Welcome to Ask An Accountant, where we take your payroll and accounting queries and help you make sense of them. Whether you’re doing payroll for the first time or you’re a seasoned veteran, we’re here to make sure you never have to worry about something going over your head.
So you’ve started a business and you’re setting up payroll for your first employee—congrats! You may want to check out our complete guide on setting up payroll while you're at it. However, you might have noticed that you need a Business Number (BN) to get started. But what is a Business Number? We talked to Knit People’s Senior Accounting Associate Guriqbal ‘Guri’ Singh to find out.
What is a Business Number (BN)?
According to the CRA, a BN is a “Numbering system used by the Canada Revenue Agency that simplifies and streamlines the way businesses deal with the federal government. It is based on the idea of one business, one number.” Put simply, it’s a unique, nine-digit number that the CRA assigns to your business as a tax ID.
BNs may be used by corporations, sole proprietors, and partnerships, however, they don’t always need them. Conversely, even if you don’t own a business, you may still need a BN.
When a Business Needs a BN
A business needs a BN to register for one or more of the following government program accounts:
- GST/HST (required if your business does not meet the Small Supplier definition)
- Payroll deductions (if you have employees)
- Corporate income tax
- Excise Duty (applies to businesses that export wine, beer, spirits, and tobacco products that are made in Canada)
In some cases, businesses may be able to communicate with the CRA using just the social insurance number of their principal owner. However, as soon as a business wishes to register for any of the above program accounts, it can no longer use that social insurance number and must apply for a BN.
When an Individual Needs a BN
In some cases, even those who don’t consider themselves business owners may need to apply for a BN. For instance, if you have employees such as nannies or housekeepers, you may need a BN.
To know whether or not you are an employer, you need to determine if the person you are paying (ie. your nanny) would be considered an independent contractor or an employee. In the case that you set a regular schedule for this person and closely supervise his or her activities, they would most likely be considered your employee. Subsequently, you would be considered a sole proprietor. In this case, you would need to obtain a BN to set up payroll.
However, if the person you hire has control over how the task is completed, they can be considered an independent contractor and you would not need a BN.
To find out whether you need a BN, you can consult the CRA’s extensive RC4110 guide.
Format of the BN
A BN is a nine-digit number that is used to create the identifier codes for your business accounts. The BN is part of a longer CRA program account number, which is made up of the following:
1. A 9-digit business number to identify the business.
2. A 2-letter program identifier code to denote the CRA program account.
● RC for corporation income tax (if your business is incorporated)
● RT for GST/HST (if your business collects GST/HST)
● RM for import/export (if your business imports goods or sells goods or services abroad)
● RP for payroll (if your business pays employees)
3. A 4-digit reference number that identifies an individual CRA program account.
● The reference number allows you to have multiple accounts under the same BN and program ID
How to Register for a BN
The CRA allows you to register for a BN a number of different ways:
- The CRA’s online portal is recommended for businesses with simple registration requirements and can be found here.
2. By Mail or Fax
- If you need to print a form, go to Form RC1, Request for a business number and certain program accounts. Fill in form RC1, and once completed, mail or fax it to your nearest tax service office or tax centre.
3. By Phone
- To obtain a BN and register for CRA program accounts by phone, call 1-800-959-5525. Before calling, be ready to answer all the questions in Part A of Form RC1, Request for a business number and certain program accounts, and any other questions in the form about the CRA program accounts you want to open.
Note: If you operate in Québec, you will need to consult Businesses operating in Québec and GST/HST program accounts.
For more information about business number registration, please consult the CRA’s handy online guide.
Disclaimer: This article provides general information and should not be construed as tax advice. Since tax rules may change over time and can vary by location and industry, please consult a CPA or tax advisor for advice specific to your business.