Starting a business in Ontario requires more than a great idea and hard work — it requires a legal foundation that protects you as the business grows. The right documents establish clear rules, manage risk, and prevent costly disputes. Whether you are a solo entrepreneur or a founding team of multiple partners, this guide walks through the key legal documents you need and the choices you face at each stage.

Sole Proprietorship Registration (Business Names Act)

The simplest form of business in Ontario is the sole proprietorship — a business owned and operated by one person, with no legal separation between the owner and the business. There is no formal incorporation process. However, if you operate under any name other than your own legal name, you must register that business name under the Business Names Act, RSO 1990, c B.17 (BNA). Registration is done through the Ontario government's online registry and must be renewed every 5 years.

Important characteristics of sole proprietorship:

Partnership Agreements: General and Limited

If two or more people are going into business together without incorporating, they are a general partnership under Ontario's Partnerships Act, RSO 1990, c P.5. A general partnership means each partner is personally liable for the debts and obligations of the partnership — including those incurred by the other partners. The partnership does not need to be registered unless it operates under a business name.

Every general partnership should have a written partnership agreement that covers:

A limited partnership (LP) has general partners (who manage the business and bear unlimited liability) and limited partners (who are passive investors whose liability is limited to their investment). An LP must be registered under the Limited Partnerships Act, RSO 1990, c L.16. Limited partnerships are commonly used for real estate investment funds and private equity structures.

Don't Skip the Partnership Agreement: Ontario's Partnerships Act contains default rules that apply when there is no written agreement — but those defaults are rarely what business partners actually want. For example, the Act provides that all partners share equally in profits regardless of their capital contribution. A written partnership agreement overrides these defaults and prevents expensive litigation when disputes arise.

Incorporation: OBCA vs. CBCA

Incorporating your business creates a separate legal entity — the corporation — with its own legal rights and obligations. The two most common options for Ontario entrepreneurs are:

Key benefits of incorporation include limited liability (shareholder personal assets are generally protected from corporate debts), income splitting and tax planning opportunities, and the ability to attract investment through share issuances.

Shareholders Agreement: Essential from Day One

If your corporation has two or more shareholders, you need a shareholders agreement — full stop. A shareholders agreement is a private contract between the shareholders (and often the corporation) that governs the relationship between owners. Corporate statutes (OBCA/CBCA) provide minimal protections for minority shareholders, and without a shareholders agreement, minority shareholders have very few rights.

Essential clauses in an Ontario shareholders agreement include:

No Shareholders Agreement = Expensive Disputes: Without a shareholders agreement, a 50/50 deadlock between shareholders has no resolution mechanism — either shareholder can apply to court under the OBCA for oppression relief or a winding-up order. These proceedings are extremely expensive and destroy business value. A well-drafted shotgun or buy-sell clause resolves deadlocks quickly and fairly.

Employment Agreements and Contractor Agreements

From your first hire, having a written employment agreement is essential. A valid employment agreement in Ontario must:

If you use independent contractors, a written Independent Contractor Agreement (ICA) should accurately reflect the actual relationship (see the Sagaz test discussion) and include deliverables, payment terms, IP ownership, confidentiality, and termination provisions.

NDAs for Employees and Suppliers

Any person who will have access to your confidential business information — employees, contractors, potential investors, suppliers, or strategic partners — should sign a non-disclosure agreement (NDA) before that information is disclosed. For employees, NDA provisions are typically included in the employment agreement rather than as a separate document. For third parties (suppliers, potential investors, licensing partners), a standalone mutual or unilateral NDA is appropriate.

Commercial Lease: Key Terms to Negotiate

If your business requires physical space, the commercial lease will be one of your most significant legal commitments. Unlike residential leases in Ontario, commercial leases are governed by general contract law (not the RTA) — this means there are no minimum protections for tenants. Key terms to review and negotiate include: