June 14, 2012
Starting a New Business
Starting a new business can be an overwhelming process; there are so many considerations which makes it easy to overlook something. Not only is it important to not overlook anything, it is important to do things in the correct order. In my time assisting clients go through this process I have developed a checklist to ensure that nothing is overlooked.
In this blog post I am unable to go into specifics as each situation is unique. For example the first decision that needs to be made is whether you are going to incorporate or not, this decision will affect virtually every other decision that you make in this process. As you will see below One Stop at the BC registry services is a great resource when starting a business (http://www.bcbusinessregistry.ca/ )
Here are the main items that need to be considered when starting a business (Information relates to British Columbia, but is similar to other provincial jurisdictions in Canada):
- Incorporate – This is one of the biggest decisions that will need to be made. This decision will be based on many factors such as projected size of the business, tax planning, number of owners of the business, potential liabilities, and expected growth. Each situation is unique and needs to be evaluated separately to determine the best structure. I recommend that you consult with professionals prior to incorporating a company, but if you know what you are doing this can be done without professional assistance.
- Register your name – whether you choose to incorporate or not you need to get the name of your business approved. This done online through the BC Registry Services (https://www.bcregistrynames.gov.bc.ca/nro/)
- Register with Canada Revenue Agency (CRA) – You will also need to register with the CRA to setup your Corporate Tax, HST, and Payroll Accounts. This can also be done through the BC registry services (http://www.bcbusinessregistry.ca/)
- HST/GST – You are not required to register for HST/GST until your business exceeds $30,000 in sales in a single calendar quarter or in four consecutive quarters. You may decide to register prior to this and it can be beneficial to do so in certain circumstances, for example if you are in a business with significant start-up costs you may choose to register to claim the HST/GST credits on these initial expenditures. Again you can register for HST/GST through BC Business Registry (http://www.bcbusinessregistry.ca/) or the CRA website ( http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/rgstrng/hwt-eng.html )
- WCB – You are required to register with Work Safe BC (WCB) if you have any employee’s, again this can be done through the BC registry service (http://www.bcbusinessregistry.ca/) or the WCB website ( http://www.worksafebc.com/default.asp )
- Municipal Business Licence – Before you start your business you will be required to get a business license from the municipality or municipalities you will conduct business in. Information on municipal business licences on your municipalities website or again at BC Business Registry (http://www.bcbusinessregistry.ca/)
- Year-end Accountant – Whether you incorporate or not you will need a year-end accountant to ensure that your accounting information is accurate and to file your corporate tax return or complete the business activities portion of your personal tax return. I would recommend using a designated accountant for this, in Canada there are three types of designated accountants Chartered Accountants (CA’s), Certified General Accountants (CGA’s), and Certified Management Accountants (CMA’s). Our firm is able to provide the quality services of a Chartered Accountant at the rates affordable to small business, our contact information can be found on our website (https://wattsca.ca/)
- Bookkeeper – You will need to find a way to do the bookkeeping for your business. I recommend three options in this regard: your year-end accountant can do this, you can hire a bookkeeper, or you can do the bookkeeping yourself with the oversight of your year-end accountant. Again our firm can provide these services, or we can evaluate your situation and provide a recommendation of the option that would best suit your needs. Visit https://wattsca.ca/ for more information on our bookkeeping services.
- Lawyer – If you are incorporating you will need a lawyer (you can incorporate without a lawyer, but I would only recommend this if you have experience with corporations). You may also need a lawyer to discuss other aspects of your business (i.e. trademarks, copyrights, or liability issues relating to your operations)
- Insurance – There will be various types of insurance that you may need, they range from liability insurance to premise insurance. You will need to speak with an insurance agent to determine your needs
- Bank Accounts – You will need to open a business bank account under your businesses name. To open the account under the business name the bank will likely require the articles of incorporation or the business name registration, so these steps need to be completed before opening the account. You will also need to determine who the signing authorities will be on the accounts and the number of signatures required on cheques, these decisions will be based on the size of your operations and the roles of your administrative staff. Although local credit unions seem to feature some enticing offers, through my own and my clients experience I have found that the major banks are more business friendly.
- Credit Cards – Like the bank account, it is generally useful to sign up for a credit card in the company’s name; this can be done at the same time as opening the bank account.
- Receiving payments – Hopefully in your new business you will be receiving payments, some businesses only accept cash and cheques, but why limit the ways that customers give you money. There are a couple of options out there for accepting payments via credit and debit card. You can opt for the standard point of sale keypad, this is the most common and trusted method but is also the most expensive. There are apps with card reading accessories that you can now use to accept credit and debit card payments on your smart phone or tablet, this option is cheaper and convenient, but some customers may not feel comfortable paying this way.
- Budgeting – The first couple of years operating a business can be difficult. New businesses are often not profitable, especially in the early years. Also, there are significant costs associated with a business start-up some of which are often overlooked. It is very important to make a budget at the earliest stages of your business, this serves two purposes; first the budget will give you an idea of the up-front capital needed to start the business, and second as the business develops you can look back at the budget and evaluate your performance to date.
- Cash flow forecasts – although budgeting is important, projecting cash flow is even more important. The majority of young businesses that fail do so not because they are not profitable, they fail due to being unable to meet their cash obligations. For example in some businesses you may make a sale but that money will not be collected for 30 days or more, in the meantime you have bills that need to be paid. The cash flow projection is like a budget but it doesn’t look at profit and loss but rather cash in and cash out, and you may be surprised there is often a big difference.
As you can see there is a lot to consider when starting a business and it can be overwhelming, but with the proper team around you it can be a fun and rewarding process.
Of course I am just touching the surface of what is required when starting a new business, but I would love to discuss your business with you in more detail. If you have any questions related to any of the items in this blog, or if you want to sit down for a free one hour consultation to discuss how I can assist your business please contact us at firstname.lastname@example.org , 604 510-0156, or visit our website at https://wattsca.ca for more information.
Disclaimer: The information in the blog is for general information only and is not intended to be a substitute for professional advice. Each person’s situation is unique, and a designated professional accountant can assist you in using the information on this blog to your best advantage. The author of this blog strives, but does not guarantee, to provide information which is current and accurate. Due to the nature of the information, it should not be relied upon for decision making without talking to a designated professional accountant. By obtaining information from this blog, you fully release Steve Watts, Chartered Accountant of any liability that may arise from using this information.