Introduction
Starting a business in Alberta as a sole proprietor is one of the easiest ways to become your own boss. With lower upfront costs, minimal paperwork, and full control over your operations, it’s a popular route for freelancers, creatives, and service providers across the province. But while it’s easy to start, being a sole proprietor comes with important responsibilities and risks that many new entrepreneurs overlook.
Whether you’re launching a side hustle or taking your full-time career into your own hands, here are 7 essential things every sole proprietor should know before starting a business in Alberta.
1. You Still Need to Register Your Business Name
One of the most common misconceptions is that sole proprietors don’t need to register their business at all. While it’s true that you can operate under your legal name without registration, you must register a trade name (also known as a “doing business as” name) if you plan to use anything else.
For example, if your name is Sarah Lee and you want to operate as “Sarah’s Web Design,” you’ll need to register that trade name with Alberta Registries.
Why this matters:
- It helps protect your business name within the province.
- It’s required to open a business bank account under your business name.
- It builds credibility when working with clients or applying for funding.
How to register:
- You can register your trade name online through Alberta.ca or visit a registry agent in person.
- The fee is usually under $100.
2. You’re Personally Liable for Business Debts
A sole proprietorship is not a separate legal entity. That means you and your business are the same in the eyes of the law. If your business is sued or incurs debt, your personal assets—like your home, savings, or car—can be used to settle those obligations.
How to protect yourself:
- Consider business liability insurance, especially if you work with clients or in high-risk environments.
- Have clear client contracts.
- Keep good financial records to track obligations early.
This is one of the biggest risks of remaining a sole proprietor long-term and one of the main reasons business owners eventually consider incorporating.
3. You’ll Use Your Personal SIN for Taxes (But May Still Need a Business Number)
Sole proprietors report their income on their personal tax returns using Form T2125 – Statement of Business or Professional Activities. You won’t file a separate corporate return, but that doesn’t mean there’s no paperwork involved.
If you don’t need to collect GST or hire employees, you may not need a business number from the CRA at all. However, many sole proprietors choose to register for one anyway to:
- Collect and remit GST/HST when applicable
- Access government grants or programs
- Open a business account with certain banks
4. You May Need to Register for GST/HST
Another myth: “I don’t need to charge tax because I’m just a small business.” That’s only true if your gross revenue is under $30,000 over four consecutive calendar quarters.
Once you cross that threshold, you are legally required to register for a GST number and begin charging clients GST on your services or products. Not doing so can result in penalties from the CRA.
Why registering early helps:
- You can claim input tax credits on business expenses.
- It signals professionalism to clients.
- You avoid scrambling when your revenue increases unexpectedly.
You can register for a GST/HST number directly through the CRA or by calling their business line.
5. Keep Your Business and Personal Finances Separate
You’re not legally required to open a separate bank account as a sole proprietor, but doing so is strongly recommended.
Why it matters:
- Keeps your bookkeeping organized.
- Makes it easier to track business income and expenses for tax time.
- Protects your personal finances during audits or legal disputes.
Most banks in Alberta offer business checking accounts for sole proprietors, and many bookkeeping platforms like QuickBooks, Wave, or FreshBooks are ideal for tracking your money.
6. You’re Responsible for CPP and Your Own Taxes
As a sole proprietor, you don’t get taxes deducted from your income like an employee would. You’re responsible for:
- Paying Canada Pension Plan (CPP) contributions (both employer and employee portions)
- Estimating and submitting your income tax
- Making quarterly instalment payments if your tax owing exceeds $3,000 in the current and past two years
Best practice:
Set aside 25–30% of your gross income in a separate account to cover taxes, GST, and other obligations.
Using a spreadsheet or accounting app can help you estimate your tax bill well before it’s due.
7. It’s Easy to Start—But Understand Your Options as You Grow
One of the biggest advantages of starting as a sole proprietor is how straightforward the setup process is. There’s minimal paperwork, no formal structure to maintain, and you retain complete control over the business.
However, as your business grows, it’s important to consider whether this structure still serves your long-term goals. You might decide to bring on a partner and form a partnership, or explore incorporation to limit your personal liability and access potential tax benefits.
Each business structure—sole proprietorship, partnership, and corporation—comes with its own legal and financial implications. Taking the time to understand your options early on will help you make the right move when it’s time to expand or shift directions.
Common Misconceptions About Sole Proprietorships
Even though sole proprietorships are common, they’re also widely misunderstood. Let’s clear up a few common myths:
“I don’t need to report income if I don’t register.”
Even if you don’t register a business name, you’re still legally required to report all income earned through self-employment to the CRA.
“I can write off anything I buy.”
You can only deduct reasonable expenses that are directly related to earning business income. That $2,000 couch for your “home office” better have a clear connection to your work.
“I’m too small to get audited.”
The CRA does audit sole proprietors—especially those who underreport income, overstate expenses, or fail to collect GST when required.
“Sole proprietorship means no paperwork.”
While you avoid corporate filings, you still have to manage invoices, receipts, bookkeeping, taxes, and legal documents like contracts and insurance policies.
“It’s always cheaper to stay unincorporated.”
In the beginning, that may be true. But if your income grows past a certain point, incorporation can save you money by letting you leave profits in the corporation and benefit from lower tax rates.
Final Thoughts
Starting out as a sole proprietor is one of the easiest and most affordable ways to get your business off the ground in Alberta. But just because it’s simple doesn’t mean it’s risk-free. Understanding your tax obligations, legal responsibilities, and the limits of this business structure will help you avoid costly mistakes and lay the foundation for a sustainable business.
If you’re unsure whether sole proprietorship is the right move for you, it’s worth speaking to someone who understands the ins and outs of starting a business in Alberta. Book an appointment with Our Invisible Empire to get clear, practical guidance tailored to your goals, so you can move forward with confidence.
