Starting a business can be more difficult than you think!

 

Starting your own business can be a frightening experience. Even if you have started a business before, compliance issues can be a mine field for anyone without experience or the right information to navigate. The following article discusses the basic requirements to consider when venturing out into the business world.

What is your motivation? Why do you want to get into business? This is an important question to ask yourself.

In Canada:

• 69% of current business owners say that being their own boss is the reason,

• 42% say that money is the reason to start their own business and

• 14% say that having more vacation time is the reason.

The first 3 years are critical in establishing your self-employment success. Most businesses will fail within the first three years and it is during this period that your time and effort will need to be invested on the right things to make your venture a success.

Having a brilliant idea for a product or service is not enough to make your business prosper. Achieving the results of your initial inspiration to start your own business may take a few years to realize. Finding and attracting the people to purchase your product or service will ultimately determine if you will succeed in your enterprise or not.

The business plan is a written document that details how your business will succeed in accomplishing success. This plan will include a marketing plan which will outline how the business intends to attract and how it will sell the product or service to customers. The business plan as a whole will determine the viability of your venture and the amount of investment you will require to make it work. Template business plans are available on-line.

Compliance issues should be considered when starting up. Your profession may require your registration with an association or governing body. Most often there will be an annual or monthly membership fee to become an affiliated member.

• CRA, (Canada Revenue Agency), will also need to be notified about your business start up. You will require a business #, and notify CRA as to the classification (sole proprietor or a corporation) of your business and whether you require a GST # for your business.

• WCB (Workers Compensation Board), may be a requirement for your business to operate. Income security and personal liability are considerations when determining if your business should carry WCB.

• It is also an important issue to comply with the privacy act legislation and how it applies to your clients and the information that they give you.

• Make sure that you adhered to the technology requirements that pertain to your service or product that you offer.

• Municipal governments need to be contacted to determine if you require a license to conduct your business or permit to locate your business operations in your home and any requirements to comply with zoning ordinances.

Setting up an accounting and bookkeeping system is imperative to your business success. CRA will require you to file a tax return and a GST return. Trying to gather your invoices, bank statements and business receipts at the year end will complicate your life and increase your chances to lose information which in turn may result in lost income. It is not how much you make, but rather it is how much you keep. Accounting for the expenses and income properly will keep more of the money that you earn and ensure that you comply with CRA requirements.

Setting up a separate bank account for business is essential whether you are a sole proprietor or incorporated. Mixing your business with your personal banking is a recipe for confusion. If you use credit cards, use two, one for business and one for personal use. This will make your bookkeeping much simpler, save your bookkeeper time and you money.

If you are paid through your own business the EI (Employment Insurance) portion of your Payroll remittances are Exempt. The Self-Employed still have to remit to the government the CPP (Canada Pension Plan) premiums, Provincial tax deductions, and your Federal tax deductions. Remember to register for a payroll number.


What business structure will work best for you? As a Self-Employed business owner you need to decide between the following:


• A Sole Proprietorship, OR

• A Corporation


There are tax advantages in a corporate structure that could provide a significant tax benefit to you financially. Also consider whether your business could be exposed to liability issues. A corporation may be the best choice when your situation is considered. A sole proprietorship works best when there is minimal income and very little exposure to liability issues.

Getting Incorporated does not have to be as complicated as you may think. Registering a corporation can be performed at a registries branch, but beware, that although, you may have a registered corporation, without a proper minute book you may be exposed to financial risk for you and your family. In the event that the owner/s are incapacitated only a properly executed minute book will authorize the proper direction for continuing the daily business functions and avoid costly probate costs. Have a professional incorporate your business properly to ensure that you and your assets are protected.

 

If you decide to become a sole proprietor you may have to obtain a GST #. Your personal tax return will include all of your business activity.

If you decide to incorporate note that a corporation is considered by the Federal Government as being a living entity and as such it has to pay tax. Corporations have to file an annual tax return. Employ the services of a professional accountant to file your corporate returns. A new corporate bank account will have to be opened at a bank or financial institution for your corporation to conduct business. This bank account will have to be different than your sole proprietor bank account if you had one before. If you were a sole proprietor, ensure that you apply for a new GST# for your new corporation to comply with CRA.

Outsource the components that are required to be performed in your business that you are not trained to do or are not the primary activity of your business. As a self-employed business owner there is a danger that too much valuable time will be spent away from working your business. Do what you do best and outsource the rest. Do not perform the tasks that are not primary to your businesses product or service. They are a business expense and your time should be spent on tasks that manage clients or bring in new customers.

What is your exit strategy? Design how you plan to exit your business. The day will come when you will want to retire or quit your business. There are several ways to make your exit in your business. Planning early will make your retirement a success. Setting up your system for turning over your business will mean all the difference in your retirement income and long term security. Check into succession planning.

Ensure your success & reduce your stress by starting your own business right the first time. It is much more difficult if you do it all on your own and try to research all the required components yourself. It is a challenge starting your own business, get the best help in the starting block.


At ASR we can walk you through this maze and make the experience easy.


 

We make it simple.

Allied Self-Employed Resources Inc. Calgary, Alberta

Your Own Business, Your Future Success, Your One Resource