Should it Stay a Hobby or Grow Into a Business? Part 1 – Laws

You’ve been working on your studies and growing so much. You’ve developed so many amazing skills and would love to share what you can make with others. You start thinking of selling at markets or perhaps online. This series will help you explore the things you should consider before taking the plunge. I can only speak to here in Ontario, Canada but it will give an idea of what to look out for where you live. This part will discuss laws.

Step 1: Do you know about the relevant laws in your area?

Learning about your local laws is a great place to start. Laws could affect what you decide to sell so it’s a good idea to learn about these first! If they’re too strict, it may affect what you decide to do with your business. Here’s just a few of the laws worth considering.

Your municipality might have regulations for home-based businesses. In some cases, your municipality may not want businesses operating out of homes at all. In some communities there are shared kitchens that you can rent out for creating your products if this is the case. It will make things more difficult but it’s still possible! There may also be restrictions about things like how many employees your business can have if you’re home-based, for example. I’m fortunate that my municipality doesn’t have any restrictions.

Health Canada regulates natural health products which includes all herbal remedies. Any product you sell should be a licensed natural health product in order to comply with the law. The exception is if you’re individually compounding a product for a patient. As part of the application process, you have to provide Health Canada with information on the medicinal ingredients, source, dose, potency, non-medicinal ingredients, recommended use, and be supported by evidence that proves the natural health product is safe (like clinical studies and research papers). The site where you manufacture must also be licensed and you have to follow the labelling requirements. For me and many other small businesses, these are some pretty significant barriers to entry! I have no personal experience with this process but please let us know about your experience with it in the comments.

Health Canada also regulates cosmetics. Cosmetics includes soap, lip balm, non-medicinal balms, for example. Any time a cosmetic is discontinued, changed, or introduced to the market, a Cosmetic Notification Form must be sent to Health Canada. The process does not cost anything and it is fairly straightforward if you read this guidance document as you do it. You must also follow the cosmetic labelling guidelines and be sure you’re following Good Manufacturing Practices.

Step 2: Do you know what you need to do to operate as a business?

You will need to register your business with the province (or federally) and decide if you would like to be a sole proprietorship or a different type of business. Incorporating will do a better job of protecting your assets but the costs to register are higher. This link from Canada Business Network has a good list of the pros and cons of the different types, to help you decide what might be best for you. A sole proprietorship has suited my needs just fine so far.

Do you need insurance? In my area, many markets require sellers to have insurance to participate. The type of insurance you get will depend on your business and what you do. This link from Modern Soapmaking has a good discussion on why you might decide to get insurance. It’s about soap specifically but I think it’s applicable to any products as well. I don’t have insurance yet so let us know in the comments where you get yours from, if you do!

Step 3: Seek out community agencies and mentors

In my region, we have a Business Advisory Centre. They are a fabulous free resource for helping entrepreneurs get started! They will likely know all the applicable laws in your area that you should be aware of as you start building your business, or they will know where to find the information so you get off to the right start.  Try doing a search for entrepreneur or small business organizations in your area. Business Canada also has a lot of great links for things to consider when you’re starting your business so try looking at the provincial, federal, and municipal websites for your area to see what information they put out for small businesses. It will be broader but it’s still important to do some serious thinking before starting!

Mentors are also a great resource, if you know of someone in your area who wouldn’t mind having a chat about the industry. If you don’t know anyone locally, there are many places online where you can brainstorm and swap information with like-minded people. I’m truly thankful for the Facebook groups I belong to and grateful for how freely members share their wisdom. There may also be professional associations

These are just a few of the things you should consider. If I’ve left anything important out, please leave that in the comments as well! In part 2, we’ll look at some other things to consider when starting up, like financial commitment and scale.

Disclaimer: This is not legal advice. You should always follow up with your own research and seek appropriate advice to ensure that this information is still correct and relevant to your situation. (I’m technically a paralegal so I have to say this!)

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