3,009
edits
Difference between revisions of "Starting a Small Business"
Jump to navigation
Jump to search
Starting a Small Business (view source)
Revision as of 06:27, 8 February 2019
, 06:27, 8 February 2019no edit summary
Dial-A-Law (talk | contribs) |
Dial-A-Law (talk | contribs) |
||
| Line 7: | Line 7: | ||
===Option 1. Buy an existing business=== | ===Option 1. Buy an existing business=== | ||
One way to start a business is to buy an existing business. You can buy either the shares of a business or the assets. Buying the assets is usually less risky. Both options have pros and cons. | One way to start a business is to buy an existing business. You can buy either the '''shares''' of a business or the '''assets'''. Buying the assets is usually less risky. Both options have pros and cons. | ||
====Advantages==== | ====Advantages==== | ||
| Line 57: | Line 57: | ||
If the business makes money, it will be taxed as your personal income — you don't get the benefit of the lower, small-business tax rate. On the other hand, as many businesses don’t make money in the first few years, you’ll have tax deductions you can use personally. A good rule of thumb is to save a percentage equal to your potential taxes so you don’t have a large tax bill at the end of the year. | If the business makes money, it will be taxed as your personal income — you don't get the benefit of the lower, small-business tax rate. On the other hand, as many businesses don’t make money in the first few years, you’ll have tax deductions you can use personally. A good rule of thumb is to save a percentage equal to your potential taxes so you don’t have a large tax bill at the end of the year. | ||
If you start with a sole proprietorship and things go well, you can always incorporate a company later and transfer the business to the company. Then you get the benefits of carrying on a business through a company instead of personally. This is called a | If you start with a sole proprietorship and things go well, you can always incorporate a company later and transfer the business to the company. Then you get the benefits of carrying on a business through a company instead of personally. This is called a “'''roll-over'''” in tax language. | ||
===Option 2. Partnership=== | ===Option 2. Partnership=== | ||
| Line 68: | Line 68: | ||
====A way to limit your liability==== | ====A way to limit your liability==== | ||
A '''limited liability partnership''' (LLP) can limit your liability for another partner’s actions. You should discuss it with a lawyer. Our information on forming a partnership (no. 266) has more on this. | A '''limited liability partnership''' (LLP) can limit your liability for another partner’s actions. You should discuss it with a lawyer. Our information on [[[Forming a Partnership (Script 266)|forming a partnership (no. 266)]] has more on this. | ||
For tax purposes, each partner treats their share of the partnership's profits as personal income. | For tax purposes, each partner treats their share of the partnership's profits as personal income. | ||
===Option 3. Incorporated company=== | ===Option 3. Incorporated company=== | ||
A '''company''' is a separate legal entity from its owners. A company is liable for its own debts, owns its own property, and can sue or be sued. Its owners, called shareholders, enjoy limited liability. This means their personal assets are generally not at risk and they are not personally liable for the company’s debts. They risk losing only their initial investment to buy shares and any shareholder loans they made to the company. | A '''company''' is a separate legal entity from its owners. A company is liable for its own debts, owns its own property, and can sue or be sued. Its owners, called '''shareholders''', enjoy '''limited liability'''. This means their personal assets are generally not at risk and they are not personally liable for the company’s debts. They risk losing only their initial investment to buy shares and any shareholder loans they made to the company. | ||
====Disadvantages==== | ====Disadvantages==== | ||
But sometimes this isn't as good as it sounds. Lenders often insist that shareholders of small companies personally guarantee the company's debts, so the lender is sure of getting repaid even if the company can't pay. And in some cases, a shareholder may be personally liable for a company's debts. Shareholders are not required to provide any work or services for the company unless there’s a contract requiring them to. You should have a shareholder’s agreement to deal with these topics. A lawyer can help with that. | But sometimes this isn't as good as it sounds. Lenders often insist that shareholders of small companies personally guarantee the company's debts, so the lender is sure of getting repaid even if the company can't pay. And in some cases, a shareholder may be personally liable for a company's debts. Shareholders are not required to provide any work or services for the company unless there’s a contract requiring them to. You should have a '''shareholder’s agreement'' to deal with these topics. A lawyer can help with that. | ||
====If you decide to incorporate==== | ====If you decide to incorporate==== | ||
| Line 87: | Line 87: | ||
In addition to filing tax returns, each year a company must file either provincial or federal corporate returns with the corporate registry in the jurisdictions where it operates. | In addition to filing tax returns, each year a company must file either provincial or federal corporate returns with the corporate registry in the jurisdictions where it operates. | ||
For more information on incorporating a company, see our information on forming a private company (no. 267). | For more information on incorporating a company, see our information on [[[Forming a Private Company (Script 267)|forming a private company (no. 267)]]. | ||
==Next steps== | ==Next steps== | ||
| Line 99: | Line 99: | ||
You get a business licence from your town or city hall. The cost will vary depending on the type of business and whether it's operated from commercial or residential premises. | You get a business licence from your town or city hall. The cost will vary depending on the type of business and whether it's operated from commercial or residential premises. | ||
You can get the name approval from the provincial government. | You can get the [https://www.bcregistrynames.gov.bc.ca/nro/ name approval] from the provincial government. | ||
Many banks won’t give you financing until you have a business licence and name approval. | Many banks won’t give you financing until you have a business licence and name approval. | ||
| Line 107: | Line 107: | ||
===Employee accounts=== | ===Employee accounts=== | ||
If you plan to have workers, you’ll have to set up a payroll program account with the federal government. You use this account to withhold your workers’ income tax deductions, Canada Pension Plan contributions, and Employment Insurance (EI) premiums to pay to the government. | If you plan to have workers, you’ll have to set up a [https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/payroll-overview/employer-responsibilities-payroll-steps/opening-a-payroll-program-account.html payroll program account] with the federal government. You use this account to withhold your workers’ income tax deductions, Canada Pension Plan contributions, and Employment Insurance (EI) premiums to pay to the government. | ||
You’ll need to register with WorkSafeBC so your workers are covered in the event of a workplace accident or illness. | You’ll need to [https://www.worksafebc.com/en/insurance/need-coverage/employers-responsibilities register with WorkSafeBC] so your workers are covered in the event of a workplace accident or illness. | ||
You may also have to set up accounts for Goods and Services Tax (GST) and Provincial Sales Tax payments. | You may also have to set up accounts for Goods and Services Tax (GST) and Provincial Sales Tax payments. | ||
| Line 123: | Line 123: | ||
==Get help== | ==Get help== | ||
===With more information=== | ===With more information=== | ||
Small Business BC has information and guides on starting a business. Call 604-775-5525 in Vancouver or 1-800-667-2272 elsewhere in the province. | [http://www.smallbusinessbc.ca/ Small Business BC] has information and guides on starting a business. Call 604-775-5525 in Vancouver or 1-800-667-2272 elsewhere in the province. | ||
Innovation, Science and Economic Development Canada has information and guides on starting a business and incorporating a federal company. | [http://www.ic.gc.ca/eic/site/icgc.nsf/eng/home Innovation, Science and Economic Development Canada] has information and guides on starting a business and incorporating a federal company. | ||
For more information on incorporating a BC company, check the BC Corporate Registry website. | For more information on incorporating a BC company, check the BC [http://www.bcregistryservices.gov.bc.ca/bcreg/corppg/index.page Corporate Registry website]. | ||
Many school boards and colleges offer seminars on starting a business. Your public library has a wealth of information including trade directories and information on sources of government assistance. Talk to other people who have started their own business. A lawyer, accountant or bank manager can advise you on certain matters. | Many school boards and colleges offer seminars on starting a business. Your public library has a wealth of information including trade directories and information on sources of government assistance. Talk to other people who have started their own business. A lawyer, accountant or bank manager can advise you on certain matters. | ||
===Registering your new business=== | ===Registering your new business=== | ||
The provincial OneStop Business Registry website lets you apply for various business licences and registrations at one time. It also refers you to “kiosks” where you can get a real person to help. The OneStop Help Desk number is 250-370-0332 in Victoria or 1-877-822-6727 elsewhere in BC. | The provincial [http://www.bcbusinessregistry.ca/ OneStop Business Registry website] lets you apply for various business licences and registrations at one time. It also refers you to “kiosks” where you can get a real person to help. The OneStop Help Desk number is 250-370-0332 in Victoria or 1-877-822-6727 elsewhere in BC. | ||