There are many things to consider when starting up a business. Do I incorporate or not. We recommend if a sole proprietorship to not incorporate until earning over $100,000.00. One of the benefits of incorporating are the lower tax rates. Plus, if you are incorporated you are not personally liable for any accumulated debts. Do remember, that if you are incorporated it is best to have payroll set up and to not just make owner’s draws. The Canadian government wants the payroll taxes right away. Not at the end of the year when you do your tax return. So by setting up payroll you have the deductions done right away and sent monthly to the CRA. A good place to get information on incorporating is the CRA website.
On the other hand a sole proprietorship or partnership are the way to go when you are just starting very small working out of your home, be it full time or part time. If you don’t hire any staff your liability will be very minimal in most cases. If you have a sole proprietorship or partnership and you are making a profit, big or small it is a good idea to submit extra income tax during the year. So you don’t have a large tax bill to pay when you do your personal return.
In either case once your business reaches over $30,000.00 in sales you must obtain a GST/HST number. Unless a Taxi or Limo company. In which case you must obtain a GST number right away. This is the law in Canada. You must also have your GST/HST number visible on all invoices and sales receipts. Do not charge the tax if you are not registered. You may think this is a no-brainer. But more often than not, the government goes after people whom thought they were registered and in fact were not registered for GST/HST. So by having your GST/HST number clearly visible on your invoices, there will be no questions that you are registered.
Most companies start off GST/HST filing once a year. However, if your company is growing fast and or making good money quarterly filing may be best. Some companies will even have a separate bank account just to put in the GST/HST they collect. Just so that they have it there when the time comes to pay it to the government.
If you file once a year you may still have to make installments. In which case you will get a letter to make an installment. Do pay the installment(s) on time as there is interest if you don’t pay on time.
For a new business it may be hard to get a credit card, without pre paying, or putting a huge deposit in a special saving account. So if you can police yourself, get one in your name and use it only for business. Otherwise just keep the receipts and put them under owner’s contributions. Some banks do offer small established businesses credit cards at good rates. So do your homework to get the best rate. Having a credit card that can earn you rewards for using it on purchases can be good if there is no yearly fee. Keep in mind if you have a credit card listed under your business the points when redeemed, must be for business. If they are not used for business then it is considered an owners draw.
The following apply not only to business but to personal situations as well.
Telephone and Internet lines: All businesses need a telephone and internet. These days a cell phone is a must. You can have your email, contacts, and calendar all in your smart phone. But do shop around for the best rates. Contracts are starting to become less popular. For good reason too. Many companies will offer you a free phone for signing up with them for 2 years. Then you are stuck in a plan that in another year from now may not be what you need or can afford. To get out of it there will be hefty fees. Then to get special rates for your internet line you may have to sign up for a contract. While you may get a good rate for the internet, there will be caps on what you can download and upload. We recommend not only searching for the best deal for unlimited internet but to find a cell phone plan that is unlimited as well. This may be a problem if you are in more rural areas. As the smaller cell phone companies that offer unlimited are usually only in the bigger metropolitan areas.
No matter how hard we try to go paperless there will come a time we will need paper. Not to mention the other numerous office supplies we may need. The internet is a great place to start for finding the best rates on the office supplies you need. For ink I recommend some of the online companies that just sell ink. They are much cheaper than buying in the big box stores. Many offer free delivery if you spend a set amount. So doubling up on ink may be worth it. But when getting a quote be armed with prices from other sources. So you can say ABC business has it at this price. Can you go lower with free delivery. Most companies will go lower. Ink is where they hike up prices a lot, so there is more wiggle room to save. Also when buying a printer find out how many pages the drum will allow. To replace the drum on a printer is expensive. Many times not worth it. However we recently discovered a little chipset that can be attached to a printer to reset the drum. It works we’ve tested it! The one in our test was 25% of the cost of the lowest quoted price on a new drum.
For a new business a laptop is best as they take up less space, are more portable and easier to move as your business grows. Shop around for the best rates and deals. Certain times of year there are better deals. If your laptop is likely to get thrown around a lot spend a little more to get something durable. It will be worth it in the long run. Try to go wireless with as many things as possible. As with ink, there are big bucks made in the computer industry selling all those extra cables.
We also recommend that for any software you may have to try to use Cloud or Online software. Your files will be stored in the Cloud and you won’t have to worry if your computer gets lost or stolen. This is also good if you don’t have a network server keeping your files separate and secure.