by Janine Morris, Hughesman Morris, Chartered Professional Accountants –
Have you recently started, or are you thinking about starting your own business? While this can be a very exciting venture you are eager to dive right into, it’s important to slow down and make sure you take the appropriate preliminary steps. If you want your business to succeed, you need to set yourself up for success right from day one.
1. Seek professional advice. This may involve speaking with a lawyer, accountant, bookkeeper, etc., but most often starts with an accountant. They will advise you what legal form your business should take, the associated tax and accounting implications and what other professionals you should speak with.
2. Business planning and administration. Consider how you will manage your business and what processes are needed. How will you manage your cash flows? How will the bookkeeping be handled and by whom? When should invoices be issued and employee paid? Talking with the appropriate professionals will help you make these important decisions.
3. Bank account. Banks require a separate bank account for business. This will also help to simplify your bookkeeping and cash flow management.
4. Corporate share structure. If you incorporate, share structure can be very important but is often overlooked by new business owners. Talk with both your lawyer and your accountant to ensure your share structure is set up appropriately.
5. Sales tax. Before you start, determine if your business should register for GST/HST and PST. Some revenues are taxable for GST/HST purposes, while others are exempt or zero-rated. Many revenue streams are not subject to PST, but the rules governing this tax are more complex than GST/HST. Ask your accountant to ensure your understanding is clear.
6. Worksafe BC. Coverage is optional for a sole proprietor with no employees. If your company is incorporated, coverage is mandatory. If you pay subcontractors and they do not have their own coverage, your company will be liable if the subcontractors are injured while working for you.
7. Remuneration. As a sole proprietor, taxes are payable on your net business income regardless of what you actually pay yourself. If you are under the age of 65, your earnings will likely be subject to CPP premiums as well. If you are incorporated, you can choose to pay yourself wages, dividends or a mix of the two so it’s important that you have a clear understanding of the various implications associated with each option.
For more information, visit www.sidneyaccountants.ca.
