Starting as a contractor in professional services can be an exciting way to take control of your career. Whether you’re looking to work as an independent consultant, a designer, or in any other professional field, Alberta offers plenty of opportunities for contractors to thrive. This blog will walk you through the essential steps to get started, covering everything from choosing the right business structure to marketing yourself to potential clients.
Disclaimer: The information provided in this blog is intended for general guidance only and may not reflect the most current regulations or legal requirements. It’s important to verify all information with the appropriate regulatory bodies and consult with a legal or financial professional to ensure you are meeting all applicable laws and requirements for your specific situation.
Step 1: Choose Your Business Structure
When you start as a contractor, you’ll need to decide what kind of business structure works best for you. In Alberta, you have a few options, but the two most common structures for contractors are sole proprietorship and incorporation.
- Sole Proprietorship: This is the simplest structure, where you and your business are considered the same legal entity. As a sole proprietor, you have complete control, but you’re also personally responsible for any business debts or legal issues and you will pay personal income tax rates for company profits.
- Incorporation: A corporation is a separate legal entity from you, which limits your personal liability. It’s more complex and expensive to set up but can offer tax advantages and better protection if your business grows. Your company will pay corporate tax rates (lower than personal tax rates).
You may want to consult with an accountant or a legal expert to help you decide which option is best for your personal situation and long-term goals. Read more about the business structure options here.
Step 2: Register Your Business
Once you’ve chosen a business structure, you’ll need to register your business with the Alberta government. For sole proprietors, this typically involves registering your business name with the provincial government through a Registry Agency, AMA or online registration company. If you’re incorporating, the process is much more involved, as you’ll need to file articles of incorporation, decide how shares are distributed, and other company formation documents.
You can start the registration process online through the Alberta government’s website.
Step 3: Get Your Business Number and GST Registration
After registering your business, you’ll need to apply for a Business Number (BN) with the Canada Revenue Agency (CRA) if one is not assigned at registration. A Business Number is necessary for things like opening a business bank account and applying for a corporate tax account (corporations only), Payroll and GST accounts.
If you expect your business to earn more than $30,000 annually, you’ll need to register for the Goods and Services Tax (GST). This registration allows you to collect GST on sales and claim GST credits on your expenses. These credits are called Input Tax Credits and allow you to reduce the GST you will remit to the CRA. For more on input tax credits, see Input Tax Credits.
Step 4: Set Up Your Financials
Setting up a solid financial foundation is key to running a successful contracting business. You’ll need to open a business bank account and separate your personal and business finances. This will help you track your expenses and income, making it easier when it’s time to file taxes.
You may also want to consider hiring an accountant or bookkeeper to help with monthly and yearly bookkeeping tasks and filings, especially as your business grows.
Step 5: Obtain Necessary Insurance
As an independent contractor, having the right insurance is crucial to protect yourself and your business. Make sure to research which types of insurance are required for your specific line of work. Common types of insurance for contractors include:
- General Liability Insurance: Covers damages or accidents that may occur on the job.
- Professional Liability Insurance: Protects against claims of negligence or mistakes in your services.
- Workers’ Compensation Insurance: If you hire employees, this insurance provides coverage in case of workplace injury. As the owner, you can purchase optional personal coverage to protect yourself in case of a work-related injury.
Step 6: Create a Contract for Your Clients
Having a solid contract in place for each project you take on is essential. A well-written contract should outline the scope of the work, deadlines, payment terms, and any other conditions that will protect both you and your client.
It’s a good idea to consult a lawyer to help you draft or review your contracts to ensure they’re clear, professional, and legally sound.
Step 7: Market Your Services
Now that your business is set up, it’s time to find clients! Marketing yourself as a contractor can be challenging, but with the right approach, you can attract the right clients. Here are a few ways to get started:
- Build an Online Presence: Create a professional website and use social media to showcase your expertise.
- Network: Attend industry events, join online groups, or participate in local business associations to connect with potential clients.
- Referral Program: Encourage your existing clients to refer you to others by offering incentives or discounts.
Step 8: Stay on Top of Your Taxes
As an independent contractor, you’re responsible for your own taxes. You’ll need to file your taxes annually, report your business income, and deduct eligible expenses. Keeping good records will make this much easier.
Remember, as a contractor, you’ll also have to pay both the employer and employee portions of Canada Pension Plan (CPP) contributions. It’s important to set aside money for your tax payments so you don’t run into surprises at tax time.
Step 9: Consider Long-Term Growth
As your business grows, you may want to revisit some of the steps you took earlier, such as expanding your services, incorporating, or hiring employees. Scaling your business is an exciting next step, but it also comes with additional responsibilities.
Additional Resources
- Business Link’s Guide on Becoming an Independent Contractor
A comprehensive guide offering insights into starting an independent contracting business in Alberta, including readiness assessments, legal structures, and tax considerations.
- Government of Alberta’s Overview on Employee vs. Contractor
This resource helps distinguish between employees and independent contractors, outlining the legal differences and implications for employment standards in Alberta.
- Samfiru Tumarkin LLP’s Guide on Independent Contractors in Alberta
This article provides an in-depth look at the rights of independent contractors in Alberta, including classifications, termination rights, and severance pay.
- Getz Collins and Associates’ Article on Freelancers, Consultants, and Independent Contractors
This piece navigates the legal landscape for freelancers and consultants in Alberta, discussing classifications and legal implications.
- Remote’s Guide on Setting Up as an Independent Contractor in Canada
This guide breaks down the process of becoming a freelancer in Canada, including tax obligations and liabilities to be aware of. - Government of Canada Business Registration Online – What you can do
This page details the functionalities of the Business Registration Online system, including obtaining a business number and registering for various program accounts.
- Service Alberta – Register a Business Name
This page outlines the steps to register a business name in Alberta, including choosing a name, obtaining a Business Name Report, completing necessary forms, and submitting them to a registry agent.
Starting as a contractor in Alberta offers a lot of freedom and flexibility, but it’s essential to follow the right steps to set yourself up for success. By choosing the right business structure, registering your business, and putting strong systems in place, you’ll be well on your way to a thriving contracting business.
Need help getting started? Book a free consultation with one of our Business Link Strategists today!
