Government regulations aside, it really isn’t that difficult to start a small business if you progress through the appropriate stages. Most challenging is the planning and market research you should do ahead of time to ensure your business will be viable. It takes effort, planning and financing to be successful and there aren’t really any short cuts through the process. Once you know the type of business you want to run, follow some basic and common sense steps, and you should be on your way.
Map out your business plan
Your business plan should include information on the following: your business structure, industry, products and/or services, market, competition, management, sources of financing, operating strategy and financial projections. There are numerous sources of guidance that can be found on the internet for further guidance.
Choose a business name and register
Two matters must be addressed when you are choosing a name for your business: the marketing potential and legal elements. Your customers and clients must be able to remember your business name and also be able to find it easily if they’re searching for it—online, or in a phone book or directory. It should also be strong, possibly catchy, and have a positive connotation that suits your particular business. Many people also think it’s wise to include words that provide information on the business, such as “Gardening,” “Trucking” or “Cleaning Services.”
As for the legal aspects, you can register your business as a sole proprietorship, a partnership or a corporation. We can provide more details on the advantages and disadvantages (financing, taxation, government assistance) on how to structure your business to suit your particular situation. Still, it is a prerequisite to register most businesses. The exception to this rule occurs if you operate under your personal name only, e.g. John Smith. However, if you choose that route, you cannot add anything to your name, such as John Smith Publishing.
Get small business financing
Many small business owners choose to finance their business with personal funds, but not all individuals have the funds available and need help from other sources. Further, bear in mind that start-up businesses may have a difficult time meeting bank requirements for direct business loans.
First you must establish what kind of financing you are seeking. If you need to borrow money to run the business, the traditional option is to borrow from a bank or credit union. Generally, short-term demand loans must be repaid within an established period of time. You can also arrange a term loan to finance business assets like capital equipment or renovation costs. Another option would be an operating line of credit whereby you are given a pre-determined amount of credit based on accounts receivable and inventory assets.
If you need equity financing—money acquired from your savings and/or investors—the customary sources for small business are friends and relatives or angel investors. Any of these groups would expect a percentage of your business in return for their equity financing.
Set-up a business bank account
Visit your bank and set-up a separate business bank account and arrange for business cheques and online banking.
Set-up accounting records
It is extremely important to keep track of your business transactions and to have the ability to determine how your business is doing financially on a regular basis. Regular and accurate financial reporting is a key requirement to effectively manage your business, think about generating and reviewing monthly balance sheets and income statements. Many of our small business clients use the ‘Quickbooks’ accounting software.
Obtain your business identification number from CRA
If you choose to operate through a company or partnership, you must register with the Canada Revenue Agency (CRA) to obtain a Business Identification number (BIN).
Register for HST/GST
If you start a small business that has a gross income exceeding $30,000, you must register for GST/HST. It might be wise to register for GST/HST even if your business doesn’t make very much to begin with because of Input Tax Credits (ITC). The ITC allows you to recover any GST/HST your business pays on capital equipment and expenses. Registration is with the Canada Revenue Agency (CRA).
Register for payroll deductions
If you will have any employees (including yourself, if operating through a corporation) then registration for payroll deduction with the Canada Revenue Agency (CRA) will be necessary.
Workplace Safety and Insurance Board (WSIB)
Generally, you must register with the Workplace Safety and Insurance Board (WSIB) to ensure coverage for both yourself and employees. There are some exceptions and registration can be arranged by calling your local WSIB office.
Employer health tax registration
If you expect your annual gross payroll will exceed $400,000, you should register with the Employer Health Tax office. Employers must remit health tax for annual payroll in excess of $400,000.
You should be ready to protect your business by ensuring you have the right kind of business insurance. While insurance can’t eliminate every potential risk that might threaten your business, you should clearly consider some of the basic insurances: property, liability, and business interruption.
These are just the basic stages towards starting your own business. We can help you with more detailed assistance and advice with any of the above stages, please contact:
Christine Mills, CA, CPA (Illinois)
Nick Simonetta, CPA, CA