Starting a Home-Based Business in Toronto in 2026: What the New Rules Actually Allow

Running a business from your Toronto home became more flexible in 2026.

Toronto changed its zoning rules at the end of 2025 to expand what the City calls “home occupations.”

Among the changes, qualifying home businesses can now potentially:

• have up to two employees working at the home in addition to the business operator
• operate from a detached garage or other ancillary building
• receive clients or customers on-site for certain types of businesses
• use an indoor parking area for the business without necessarily having to replace that parking space

The changes are significant.

But they do not mean every residential property can suddenly become a store, warehouse, auto shop or full commercial operation.

If you are thinking about starting a business from your Toronto home in 2026, here is what has actually changed — and what you still need to check.

Quick answer: what changed?

Toronto City Council passed Zoning By-law 1508-2025 on December 17, 2025. The City’s current Neighbourhood Retail & Services information says the new home-occupation rules are now in force.

• Employees at home — Up to 2 employees, in addition to the operator
• Detached garage / ancillary building — Can potentially be used for the home business
• Clients visiting — Permitted for certain business/use types
• Maximum business space — Generally the lesser of 25% of the home’s interior area or 100 m²
• Warehouse operation — Not permitted
• Operator residence — Home must remain the operator’s principal residence
• Business licences — Still required where applicable
• Provincial registration — Still required where applicable
• GST/HST — Federal rules still apply

The critical phrase is “where applicable.” The zoning rules depend on your exact business, property and use.

1. You can now have up to two employees working from the home

This is one of the clearest changes.

Toronto’s amended zoning rules state that a home occupation may have two employees working in the dwelling unit in addition to the business operator.

Previously, Toronto’s general home-occupation rules were considerably more restrictive about employees working on the premises.

That could make home operation more realistic for businesses such as consulting firms, small professional offices, design businesses, administrative businesses, certain educational businesses and small creative businesses.

It does not mean a home can become an office for unlimited staff. The business is still supposed to function as a home occupation, not as a conventional commercial workplace transplanted into a residential property.

2. Some businesses can now receive clients at home

Toronto also broadened the situations in which customers or clients can attend a home-based business.

Under the amended rules, the general client prohibition no longer applies in the same way to certain uses, including education uses, artist studios, offices, service shops and custom workshops.

Toronto already had additional exceptions for certain personal-service businesses and regulated health professionals.

For example, existing Residential Zone rules recognize certain home-based personal services such as barber, hairdresser, beautician, dressmaker, seamstress and tailor.

But this does not mean every business can take walk-in customers.

Toronto’s zoning system defines different uses, and the rules applying to an office may be different from the rules applying to retail, automotive work, food production or another activity.

Before advertising your home address as a customer-facing business location, confirm that your particular use allows customers to attend.

3. A detached garage can now potentially become business space

Another major change is the removal of the general prohibition against operating a home occupation from an ancillary building.

In practical terms, that can include something like a detached residential garage.

The amended by-law specifically allows home occupations to extend into ancillary buildings and can permit an existing lawful indoor parking space to be used as home-business floor area without necessarily requiring another replacement parking space.

That could be useful for artists, makers, designers, instructors, certain service businesses and businesses needing a dedicated workspace separate from the living area.

But converting a garage into usable business space can raise building, electrical, fire, structural and zoning questions beyond the home-occupation rule itself.

Do not assume that because the business use is permitted, every physical renovation is automatically permitted too.

4. Your home still needs to be your home

The new definition of a Toronto home occupation continues to tie the business to the operator’s residence.

The amended by-law defines a home occupation as a business use within a dwelling, living accommodation or ancillary building where the associated dwelling or living accommodation is the principal residence of the business operator.

In simple terms, you generally cannot rent a residential property solely to operate it as a commercial business and call it a home occupation if you do not actually live there.

The business remains secondary to the residential use.

5. There is still a size limit

Toronto did not turn homes into unrestricted commercial properties.

Under the updated rules, home-business floor area generally cannot exceed the lesser of 25% of the total interior floor area or 100 square metres.

The updated calculation also takes ancillary buildings or structures into account.

Example: if your home has 120 square metres of interior space, 25% is 30 square metres, so the general home-occupation limit would be approximately 30 square metres, not 100.

If you have a much larger home, the absolute 100-square-metre cap can become the limiting factor.

Property-specific zoning exceptions can exist, so always confirm the rules applying to your address.

6. You cannot turn your home into a warehouse

Toronto’s new rules explicitly address this.

The amended zoning by-law says premises used as a home occupation must not operate as a warehouse for the distribution of goods or commodities.

That matters for online sellers.

There is a big difference between running an online business administratively from your home and using your house or garage as a commercial distribution warehouse with large inventories, deliveries and shipping activity.

The first may fit within home-occupation rules. The second may not.

If you operate e-commerce from home, check how your inventory, deliveries, pickups and storage affect the zoning classification.

7. Home-based retail is still more complicated

This is another area where it would be easy to misunderstand the new rules.

Toronto’s standard home-occupation regulations continue to restrict the direct sale, rental or lease of physical goods from a dwelling unit, except where another specific permission or zoning exception applies.

So the new rules should not be read as:

“Every Toronto homeowner can open a retail shop in their living room.”

Toronto separately expanded some neighbourhood retail permissions through other 2025 zoning changes, including certain major streets and selected neighbourhood locations.

Those are different rules from the general home-occupation framework.

If physical retail is central to your business model, verify the zoning for the specific property rather than relying on general home-business information.

8. Some businesses still do not fit the standard home-occupation rules

Toronto’s zoning rules continue to prohibit certain activities under the general home-occupation framework.

Examples include:

• animal shelters and kennels
• vehicle repair shops
• vehicle service shops
• vehicle washing establishments
• manufacturing uses
• distribution warehouses

So “I’ll start repairing customers’ cars in my driveway” is very different from “I’ll run my bookkeeping company from a home office.”

Both are businesses. They are not treated the same way under zoning.

9. Zoning permission does not replace a business licence

This is one of the biggest mistakes a new entrepreneur can make.

Being allowed to operate a type of business from a residential property does not automatically mean you have every licence needed to operate it.

The City of Toronto says businesses must obtain the applicable licences, permits and inspections before operating.

The City also tells people planning to operate from home to confirm that the zoning on the property permits the business.

Depending on what you do, requirements may exist at municipal, provincial, federal or professional/regulatory level.

A hairstylist, food business, childcare provider, contractor and online consultant can have very different regulatory obligations.

Related AD18 Local guide: Toronto Business Licence Guide 2026: Does Your Business Actually Need One? →

10. You may also need to register the business in Ontario

Zoning is separate from business registration.

Ontario operates the Ontario Business Registry for business registrations and corporate filings.

For example, Ontario currently lists the government registration fee for a sole proprietorship at $60, while an Ontario business corporation registration is listed at $300.

Toronto also notes that businesses operating under a name other than the owner’s name generally need to register that business name with ServiceOntario.

Your legal structure might be a sole proprietorship, partnership or corporation.

The right structure depends on issues such as liability, taxes, ownership and growth plans.

Operating from home does not require you to choose one particular structure.

11. Don’t forget GST/HST

Starting from home does not create a special exemption from Canada’s tax rules.

For most businesses, the CRA’s current small-supplier threshold is $30,000 in worldwide taxable supplies.

A business that remains under the threshold generally does not have to register for GST/HST, although voluntary registration may be possible.

Once the threshold is exceeded, the timing of mandatory registration depends on how and when the $30,000 threshold was crossed.

For example, if you exceed $30,000 in taxable supplies in a single calendar quarter, CRA says you generally cease being a small supplier on the transaction that puts you over the threshold and must begin charging GST/HST accordingly.

This is one area where a bookkeeper or accountant can quickly become worth the money.

12. Check your insurance

Ontario’s current small-business startup guidance recommends considering business insurance even when a business operates from home.

That is sensible because ordinary residential insurance may not automatically cover every business-related loss or liability.

Questions worth asking your insurer include:

• Is business equipment covered?
• Is inventory covered?
• What if a client is injured while visiting?
• Does having employees affect coverage?
• Is commercial liability required?
• Does operating from a detached garage affect coverage?

Do this before you have a loss, not afterward.

What about renters and condo owners?

Municipal zoning is only one part of the picture.

If you rent, your lease and building rules may affect what activities can occur inside the property.

If you own a condo, the condominium’s declaration, rules and policies may also matter.

For example, a quiet laptop-based consulting business and a customer-facing business bringing multiple visitors through a condo hallway create very different practical issues.

Before spending money on equipment, renovations or advertising, confirm both:

• Is the activity allowed by the City?
• Is it permitted under the rules governing my particular property?

A practical Toronto home-business checklist

1. What exactly is my business activity?

Do not simply say “It’s a small business.”

Zoning depends on the actual use.

Are you operating an office, artist studio, custom workshop, educational business, personal service, online store, childcare business or health practice?

That classification matters.

2. Does my property allow the use?

Toronto recommends confirming home-business zoning with Toronto Building.

You can also use the City’s zoning resources to identify the zoning applying to a property.

3. Will clients visit?

If yes, confirm that your specific business classification permits it.

Do not assume the 2026 changes apply identically to every home business.

4. Will employees work there?

The general updated rule allows up to two employees in addition to the operator, but other business-specific requirements can still apply.

5. How much space will the business occupy?

Generally stay within the lesser of 25% of the relevant interior area or 100 square metres.

6. Are you using a garage or other detached building?

The new rules may allow this, but verify any construction, building-code, electrical or conversion requirements before modifying the structure.

7. Do you need a Toronto business licence?

Check the actual licence requirements for your industry.

8. Does the business need Ontario registration?

If required, register through the Ontario Business Registry.

9. Do you need GST/HST registration?

Track taxable revenue from the beginning rather than discovering the $30,000 threshold after you have already crossed it.

10. Is your insurance appropriate?

Tell your insurer what the business actually does.

The kinds of businesses that may benefit most from the new rules

The changes could be particularly useful for very small businesses that do not need a full commercial storefront yet.

Examples include:

• consultants
• bookkeepers
• designers
• tutors
• artists
• photographers doing administrative/editing work
• certain personal-service providers
• small creative studios
• selected custom-work businesses
• professional offices

For someone starting small, avoiding commercial rent can dramatically reduce the amount of revenue needed just to keep the business alive.

That makes Toronto’s expanded home-business permissions potentially meaningful for entrepreneurs testing an idea before committing to a storefront or office.

When a commercial space probably makes more sense

A home business is not the right solution forever.

A commercial location may become more appropriate when you need:

• substantial customer traffic
• multiple employees
• large amounts of inventory
• significant deliveries
• specialized equipment
• exterior signage or displays
• production space
• substantial food preparation
• activities that create noise, fumes or other impacts
• a true retail storefront

The goal should not be to force a growing commercial operation into a house simply because residential rent or mortgage costs are already being paid.

Home occupation works best when the business remains compatible with the surrounding residential environment.

Find services for starting and growing a Toronto business

If you’re building a business in Toronto, the AD18 Toronto Business Directory can also help you discover local companies that provide services entrepreneurs commonly need.

• Professional Services: Browse Toronto professional services →
• Business Services: Browse Toronto business services →
• Financial Services: Browse Toronto financial services →
• Technology & Repair Services: Browse Toronto technology and repair services →
• Toronto Business Directory: Browse all Toronto businesses →

If you operate a Toronto business that is not currently listed, you can also add your business to AD18.

An AD18 Directory listing is a discovery tool and does not confirm that a business has obtained every licence, registration or regulatory approval required for its operations.

The bottom line

Toronto made it easier to run certain businesses from home in 2026.

The most important changes include allowing up to two employees, allowing home occupations in detached ancillary buildings and expanding on-site client access for certain types of businesses.

But the new rules are not a blanket permission to turn any Toronto home into any type of commercial operation.

Before launching:

• Identify the business use.
• Check your property’s zoning.
• Confirm client and employee rules.
• Check licences.
• Register the business if required.
• Understand GST/HST.
• Check your insurance.

For many Toronto entrepreneurs, working from home can be a low-cost way to get started.

The important part is making sure the business is not only a good idea — but actually permitted to operate the way you intend to run it.

This article provides general business and zoning information, not legal, tax or planning advice. Toronto zoning can include property-specific exceptions, and licensing requirements vary by industry. Information was reviewed August 31, 2026. Confirm current requirements with the City of Toronto, Government of Ontario and Canada Revenue Agency before operating a business.