Much of the Canadian workforce comes from smaller enterprises, making Canada one of the top places in the world to start a business. However, the definition of a “small business” varies in this country and depends on several surprising factors. 

It’s not enough to have a few workers on payroll to become a small business owner. However, knowing what qualifies as a small business in Canada ensures that one adheres to all of the country’s restrictions and regulations during a business venture.

What Qualifies as a Small Business in Canada?

As of 2019, small businesses were responsible for 68.8% of the total private labour force, while medium-sized companies only accounted for 19.7% of the private labour force. With so many people working for enterprises with small footprints, and with major workforce impacts, the definition of a small business should be straightforward. 

Canada categorizes businesses by micro-business, small business, medium-sized business, and large business. However, the term “small business” has several definitions, with factors that place companies in the appropriate categories.

Industry Canada

According to Industry Canada, companies with fewer than five employees are micro-businesses. Service enterprises consisting of five to 50 employees are small businesses, while companies that produce goods are small businesses as long as they employ five to 100 workers.

Export Development Corporation

The Export Development Corporation deals specifically with companies that export goods. This corporation determines a small business by how much revenue it generates through exports, not the number of employees. According to this sector’s regulations, a small exporter has less than $1 million in annual business income from export sales.

Treasury Board of Canada Secretariat

The Treasury Board of Canada Secretariat mixes the number of employees with annual gross revenue to define small, medium, and large companies. By this sector’s standards, a small business employs fewer than 100 workers and has an annual gross income of $30,000 to $5 million.

Canadian Bankers Association

The Treasury Board of Canada Secretariat mixes the number of employees with annual gross revenue to define small, medium, and large companies. By this sector’s standards, a small business employs fewer than 100 workers and has an annual gross income of $30,000 to $5 million.

Canadian Small Business Financing Program

Industry Canada runs the Canada Small Business Financing Program, but each organization follows different criteria when defining small businesses. The latter program considers revenue, not workers, when determining businesses sizes. With these regulations, a small business has $5 million or less in yearly revenue.

Why a Business Owner Needs to Know if They Have a Small Business

It may not seem important to know the various definitions of a small business. However, these various classifications will determine if a particular enterprise qualifies for financial applications and certain tax deductions. 

For instance, the small business deduction is available for small companies. This tax benefit allows the company to be eligible for a reduced corporate tax rate. Other eligibility qualifications for the benefit include, but are not limited to: 

• One or more public corporations cannot control the business
• No person or entity who is not a resident in Canada can control the company directly or indirectly
• The business must be a private corporation 

Knowing a business’s classification also gives the owner access to several resources to help set up and run the enterprise, including resources for registering your business and filing income taxes.

Protect Your Small Canadian Business With Group Enroll

Understanding what qualifies as a small business in Canada means you know how to define your company best. As a small business owner, you want to take care of your growing enterprise by ensuring that your employees have affordable group benefits with the help of Group Enroll. 

Group Enroll is an insurance broker. At Group Enroll, we help businesses across Canada find the best solutions to grow their enterprises.  We help people compare and pick the group insurance product that suits their needs, such as: 

• Extended Health Care
• Group Dental Insurance
• Group Disability Insurance
• Group Life Insurance
• Group Retirement Savings Plan
• Health Care Spending Account (HCSA)

As a leading insurance broker serving Canadian businesses, Group Enroll works with top insurance providers. We will help you secure everything from comprehensive healthcare for your employees to group life insurance and other quality insurance products. Our headquarters is at 10 Great Gulf Drive, Unit 5, Vaughan, ON, L4K 0K7, but you can fill out our online quote form today or contact us at [email protected].