A sole proprietorship does not automatically require a CRA Business Number. Registration becomes mandatory when your taxable revenues exceed $30,000 over four consecutive calendar quarters, when you hire employees, or when you import or export commercial goods. Sole proprietors can also register voluntarily to claim Input Tax Credits on eligible business expenses.
If you are running a business as a sole proprietor, whether you are a freelancer, a consultant, a tradesperson, or a shop owner, you will likely reach a point where the Canada Revenue Agency (CRA) expects you to register. The trick is knowing exactly when that happens. Get it right, and you stay compliant with minimal friction. Get it wrong, and you can end up owing back-dated GST/HST with interest.
This guide explains what a CRA Business Number is, the specific situations that trigger mandatory registration, when voluntary registration makes sense, and the misconceptions that regularly catch Canadian business owners off guard.
What Is a CRA Business Number?
A CRA Business Number (BN) is a nine-digit identifier assigned by the Canada Revenue Agency. Think of it as the SIN of your business: one BN links together every federal program account your business needs.
The BN itself does not do anything on its own. Instead, it acts as the anchor for various program accounts, each identified by a two-letter code followed by a four-digit reference number. The most common program accounts are:
- RT, GST/HST Program Account: For collecting and remitting GST/HST on taxable supplies.
- RP, Payroll Deductions Account: For remitting CPP, EI, and income tax deductions when you have employees.
- RM, Import/Export Account: For commercial importers and exporters.
- RC, Corporate Income Tax Account: For incorporated businesses only. It does not apply to sole proprietors.
Because a sole proprietorship is not a separate legal entity from its owner, sole proprietors report their business income on their personal T1 return (using Form T2125, Statement of Business or Professional Activities). That means an RC account is not relevant for you unless and until you incorporate.
Does a Sole Proprietorship Require a CRA Business Number?
You only need a CRA Business Number when one of the following conditions applies. Registration is not optional in any of the three mandatory scenarios below.
1. Your Taxable Revenues Exceed $30,000 (The Small Supplier Threshold)
This is the most common trigger. Under section 148 of the federal Excise Tax Act, R.S.C. 1985, c. E-15, you qualify as a "small supplier" and are exempt from mandatory GST/HST registration as long as the total value of your worldwide taxable supplies (including those of associated persons) stays under $30,000 over the four preceding calendar quarters. The threshold is $50,000 for public service bodies.
The moment you cross the small supplier threshold, that status ends and GST/HST registration becomes mandatory. Under section 240 of the Excise Tax Act, you must apply to register no later than 30 days after making the taxable supply that pushed you over the limit. Once registered, you receive a BN and a GST/HST (RT) program account, and you must start charging GST/HST on your taxable supplies.
A few nuances matter here:
- The $30,000 threshold applies to taxable supplies, not all revenue. Some goods and services are GST/HST-exempt (for example, most health-care services, certain educational services, and long-term residential rent) or zero-rated (for example, basic groceries and exports). Exempt supplies do not count toward the threshold.
- The calculation looks back across four consecutive calendar quarters, not a calendar year. A strong fourth quarter can push you over the line even if your annual revenue looks modest.
- Certain industries must register regardless of revenue. Taxi operators and commercial ride-share drivers, for example, are required to register even if they would otherwise qualify as small suppliers (Excise Tax Act, ss. 123 and 240(1.1); the statutory definition of "taxi business" covers passenger transport arranged through an electronic platform).
You can review the primary legislation directly at Excise Tax Act, s. 148 and Excise Tax Act, s. 240.
2. You Hire Employees
The moment you pay employment income (salary, wages, taxable benefits, or similar), you become an employer in the eyes of the CRA. Employers must deduct Canada Pension Plan contributions, Employment Insurance premiums, and federal and provincial income tax from each pay cheque and remit those amounts to the CRA.
To do this, you must open a payroll deductions (RP) program account, which in turn requires a CRA Business Number. This applies even if you are otherwise well below the $30,000 GST/HST threshold.
Hiring an independent contractor is different. Contractors invoice you and handle their own tax obligations, but the CRA applies a multi-factor test to determine who counts as an employee versus a contractor. Getting this classification wrong is a common and expensive mistake for sole proprietors scaling up for the first time.
3. You Import or Export Commercial Goods
If you bring commercial goods into Canada or ship commercial goods abroad, you need an import/export (RM) program account before your first shipment clears customs. Casual personal imports do not trigger this requirement, but commercial activity does.
Voluntary Registration: When It Makes Sense
Even if none of the mandatory triggers apply, sole proprietors can register for a GST/HST account voluntarily. The main benefit is access to Input Tax Credits (ITCs): once registered, you can recover the GST/HST you pay on eligible business expenses, such as equipment, professional services, software, and commercial rent.
Voluntary registration is often worth considering when:
- Your start-up costs are high and you want to recover GST/HST on those expenses.
- You sell primarily to other GST/HST-registered businesses (they can claim ITCs on your invoices, so charging tax does not affect their cost).
- You expect to cross the $30,000 threshold soon and would rather have your systems and invoicing ready in advance.
- Collecting GST/HST signals professionalism, especially in B2B settings.
The trade-off is administrative: once registered, you must file regular GST/HST returns, charge and remit tax correctly, and keep supporting records. For some small-scale sole proprietors, staying a small supplier is simpler.
Common Misconceptions About the CRA Business Number
These four misunderstandings come up constantly. Getting them straight can save you a great deal of time and money.
"I registered my business name, so I already have a BN." No. Registering a business name in Ontario under the Business Names Act, R.S.O. 1990, c. B.17 (typically done through ServiceOntario) is a provincial registration. It records the trade name you use to carry on business. A CRA Business Number is a separate federal registration. You need to register for a BN separately through the CRA.
"I'm a sole proprietor, so I just use my SIN." Partly true. You will continue to use your Social Insurance Number to report business income on your personal T1 return. But once you open a GST/HST, payroll, or import/export account, you will use your CRA Business Number for dealings with the CRA on those matters.
"Under $30,000 means I never need a BN." Not quite. The $30,000 threshold only governs mandatory GST/HST registration. If you hire a single employee or import commercial goods, you need a business number no matter how small your revenue is.
"Getting a BN turns my business into a corporation." No. A Business Number is purely an identifier for CRA program accounts. It does not change your legal structure. You remain a sole proprietor, personally liable for the debts and obligations of the business, until you formally incorporate under federal or provincial law.
When the Business Number Question Becomes a Bigger Question
For many entrepreneurs, the moment they need a CRA Business Number is also the moment they start thinking seriously about whether a sole proprietorship is still the right structure. Hitting the $30,000 threshold, hiring your first employee, or starting to import goods are all signs that your business is outgrowing its original setup. Incorporation can offer limited liability protection, potential tax deferral opportunities, and added credibility, but it also brings new compliance obligations. A short conversation with a lawyer can help you weigh the trade-offs before you register anything.
Related Questions
How do I get a CRA Business Number as a sole proprietor?
You can register online through the CRA's Business Registration Online service, by phone through CRA business enquiries, or by mail using Form RC1 (Request for a Business Number and Certain Program Accounts). Have your SIN, business address, and a description of your main business activity ready. Registration itself is free.
What happens if I go over $30,000 and do not register for GST/HST?
The CRA can assess you for the GST/HST you should have collected from the date you were required to register, plus interest and potential penalties. You remain liable for the tax even if you never collected it from your customers, which makes late registration an expensive mistake.
Do I need a business number if I work as a freelancer or contractor?
Only if one of the mandatory triggers applies, typically crossing the $30,000 GST/HST small supplier threshold. Many freelancers who work below that threshold and who have no employees and no commercial imports operate legally without a CRA Business Number.
Can I register voluntarily before I reach the threshold?
Yes. Voluntary GST/HST registration is allowed and often strategic. The main benefit is the ability to claim Input Tax Credits on eligible business expenses. You should consider the administrative cost and whether your client base is B2B or B2C before making the decision.
Sources & Official Resources
Federal Statutes Cited
- Excise Tax Act, s. 148, Small Suppliers
- Excise Tax Act, s. 240, GST/HST Registration Requirements
- Excise Tax Act, s. 123, Definitions (including "taxi business")
Ontario Statutes Cited
- Canada Revenue Agency, Register for a Business Number
- Canada Revenue Agency, GST/HST for Businesses
- ServiceOntario, Ontario Business Registry
Contact Hadri Law
If you are trying to decide whether to register for a CRA Business Number, or whether it is time to move from a sole proprietorship to a corporation, a short conversation with a lawyer can save you from costly missteps. At Hadri Law, we help entrepreneurs across Toronto and the GTA structure their businesses correctly from day one and stay onside with CRA compliance as they grow.
Call (437) 974-2374 for a free initial consultation. We serve clients in English, French, Spanish, and Catalan, and you can also book directly at calendly.com/hadrilaw/free-consultation.
This article provides general information and is not legal or tax advice. Every situation is different. Contact a lawyer or tax professional to discuss your specific circumstances.
