The Many Hats of Self Employment

Being self employed comes with many benefits.  You can sleep in, work in your pyjamas and go shopping in the middle of the day.  You no longer have to report to a boss who doesn't really understand what you do or deal with mindless workplace politics.  It all sounds wonderful, but unfortunately there are also many challenges.  Small business owners have to deal with uncertainty and risk.  They need to be disciplined and deal with the many demands that being self employed can impose upon us.  In the early stages of self employment, most of us have to take on the responsiblity of fulfilling the administrative functions that you find in a more established business. Some of the skills that you need to develop are:

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Guidance on Deducting Home Office Expenses

One of the benefits of having a home based business (for freelancers, self employed contractors and small business owners) is that you can deduct the expenses relating to the space that you use to work.  This can result in a significant reduction in your tax bill for costs that you would incur regardless, giving you one more reason to love being your own boss.  

Criteria for Deductibility:

For home office expenses to be deductible, they have to meet the following criteria: 

  • It has to be your principal place of business i.e. you cannot deduct home office expenses if you have another office that relates to your business, elsewhere, even if you work 22 hours a day or you check your blackberry in bed.
  • The space designated as your home office is used to earn business income and/or you meet clients or customers on a regular basis.  You can deduct expenses relating to the workspace in your garage which is used for home improvement projects.
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Employee vs. Self Employed: Criteria and Considerations

For the majority of income earners, employment status is pretty evident.  If you are going to the same place every day,  have an assigned cubicle with a computer and corporate stapler, and your boss tells you what you need to do, chances are that you are an employee.  Conversely if you have several clients, use your own laptop, and are worried about where your next  sale is going to come from, you are most likely, self employed.

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7 Qualities of Highly Desirable Clients

“I want to create a rival to Twitter. So I want it exactly the same except where it says What’s Happening? I want it to say How are you feeling?”(From the very funny "Clients from Hell")

This pretty much sums up the type of client we don't want - ridiculous expectations, unimaginative and just plain clueless. Conversely, there are some clients that are a pleasure to deal with.  Ones that ask great questions, and make us feel happy to have chosen the entrepreneurial route.  The more important of these are listed below:

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GST and QST Considerations For New Business Owners

The Goods and Services Tax or GST is a consumption tax that is charged on most goods and services sold within Canada, regardless of where your business is located.  Subject to certain exceptions, all businesses are required to charge GST , currently at 5%, plus applicable provincial sales taxes.  A business effectively acts as an agent for Revenue Canada by collecting the taxes and remitting them on a periodic basis.  Businesses are also permitted to claim the taxes paid on expenses incurred that relate to their business activities.  These are referred to as Input Tax Credits.

Does Your Business Need to Register?

Prior to engaging in any kind of commercial activity in Canada, all business owners need to determine how the GST and relevant provincial taxes apply to them. Essentially, all businesses that sell goods and services in Canada, for profit, are required to charge GST, except in the following circumstances:

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9 Tips For Managing Your Customer Receivables

Having Accounts Receivable i.e. amounts owing by customers is both good and bad.  It's good because it means that you have sales and customers.  It's bad because it is cash that you don't have now, and there is always a possibility that you won't collect.  When you offer credit terms to your customers it is extremely important to have a system in place to manage your accounts receivable.  It is difficult to collect amounts due when you don't actually know how much you are owed or when it is due.  Having the information at your fingertips  (this really relates to any kind of information) also makes a great impression. Below are some steps to help manage and collect on your accounts receivable:
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Are You Ready to Start Your Own Business?

The contemplation of starting your own business can be a very gratifying exercise.  It allows you to    create an alternate existence (sort of like what you would do if you had a million dollars) where you are your own boss and have a greater purpose than being a cog in a corporate machine. There are many reasons to become an entrepreneur.  But there are just as many reasons not to.  As such, the decision to take the plunge into self employment should be considered very carefully. Below are some resources to help with that decision:
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4 Metrics to Help Improve Your Small Business Cash Flow

In a recent study by TD Bank Financial Group it was determined that one of the primary challenges facing small business was cash flow (The other two were managing clients and government red tape).  This probably comes as no surprise to most small business owners, especially in the early stages.  Of course, the simple answer to this problem would be a limitless source of cash.  (Of course if we had unlimited funds, we may not find it necessary to endure the trial and tribulations of business ownership).  Since this is usually not possible, we need to do the next best thing: analyze our cash flow requirements and find the most cost effective and easily available solution for any shortfalls.  Even the most successful business can find itself shutting its doors if it is not able to manage it's cash flow needs. 

Below are 4 financial metrics, which if monitored regularly, can actually help improve your business' cash flow:

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Guidance on Working from Home

Having a home based business has many advantages -  there's no soul sucking commute to and from work, waking up hours are flexible and it allows us to work when we are at our most productive or creative.  Also, it is tax deductible.  It can, however, also present a unique set of challenges.  Given the proximity of distractions including our beds, fridge and tv, even our primary work tool i.e. our computers, it requires a great deal of discipline and focus to actually get any work done. Below are three articles that provide guidance on having a home office:

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3 Great Resources For Your Facebook Business Page

 

Every small business should consider setting up a facebook business page.  Except for your time (which is an opportunity cost), there are no explicit costs to setting up a page, and the rewards can be significant.  Keep in mind that, after you have set up your page and have found 25 people to like it, you are entitled to a "vanity" url (mine is http://www.facebook.com/montrealfinancial) This, in addition to being kind of exciting, is akin to reserving a domain name for your business.

Below are three articles that provide essential guidance and resources to anyone looking to either setup a business page for the first time, or enhance their existing page.  It is important to note that a facebook page does require regular updates, and  interaction to act as an effective marketing tool.

 

 

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Small Business Confidence Declines in August

According to CFIB's Business Barometer® Index , small business confidence for August fell for the third consecutive month to 64.9 last month, down from 65.7 in July.  The 2010 peak was reached in March when the index was at 69.9.  An index result that exceeds 50 indicates that owners expect their business to grow in the following year.  The figure is significantly higher that it was at the end of 2008, when it was below 40.
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Tax Tips: Employment Insurance for Self Employed Individuals

In January, 2010 the Federal Government extended  Employment Insurance benefits to self employed individuals/small business owners.  The following represents some of the key details:
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Noteworthy: August20, 2010 - Mark Hurd "resignation", Startup Considerations and Traits of Happy Entrepreneurs

  • Quebeckers not overly interested in wealth creation:

Using 20 indicators, it (Quebec Employers Council) gave Quebec good marks for university graduation, taxation on business investment and spending on research and development. That was offset by the need to do more on the economic integration of immigrants, payroll taxes, labour laws and public debt, the council said in its first report card.

  • The real reason Mark Hurd was forced to resign:

Apparently Mark Hurd's "resignation" had less to do with a violation of HP's sexual harassment policy and more to do with Board's fear of bad publicity.  Although improprieties in his expense reports would have given them cause to fire him, they let him resign (along with his $40 million severance) to avoid a possibility of a wrongful termination lawsuit.

  • 10 Things to Consider before Starting your Start-Up

The article contemplates factors to consider including before launching a startup including competition, industry, funding and marketing.

Thriving on risk, patience and being competent at different jobs are all characteristics of an entrepreneur.

Warren Buffet Words of Wisdom

No article about stock market myths  is complete without at least an allusion to Warren Buffet.  The actual quote referenced in the article  is "We've long felt that the only value of stock forecasters is to make fortune tellers look good".  Other gems:

 

  • A girl in a convertible is worth five in the phonebook.  
  • Managers and investors alike must understand that accounting numbers are the beginning, not the end, of business valuation. 
  • I've reluctantly discarded the notion of my continuing to manage the portfolio after my death – abandoning my hope to give new meaning to the term 'thinking outside the box.' 
  • If you understand the business, you don't need to own very many of them. If you have a harem of 40 women, you never get to know any of them very well.
  • I'll tell you why I like the cigarette business. It costs a penny to make. Sell it for a dollar. It's addictive. And there's fantastic brand loyalty. 

And, perhaps his most memorable advice:

  • Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful.