How to start a business from home: Simple steps for Canadians

Published Monday 26 January 2026

Table of contents

• What kind of business can you start from home?
• How to start a business from home: a step-by-step guide
• How to start an online business from home
• Overcoming challenges of running a home business
• Resources and tips for running a successful home business
• Start your home business journey today
• FAQs on starting a business from home

Key takeaways

• Validate your business idea by assessing your skills, confirming market demand through research, and calculating profit potential to ensure customers will pay for your product or service before investing time and money.
• Establish proper financial systems by opening a dedicated business bank account, choosing cloud-based accounting software, and maintaining accurate records of all income and expenses to simplify tax preparation and ensure legal compliance.
• Create a dedicated home office space exclusively for business use to increase productivity, maintain professional boundaries, and potentially qualify for tax deductions while ensuring the area meets zoning requirements for your business type.
• Register your business properly by checking local zoning laws, obtaining necessary permits and licenses through BizPaL, and completing online registration with the Canada Revenue Agency to operate legally and avoid penalties.

What kind of business can you start from home?

A home-based business is any business where your home serves as the principal place of operations. Over 70 percent of recently registered Canadian businesses operate from home.

Popular home business categories, such as those in the home business ideas guide, include:

• Creative services: Copywriting, content writing, graphic design
• Technology services: Web design, app development, digital marketing
• E-commerce: Handmade products, dropshipping, online marketplaces like Etsy

Whether you want a side hustle or full-time venture, home businesses offer flexibility and lower startup costs than traditional brick-and-mortar operations.

You may need to check the laws in your province or territory, and your municipality, as some areas control home businesses through zoning regulations. If you'll have business visitors in your home, you may also want to familiarize yourself with laws about safety and liability insurance.

How to start a business from home: a step-by-step guide

Follow these eight steps to get your home business started.

1. Develop your business idea

Business idea development helps you identify profitable opportunities that match your skills and market demand. This foundation determines your success potential and startup requirements.

Choose ideas that align with your strengths:

• Assess your skills: Use your years of experience, qualifications, or natural talents
• Identify market opportunities: Consider what problems you can solve for customers
• Match passion with profit: Ensure your interests align with revenue potential

For example, strong baking skills could lead to a home bakery specializing in custom cookies or wedding cakes.

Validate your business concept through passion assessment and market research:

• Test your enthusiasm: Choose ideas that genuinely excite you for sustained energy and focus
• Confirm market demand: Research if customers will pay for your product or service
• Analyze competition: Study similar businesses to understand market gaps and pricing
• Calculate profit potential: Ensure you can generate revenue that exceeds your costs

Only some skills lead to a profitable business, so checking your idea carefully helps you avoid costly mistakes. You can begin by researching the market, including your potential competition.

Consider if you can run your idea from home

You'll need to think about zoning laws. For example, if you want to run a catering business, you may not be allowed to, but you may be able to run a home baking business. Home bakeries are cottage industries and are permitted to make low-risk foods; catering businesses can produce high-risk foods and require more regulation and facilities that may not be allowed in a residential area.

When you're brainstorming ideas, don't discard anything. Your ideas are allowed to be wild or simple.

Once you're satisfied that you can pour your energy and skill into it and make a financial return from it, you're ready for the next step.

2. Write a business plan

A business plan transforms your idea into a structured roadmap that defines your product, target customers, and profit strategy. Even a simple one-page plan significantly improves your chances of success by forcing you to consider key elements like business structure, which can have major financial implications; for example, certain tax credits favour Canadian controlled private corporations.

Download a one-page business plan template.

3. Create a financial plan

Financial planning reveals your path to profitability and identifies funding needs before you start spending. Most home businesses take 6-12 months to become profitable, so planning prevents cash flow problems.

Essential financial components

Budgeting:

• Estimate startup costs: Equipment, supplies, licenses, and initial marketing
• Project monthly expenses: Ongoing costs like software, utilities, and materials
• Forecast revenue: Realistic sales projections based on market research
• Identify break-even point: When income covers all expenses

Funding requirements:

• Calculate cash needs: How much money you need before becoming profitable
• Explore financing options: Personal savings, loans, or investor funding

Learn about small business budgeting.

Pricing

You'll need to strike a balance between affordability for the customer and profitability for you.

Get the scoop on common pricing strategies.

Financing

How will you pay for everything? Do you need a loan (or investment) to start up your business?

Find out how small business finance really works.

How to pay yourself

Work out what you can afford to pay yourself. And learn how to do it without getting a surprise tax bill. Quick reality check: most small business owners only take modest pay to begin with.

Figure out how to pay yourself.

4. Choose your business name and legal structure

Business naming and legal structure establish your professional identity and determine your tax obligations, liability protection, and operational requirements.

Choose an effective business name:

• Make it memorable: Easy to remember and spell
• Clarify your service: Customers should understand what you do
• Ensure availability: Avoid trademark conflicts and domain issues

Verify name availability:

1. Search Google: Check for existing businesses with similar names
2. Check trademark database: Search the Canadian Intellectual Property Office database
3. Review provincial records: Search your provincial business registry
4. Secure domain name: Ensure matching website address is available

You'll also need to choose a suitable business structure. This can affect how you're taxed and how much you're personally liable for the business.

There are three main types of structure to consider:

• Sole proprietorship
• Partnership
• Corporation

The government will automatically assume you're a sole proprietor unless you choose to be something else. To choose the correct entity for your business, consult with an accountant.

There are several ways to make your business name official:

• Corporate name: If you've decided to set up as a corporation, the process of incorporating includes business name registration in the province or territory where you're incorporating. If you incorporate federally, you'll have exclusive use of your corporate name across Canada and if you incorporate provincially or territorially, you'll just have exclusive use of your corporate name there.
• Trade name: If you want to use a business name other than your personal name, or you're a partnership, you'll need to register a trade name with the provinces or territories where you plan to do business (except in Newfoundland and Labrador).
• Trademark name: By registering your trademark, you protect it under law from misuse by others, and you gain exclusive rights to use it throughout Canada for 10 years (a term that you can renew).
• Domain name: This protects your business web address.

For more information, check out these guides on Types of business structures and Registering a business.

5. Register your business and get licenses

You may have to pay income tax, and federal and provincial sales tax. The Canada Revenue Agency (CRA) and provincial tax offices need to know about your business.

Be aware that as of November 3, 2025, all registrations for new business numbers or CRA program accounts must be done online. In some provinces and territories, you'll automatically receive a business number and relevant tax accounts when you register or incorporate your business. In others, you'll have to apply separately.

After you've completed registration, you'll need to apply for any business licences. The licences and permits that you require vary in each province. You can find out what federal, provincial/territorial and municipal government permits and licences you may need through BizPaL. Some of the common permits include:

• Home occupation permit: Most home-based businesses will require one of these to operate legally
• General business licenses and permits: You'll need to check if you need any operating licenses, such as a professional trade license, zoning or a sales tax permit

It helps to review your home-based business insurance needs. Typical cover includes home and vehicle insurance, public and professional liability, and business interruption insurance. If you have employees, you'll need workers’ compensation insurance.

Learn more in this guide to Registering a business.

6. Set up your home office

A dedicated home office increases productivity, creates professional boundaries, and may qualify for tax deductions. Proper workspace setup directly impacts your business success and work-life balance.

Essential workspace requirements:

• Designated area: Separate space exclusively for business use
• Minimal distractions: Away from high-traffic areas and noise sources
• Adequate space: Room for equipment, inventory, and comfortable movement
• Professional appearance: Clean background for video calls and client meetings

Prioritize equipment purchases:

1. Essential technology: Computer, reliable internet, phone system
2. Core furniture: Ergonomic desk and chair for daily comfort
3. Storage solutions: Filing systems and inventory organization
4. Upgrade items: Better lighting, backup equipment, comfort improvements

For more details, see tips for a mobile office.

7. Set up business banking and accounting

Business banking and accounting separate your personal and business finances, simplify tax preparation, and provide clear insights into your profitability. Proper financial systems are essential for business growth and legal compliance.

Set up essential financial systems:

• Open business bank account: Separate account exclusively for business transactions
• Choose accounting software: Cloud-based system for automated tracking and reporting
• Implement receipt tracking: Digital system for capturing and organizing expense records
• Establish invoicing process: Professional system for billing customers and tracking payments

Maintain accurate records:

• Track all income: Record every sale and payment received. Failing to report all your income to the CRA can result in a penalty of 10% of the unreported amount after your first omission.
• Document expenses: Save receipts for potential tax deductions
• Monitor cash flow: Regular review of money coming in versus going out
• Prepare for taxes: Organized records simplify filing and maximize deductions

Get a tax advisor on board as soon as you can. They’ll help you claim all the deductions you're entitled to and submit an accurate return. They can also estimate your tax bills so you stay prepared.

Learn more in this intro to small business accounting.

8. Create a marketing plan

Writing a marketing plan can help you define your marketing strategy and identify the best channels to market your products or services.

To create your marketing plan, you should take these steps:

Analyze the market

Do a SWOT (strengths, weaknesses, opportunities, threats) analysis to determine where your business fits in the market.

Set your goals and objectives

Make them SMART (specific, measurable, achievable, relevant, time-bound).

Outline your marketing strategies

Choose marketing activities to suit your target audience. For example, will you reach them online?

Set your marketing budget

Knowing how much you have to spend is critical to the success of any marketing campaign.

Keep your marketing plan up to date

Analyze your campaigns and tweak or change your plan as needed. Track how much business you get in return for each dollar spent. When you see something isn't working, invest your money and energy in other ideas.

Useful marketing tools for home-based businesses include:

• A simple website
• Social media accounts on platforms your customers use

How to start an online business from home

Online businesses offer the lowest barrier to entry for home-based entrepreneurs, with reduced startup costs and global market access. Digital operations provide maximum flexibility and scalability potential.

Key advantages of online businesses:

• Lower startup costs: Minimal physical inventory and overhead expenses
• Global reach: Access customers worldwide through digital marketing
• Location flexibility: Work from anywhere with internet connection
• Easy scaling: Add customers without proportional cost increases
• Side hustle friendly: Manageable alongside full-time employment

You can follow the complete process in this guide to starting an online business.

Overcoming challenges of running a home business

Home business challenges are common obstacles that can derail your success if not properly addressed. Identifying and planning for these issues early prevents costly setbacks and builds resilience.

Financial constraints:

• Assess startup costs: Calculate realistic funding needs before launching
• Explore funding options: Personal savings, small business loans, or partnerships
• Create cash reserves: Maintain emergency fund for unexpected expenses
• Start lean: Begin with minimal investment and scale gradually

Legal and regulatory hurdles:

• Research requirements: Identify all necessary permits and licenses
• Consult professionals: Work with accountants or lawyers for complex regulations
• Stay compliant: Regularly review changing rules and requirements
• Document everything: Maintain records of all registrations and permits
• Interruptions from family and friends: You need to establish boundaries so that your family or friends know not to interrupt you during business hours. You also need to avoid working around the clock just because you happen to live in your office.
• Feeling isolated: You may feel lonely working on your own. Join some professional groups and try working in a shared space or café occasionally.

Resources and tips for running a successful home business

Setting up a home-based business takes planning and effort. These resources can help you run a successful home business.

• Business plan template: Download this free template (with a how-to guide) to help put your idea together.
• Cash flow projection template: Use this free template to track expected costs against your cash reserves to help see if you need a loan.
• Small business trends: Check out this stat-packed report on the issues affecting small businesses around the world.

Start your home business journey today

Starting a business from home is an exciting step toward more flexibility and control over your career. With a solid plan and the right tools, you can turn your passion into a successful venture.

Xero is here to simplify your finances from day one, so you can focus on growing your business, not your books. See how easy it is to manage your finances. Try Xero for free.

FAQs on starting a business from home

Here are answers to some common questions about starting a business from home.

What is the easiest business to start from home?

The easiest business often depends on your skills and passions. Service-based businesses like consulting, freelance writing, or graphic design have low startup costs. E-commerce businesses using a dropshipping model are also popular because you don't need to manage inventory.

Is $5,000 enough to start a home business?

For many home-based businesses, $5,000 can be more than enough, especially for service-based ventures where your main costs are a computer and software. Create a detailed budget to understand your startup costs and see how far your funds will go.

Do you have to claim business income under $30,000 in Canada?

Yes, you must report all income you earn from your business to the Canada Revenue Agency (CRA), regardless of the amount. The $30,000 threshold relates to whether you must register for, collect and remit goods and services tax/harmonized sales tax (GST/HST). According to the CRA, you are considered a small supplier if your total worldwide taxable supplies in the previous four calendar quarters do not exceed $30,000.

How long does it take to start making money from a home business?

The time it takes to become profitable varies widely. Some service businesses can earn revenue right away, while product-based businesses may take several months to a year. A solid financial plan and cash flow forecast can help you set realistic expectations.

Can I run any type of business from my home?

Not always. Local zoning laws and regulations can restrict certain business activities in residential areas. For example, businesses that involve significant customer traffic, noise, or handling of certain materials may not be permitted. It's best to check with your local municipality.