After you have done your market research and decided on what services/products your business is going to specialize in it’s time to do the formal part. Spending time setting your business up can save you a lot of trouble in the long run.
- What kind of structure do you want to go with?
This is a conversation you should have with your Lawyer and Accountant ahead of time. Many factors come into play when choosing this. Once you register your name with NS Registry of Joint Stock you are automatically a Sole Proprietorship. To Incorporate you should have a Lawyer file the paperwork. Here are a few highlights of the main structures:
-Easy to set up
-Light regulatory burden
-Losses can be used to offset other income
-Potential creditor protection
-Split income with other shareholders
-Can be easier to borrow money
2. Pick and register the name
The NS Registry of Joint Stock is where you can do this. Before you submit the request for your new business name you should look through their database (available online) and make sure no one else is using the same name. Once you decide on a name you can register the name online also through the Joint Stock Website. If you prefer to do it in person the forms can be printed from their website and brought to any Access Nova Scotia office. Once this is done you officially have your business started!
You only need an HST number if your sales are more than $30,000 in a year. If your sales are less than this you don’t have to file any HST returns (or collect it). To get an account number you can either call CRA or register for it on their website. When you register CRA will tell you how often to file your HST returns. An HST return shows your sales, HST collected, and HST paid. You only remit to CRA the difference between what you collect and what you pay out. Don’t forget to check out my HST blog post
CRA phone number and website:
If you plan on hiring staff you will need a payroll account with CRA. This will be the same as your HST number (if you need one) except it will have “RP” instead of “RT” in it. Once you hire and pay staff you will need to remit to CRA each month CPP, EI and taxes. You will remit the amount you withheld from the employees pay plus the companies portion. These are due to CRA by the 15th of the following month. I strongly recommend using a payroll service to help with payroll. They can manage the amount of deductions, handle remitting the funds to CRA and producing pay statements and T4’s at the end of the year. There are lots of different companies that offer this so shop around for the best fit.
5. For Your Taxes
If you are a Sole Proprietorship your tax year is the calendar year. The return for the business is done within your normal tax return. If you are incorporated it is a separate and more complicated tax return and you have the option of picking your tax year. Have a conversation with your Accountant about this. Generally I advise to not follow the calendar year but it depends on each situation.
Some general comments on deductions:
-Keep all receipts and statements
-Can be digital, CRA is fine with electronic receipts as long as they can be read (emails, scans, pictures etc.)
-Anything “reasonable” you spend to earn an income can be deducted (for example cloths would not be deductible, branded cloths with your logo that you wear to jobs would be).
-If you purchase something for more than $500, something that would be ongoing for the business to use (i.e. tools, computer, vehicle), this would be expensed over several years.
This isn’t an exhaustive list but will give you a blueprint of what to do to start your venture. I encourage you to talk to a Lawyer and an Accountant to make sure your business is set up for protection, growth and tax efficiency. Feel free to call if you would like to discuss more.