Starting Your Own Business? Useful tips.

If you are planning to start your own business, you will need a business plan. This is a task you must complete yourself. It starts with your business idea, your business bio, marketing, operations and the forecasts. Don’t start a business without one.

If you are going to start as an unincorporated business (ie. a proprietorship) go to this website and read the information and register:

http://www.registerbusinessinontario.com/register-a-sole-proprietorship.html?gclid=CKDL5eW8pboCFe4-Mgod1CAA6A

If you plan to open a business bank account under your registered name, you will need to bring a copy of the registration to the bank.

You should also get a business number from the Canada Revenue Agency. If you invoice clients and charge Harmonized Sales Tax (HST) you should get a number. If you will have employees you must register. The business number application is free. One number will suffice to report and pay payroll remittances (RP0001) as well as HST (RT0001).  Here is the URL for registration:

http://www.cra-arc.gc.ca/bn/

Make sure you list your business number on all invoices to clients. The client must pay the HST in addition to your fees. HST is excluded from all non-Canadian client invoices.

At year end, an unincorporated business reports its business income on the T1 return of the proprietor. A proprietor does not draw a salary. The income (from business of the proprietorship) is reported on the Statement of Business or Professional Activities. Check out this CRA form:

http://www.cra-arc.gc.ca/E/pbg/tf/t2125/README.html

Incorporation requires more oversight and planning. There are distinct tax advantages to incorporation. I do not recommend incorporating from the outset for a number of reasons:

  1. It can be expensive to incorporate – $1,000 to $2,000
  2. The year end corporation tax return and financial statement cost can be expensive ($750-$5,000)
  3. It is a separate legal entity and the choice of shareholders, officers and directors needs to be carefully considered.
  4. The jurisidiction of incorporation must be carefully planned.
  5. A corporation can be dormant but if there is no activity, it should be wound up. This can be costly.
  6. A corporation can survive the death of the shareholders. A good estate and succession plan should be considered in the event of the death or disability/serious illness of the shareholders.

The advice of a lawyer and accountant should be sought before incorporation.

 

 

 

 

 

 

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