1. Should I Incorporate?
Probably one of the most commonly asked questions from individuals looking to start a new business is whether or not they should incorporate. Every person is different, and of course, the circumstances around his or her business are as well. To assist you in determining if and when you should incorporate, here are some food for thought items.
- Is there risk involved in your business, and therefore you wish to have the liability protection
- You hope to sell the business at some point down the road or pass it on to the next generation
- You are looking at obtaining credit or lines of credit from suppliers
- You may have potential investors in the business
- The name of your business is important, and you wish to protect it
- The business has the ability to grow and earn more than what is required by the business owners
- Employees or contract workers will be hired
This is a simple list of items to consider and if you are saying yes to a number of these items, incorporating the business may be a more viable option for your business start.
2. How Do I Choose a Year-end For a Corporation?
The bulk of people choose December 31 as the year-end for the corporation. Often this is believed to be the best or only option; however, it may not be the best time for you and your business to be pulling all the documents required for the year-end filing. Most businesses are quieter in the summer, and for others, it is the winter. Why not choose a year end that suits when both you and your business have the time to set aside to complete the requirements of a year-end filing?
If your business slows down in the summer, you can make your year-end June 30, and if your business slows down in winter, you can make the year-end March 31. Another point to consider is how busy your accountant or bookkeeper will be. The busiest time of year for this profession is from January 1 to April 30 as December 31st is not only the most common corporate tax season, but it is only the time every individual in Canada is personally preparing to file their tax returns.
3. Should I Open an HST Account After I Incorporate?
Every business needs to consider setting up an HST account. From when you first start your business whether it’s an incorporated business as we are speaking about or a small business, the HST account is a tax charged for both services and products across Canada. The HST is mandatory when the business earns $30,000.00 within the fiscal year for a corporation or yearly for a small business. Before the business earns $30,000.00, you can either opt into the HST set up or not. Once the business has earned the $30,000.00, HST becomes mandatory.
Some things to consider are how much your expenses are to start the business? If the business is spending a fair amount of money to begin, applying for HST from the start may be a benefit to you as you can use what you have put out in HST against what you bring in.
Are you dealing with corporations or individuals? If your clients tend to be corporations and other businesses, typically, they want the HST charge from you and may question why you don’t have an HST account. If your clients are individuals, you may want to use the NO HST as an incentive for them to purchase until you earn that $30,000.00.
4. What Expenses or Write-offs Can I Use For My Business?
Many items can be listed as business expenses when they assist you to operate your business. Some you can fully expense and others, such as a vehicle or your home, is a portion of the overall expenses because you are using these items partially for business and partly for personal. When going through the listing, consider and track how much you use for yourself and how much you use for the business and mark a percentage when applicable.
Here are some examples of items that may be considered business expenses:
- Office supplies
- Meals and entertainment
- Vehicle costs, fuel, repairs, insurance, parking
- Phones and cell phones
- Rental space or home office
- Business insurance
- Property taxes, utilities
- Education, seminars, conferences
- Gifts to clients
- Association fees or memberships
- Software, hardware, licensing
- Signage, advertising, promotional material
- Events, hotel stays, taxi, Uber or Lyft expenses
- Professional fees, lawyer, accountant, suppliers
The best thing to do is to keep track of all of your monthly expenses and, with the assistance of an accountant or bookkeeper, over time it will be clear to you what monthly expenses you can use against the operation of the business.
5. Should I Get Business Insurance?
In a few short letters, yes, yes, and yes. When you incorporate your business, you do have the furthest reach between you and your business from a liability perspective, but that doesn’t mean you shouldn’t also find business insurance to protect the business assets. The best place to start if you don’t know where to obtain business insurance is to contact the company that holds your house or car insurance, if they don’t offer business insurance, they will most likely have referrals for you. If your business will be operating out of your home, it is best to notify your home insurance company of this, especially if you have clients or suppliers coming to the door. Having the business out of your home does increase your risk, and you want to ensure you are covered if someone or something is hurt or damaged on the premises.
We have been assisting those individuals to incorporate for over 25 years.
If you would like to look at some additional information and perhaps incorporate with us, here is the link to do so:
If you have any questions, please feel free to reach out and speak to one of our dedicated staff who are always eager to assist new business owners.
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Ontario Business Central Inc. is not a law firm and cannot provide a legal opinion or advice. This information is to assist you in understanding the requirements of registration within the chosen jurisdiction. It is always recommended, when you have legal or accounting questions that you speak to a qualified professional.