When embarking on a new business venture one of the first decisions that has to be made is the type of legal structure best suits the needs of the new business. In Canada there are essentially two choices - business registration (sole proprietorship or partnership/unincorporated entity) or incorporation. Like many small business decisions, the answer in not necessarily straightforward and depends on the business owner’s specific set of circumstances:Read More
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:
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:Read More
There are three primary ways in which you, as an owner-manager, can withdraw funds from your corporation. You can pay yourself a salary, you can declare a dividend or you can borrow money from the corporation. When you borrow money from your own corporation the Canada Revenue Agency (CRA) has put into place strict rules as to when you have to repay the loan. This is essentially to ensure that the owner-manager does not avoid paying taxes indefinitely.
The basic rule for shareholders loans is that they must be paid in the fiscal year following the year in which the loan was taken. For example, if your fiscal year end is December 31 and you borrow money in 2011, then it must be repaid before December 31, 2012. Failure to repay will result in the loan amounts being included in the shareholder’s income in the year in which the loan was taken, which in this case would be 2011. The loan must also not be considered to be a series of loans and repayments eg. Repaying an amount at the end of 2011 only to borrow again in early 2012.
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Any business that carries out activities relating to development of a new product or process may be eligible for R&D Credits, up to 35%, on qualifying costs including wages, material costs, equipment and overhead.
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Protection against personal liability is a primary reason to for small businesses to incorporate.
If you are unable to pay, the landlord could garner your wages, attach your bank account, put a lien on you house, or employ many other methods that would both make you life miserable and damage your personal credit