How to Register a Small Business in Quebec

Many budding business owners are interested in setting up a small business or becoming self employed, either on a full time or part time basis, but are not really sure where to start.  The process of registering a business in Quebec, depending on your circumstances,  can actually be quite simple or it can be a little more involved.  Below we look at the questions that you need answer to determine your business registration obligations:
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Should you Register or Incorporate Your Small Business?

One of first decisions you have to make when embarking on your small business venture is the type of business structure to select.  There are essentially two choices – business registration (sole proprietorship or partnership) or incorporation.  Like many small business decisions, the answer can be ambiguous and depends on the business owner’s specific set of circumstances

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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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To Inc. or Not To Inc.

The decision to incorporate is one that most small businesses face at some point in their lifetime.  Incorporation, literally, represents the creation of a new person.  Whereas a sole proprietorship is an extension of one's self, a corporation takes on a life of it's own; it can give birth to subsidiary, marry via a merger and die with a dissolution.  It has to file it's own tax return, can be sued and has a set of rules that govern it's existence.  Below are some of the points to consider when deciding whether to incorporate:

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7 Measures in the 2013 Federal Budget that Affect Your Small Business

While the Federal 2013 budget or the (more interestingly named) Economic Action Plan delivered on March 21, 2013 was not earth shattering in any way, it is interesting to note how well Canada is performing relative to other countries in the G7.  According to the EAP, The Canadian economy has experienced the best performance among the Group of Seven (G-7) countries over the recovery, with the strongest record of economic growth and job creation.  950,000 jobs have been created since July 2009, the majority of which are full time positions in high wage industries. Additonally, Canada is only G-7 country to also have more than fully recovered business investment loss during the recession.  And although the recovery has been broad based, investment in the manufacturing sector has been particularly strong.

The EAP also notes that while GDP growth over the next five years remains unchanged, expected growth for 2013 has been revised to 1.6% down from 2.0%.  This will be offset by higher estimated growth between 2015 and 2017.  Consequently, economists expect lower inflation in 2013.  The CPI inflation in January 2013, compared with the prior year, was 0.5% while inflation for all of 2013 is expected to be lower than average at 1.3%.   They also expect that the Canadian dollar will remain at par with the US dollar.

The 2013 budget introduces and extends certain initiatives for small business, while also impacting taxes payable for small business owners:

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Deferred Revenue and its Impact on your Small Business

Most small business owners are familiar with the concept of revenues, which is essentially the total sales of their product or service, to customers and clients, prior to deducting any costs.  Revenues are a crucial component of business’ profit and loss statement and it is essential that they are accurate so that the business owners may effectively analyze the profitability of their businesses.  Additionally there are third parties for which the accuracy of the revenues, and corresponding financial statements, is essential for effective decision making.  Third parties include tax authorities, banks, partners and key employees (on which remuneration/bonuses might be based). 

At first glance the calculation of total sales/revenues seems fairly straightforward.  Add up your total sales (or ideally have your accounting software do it for you) and voila – you have your gross sales. There are, however, several types of adjustments that need to be made depending on the nature of the sale, including any amounts that might be construed as deferred revenues.  Essentially (and quite simply) deferred revenues represent sales that are invoiced their customers now for goods or services to be provided at a later date.   Revenue recognition principles dictate that, unless the sale has actually occurred, the revenue cannot be recognized.  In other words these amounts must be reflected as deferred revenues.  Once the product or service has been delivered or performed, the deferred revenue is then considered to be an actual sale/revenue.  To a non-accountant, this can sound like a lot of mumbo jumbo.  The examples of deferred revenue below should help illustrate the concept more clearly:

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Guidance on Registering for Payroll and Remitting Source Deductions

 

There comes a time for many small business owners when they decide that they need to hire employees.  This is usually an excellent sign as it means a) the business is growing and b) the small business owner has learned to delegate.  It also means that additional paperwork needs to be filled out and additional taxes need to be paid.  The simplest option when deciding to augment your workforce is to have the new worker invoice the business, based on hours worked or some other formula.  Unfortunately, there are very specific rules as to who qualifies as a self employed contractor.  Essentially, if your worker  is working full time, has little flexibility and you provide the tools, then the tax authorities will classify them as an employee.  In this case, you must take your new worker on as an employee, register for payroll, pay them a salary and submit regular, periodic payroll reports and payments to the Canada Revenue Agency (CRA).  As usual, if you live in Quebec, you must submit to Revenue Quebec (MRQ) as well.  The registration procedure is discussed below:

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Revenue Canada Interest, Penalties and Payment Arrangements for Income Tax and GST/HST Returns

Whether you are an individual or a business in Canada, taxes are an inescapable part of your existence.  All sources of income need to be calculated, tax returns needs to be filed and taxes owing must be paid.  This is somewhat facilitated if you are an employee as your employer tends to take care of the majority of remittances.  Self-employed individuals, sole proprietorships, partnerships and corporations on the other hand, must account for their income and expenses , determine taxes payable  and remit the appropriate amounts.  Additionally, businesses are also responsible for other filings including GST/HST and QST and payroll.  A lack of knowledge, imperfect accounting systems and the business of running a business sometimes interfere with the timeliness of filings.  The Canada Revenue Agency attempts to curb these tardy behaviours by imposing penalties and interest on late filings as follows:

Unincorporat

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3 Provisions from the 2011 Federal Budget that Benefit Small Businesses

Although the 2011 federal budget tabled in March was not directly responsible for an election, a change in government and one of the most interesting election results in recent history, it was certainly a contributing factor.  When the excitement was over however, the budget pretty much remained the same.  The budget’s primary focus is the economy and includes provisions to stimulate jobs and growth, while, for the most part, maintaining current tax rates.  Some provisions that impact small business are discussed below:

Temporary Hiring Credit 

A one-time credit of up to $1,000 based on the increase in an employer's employment insurance (EI) premiums paid for 2011 over those paid for 2010. 

Small businesses whose EI premiums were less than $10,000 in 2010 and whose premiums increased in 2011 from 2010, are eligible for a one time credit.  The credit will be automatically calculated when you submit your T4s and summaries for 2011.  The deadline, to be eligible for the credit, is January 15, 2015 (if you haven’t filed your T4s by this time, you probably have bigger problems). 

Note that you cannot reduce your payroll deductions by the amounts anticipated.  You must wait for the CRA assessment subsequent to filing your T4 returns.

Further info can be found here

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Is the Quick Method of Reporting GST/HST & QST the Right Choice for your Small Business

If you are self employed or a small business with annual sales between $30,000 and $200,000, it might make sense to select the Quick Method of reporting your GST/HST and QST (note that if your sales are less than $30,000 you are not required to collect sales taxes).  While regular reporting of sales taxes requires that you calculate all amounts collected and paid on eligible expenses, the quick method requires the application of a single rate to your sales.  The key details of the Quick Method and its suitability for your business are discussed below:

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Are You Ready For Real Estate Moguldom? The Business and Tax Implications of Owning Rental Property

From the Rothschild family to John Jacob Astor to Donald Trump, a great many fortunes have been made in real estate.  Conversely, as was evidenced in 2008 with the deflation of the housing bubble, many fortunes have also been spectacularly lost.   Fortunes aside, owning real estate is one of the best ways to build equity.  If you own your home, you are already one step ahead.  With rental property, you can further augment your net worth while, after investing the necessary down payment,  having the investment pay for itself (Leaving you free to move on to buying your next property).  This is not a decision to take lightly and there are several business and tax factors to consider before taking the plunge:

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The Parable of the Toy Soldier: How a Small Gaming Business Became a Victim of their Own Success.

This story has all the ingredients of a great novel - drama, intrigue, the Chinese, hostile takeovers and a guy named Lonnie.   It has shaken the world of miniature gaming, where excitement is usually imagined rather than real.  And, although the details are murky, it is an excellent case study that demonstrates how mistakes made by business owners can result in severe and unintended consequences.

On January 17th, the founder of Wargames Factory, Tony Reidy issued an open letter:

Wai Kee Hui - if your true intention is to salvage this company and pay back the debts - you have started down the absolutely wrong path.

I understand that this is so far beneath you because you run so many multi-yuan millions businesses - but if you want to salvage anything, you are proceeding in the absolutely worst direction right now.

Your faith in Lonnie Mullins is incredibly misguided. You're trusting a guy who threw me under the bus in order to save his own skin. A guy who has no honor whatsoever.

Read full letter Open letter from Tony Reidy

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Quebec's Gift Card Legislation and the Solidarity Tax Credit

Some interesting (somewhat) new legislation from Quebec's Consumer Protection Act regarding gift cards eliminating expiry dates and requiring refunds of amounts under $5.  And a new (but) old tax credit from Revenue Quebec, requiring eligible taxpayers to sign up for direct deposit.
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New Revenue Quebec Requirements for Mandatory Billing/SRMs in Restaurants

To combat perceived tax evasion in the restaurant sector, Revenue Quebec(MRQ) has implemented a new program which requires all businesses in the restaurant sector to comply with certain rules, most notably the installation of a Sales Recording Module (SRM), that has been selected by the MRQ.  To compensate for the costs of installing the system, Revenue Quebec is (kindly?)offering a subsidy, the amount of which is dependent on the date of the installation.  Below are some of the key details relating to the program:
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How to Forge a Successful Partnership

 


Finding the right partner, whether creative, life or business, can be a difficult endeavour.   Very few of the people that we interact with on a regular basis, no matter how much we like them are actually suitable partnership material.  Anyone who has been in a relationship can attest to this.    It can be difficult to escape the inevitable irritation that comes with knowing someone too well.  Potential partners, who seem perfectly compatible at the beginning, end up being too much like us or too different (or occasionally psychotic).   For a partnership to work, it is vital to sustain an attitude of mutual respect , trust  and compromise.  It also helps to not spend every waking moment together .  Both parties must recognize the value of each other’s skills and abilities and be willing to entertain their ideas, no matter how stupid they seem.  Additionally, an ideal partner should be compatible, but also different enough that they complement your skills and bring an alternative perspective to the table.   Conflict is often the spark that helps drive innovative thinking.  But conflict, as we know, can also result in irreconcilable differences.  As such, a good partnership should have its own built in conflict resolution.  As with any relationship it helps to have a good sense of humour as it can be invaluable in diffusing a tense situation.

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American Apparel's Financial and Legal Woes Continue

As evidenced by their most recent quarterly filing, American Apparel's continues to grapple with financial issues.  Despite its strong brand recognition (among a host of accolades, they were named "label of the year" by The Guardian in 2008), it's reputation as a trendsetter, and it's provocative advertising, they are struggling to survive. The company lost $9.5 million in the 3rd quarter of 2010 (alone)  compared with a profit of $4.2 million for the same period in 2009.  Exacerbating the problem is the resignation of their auditors, Deloitte and Touche, in August, 2010 who claimed that there were "potential material errors in the consolidated financial statements for 2009".  This has become the subject of an official FBI criminal investigation. 
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Accountant Shenanigans: Paul Beckwith (Hospira, Inc.)

The SEC has filed a complaint against Paul Beckwith, CPA alleging unauthorized transfers and embezzlement of funds from Theradoc, a Utah based medical management systems company, where Beckwith was employed as assistant controller .  The company had been acquired by Hospira, Inc., a company listed on the NYSE, in December, 2009.  Some of the more interesting details from the SEC complaint are as follows:
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Small Business Jobs and Credit Bill: Key Provisions

The US senate passed the Small Business Jobs and Credit Act, introduced on May 13, 2010, by a vote of 62 to 38.  The vote included the support of two republicans - George Voinovich of Ohio and George LeMieux of Florida.  The bill will go back to the House of Representatives where democrats are hoping it will be approved without delay.  Some of the key provisions of the bill are as follows:

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Noteworthy - Sept 12, 2010: Rule of 20 for Retirement Savings, Tips for Saving on Hotel Rooms, Will Drafting Software Reviewed

  • How much do you need to retire? The Rule of 20.

This article at Canadian Finance reveals how for every dollar of desired retirement income you need to have $20 of savings in your retirement account.  Desired retirement income calculations should deduct estimated government pension income (assuming that we still have a pension fund) and apply a factor of 20.

  • How To Save Money on Hotel Rooms

Boomer and Echo discuss 5 ways to save money when getting a hotel room, including calling the hotel directly after identifying discounts with online travel sites like Expedia.  Since hotels have to pay a fairly high fee to these sites, they are often happy to extend a discount directly to the customer as it ends up costing  them less.

The NYT looks at 4 software options for writing a will and concludes that it is still useful to have a lawyer at least review it.  Any will drafting software has inherent limitations and does not provide for situation specific advice and guidance. 

 

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Accountant Shenanigans: Derma Wand

For one simple payment of $119.80 plus $14.95 S&H you can purchase the Derma Wand, a pen like device that promises to take years off your face and provide instant rejuvenation.  If one were reading their financial statements it would seem that a large number of people had bought into the hype and purchased their product.  Unfortunately, however, for Derma Wand, it was discovered recently that this was not the case.  In early August, the SEC charged Karl Redekopp, CGA and former CFO of ICTV, with fraudulently inflating sales thereby turning profits into losses. Some of the key details are as follows:
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