements
Business Registration
All salons operating in Canada must register as a business with the relevant provincial or territorial authority. The specific registration process depends on the business structure chosen -- sole proprietorship, partnership, or corporation. Sole proprietorships and partnerships are typically registered through provincial business name registration systems. Corporations are incorporated either federally through Corporations Canada under the Canada Business Corporations Act, or provincially under the applicable provincial corporations act.
A federal Business Number (BN) must be obtained from the Canada Revenue Agency (CRA). The BN serves as the unique identifier for all interactions with the CRA and is required for opening CRA program accounts including GST/HST, payroll deductions, and corporate income tax.
GST/HST Registration
Salons with annual taxable revenues exceeding CAD 30,000 must register for the Goods and Services Tax (GST) or the Harmonized Sales Tax (HST), depending on the province of operation. GST applies at a rate of 5% in provinces without HST. HST combines the federal GST with the provincial sales tax in participating provinces: Ontario (13%), New Brunswick (15%), Newfoundland and Labrador (15%), Nova Scotia (15%), and Prince Edward Island (15%).
British Columbia, Saskatchewan, Manitoba, and Quebec operate separate provincial sales tax (PST/QST) systems. Salons in these provinces must register for and collect both federal GST and provincial sales tax on taxable goods and services.
Payroll Obligations
Employers must register for a payroll account with the CRA and withhold income tax, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums from employee wages. These deductions must be remitted to the CRA on a regular basis (monthly, quarterly, or annually, depending on the amount). Employers also make matching CPP contributions and pay 1.4 times the employee EI premium as the employer share.
T4 slips must be issued to employees by the last day of February each year, summarizing employment income and deductions for the previous calendar year. Records of all payroll transactions must be retained for a minimum of six years.
Income Tax
Salon businesses must file annual income tax returns. Sole proprietors report business income on their personal T1 return. Corporations file a T2 corporate income tax return. Partnerships file an information return (T5013) and each partner reports their share of partnership income on their personal return. The CRA requires that all business records be maintained in an orderly manner and retained for at least six years from the end of the tax year to which they relate.
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Quick Decision Matrix
Find your salon compliance priority in 5 seconds.
| Your Situation | Priority Action | Go To |
|---|---|---|
| Opening a new salon | Licensing + registration before opening day | Chapter 2 |
| Chemical products and colour treatments | Chemical safety and ventilation requirements | Chapter 3 |
| Staff hygiene and infection control | Sanitation protocols and training | Chapter 4 |
| Preparing for health inspection | Inspection readiness review | Chapter 5 |
| Insurance and liability questions | Public liability and professional indemnity | Chapter 4 |
| Hiring stylists (employee vs booth rental) | Employment classification obligations | Chapter 6 |
5-second answer: Every salon needs a valid licence, chemical safety protocols, and infection control procedures. If you don't have all three, start with Chapter 2.