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Starting a Small Business (view source)
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{{REVIEWEDPLS | reviewer = [http://severidelawgroup.com/oliver-b-hamilton/ Oliver Hamilton], Severide Law Group|date= July 2018}} {{Dial-A-Law TOC|expanded = business}} | {{REVIEWEDPLS | reviewer = [http://severidelawgroup.com/oliver-b-hamilton/ Oliver Hamilton], Severide Law Group|date= July 2018}} {{Dial-A-Law TOC|expanded = business}} | ||
There’s a lot to be said for starting your own business. You can be your own boss, and shape something of value. Learn the options and considerations in | There’s a lot to be said for starting your own business. You can be your own boss, and shape something of value. Learn the options and considerations in starting a business. | ||
==Options to start a business== | ==Options to start a business== | ||
===Option 1. Buy an existing business=== | ===Option 1. Buy an existing business=== | ||
One way to start a business is to buy an existing business. You can buy either the '''shares''' of a business or the '''assets''' | One way to start a business is to buy an existing business. You can buy either the '''shares''' of a business or the assets. Buying the '''assets''' is usually less risky. Both options have pros and cons. | ||
====Advantages==== | ====Advantages==== | ||
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===Option 2. Buy a franchise=== | ===Option 2. Buy a franchise=== | ||
A '''franchise''' is a common way to start a business. It’s a system for distributing and marketing a product or service, such as the right to sell a certain brand of fast-food hamburgers or a dollar store. | A '''franchise''' is a common way to start a business. It’s a system for distributing and marketing a product or service, such as the right to sell a certain brand of fast-food hamburgers or a dollar store. | ||
====How franchises work==== | ====How franchises work==== | ||
Sometimes financing and training are supplied, so a franchise can be a good turnkey operation. Usually you must buy goods or services from the | Sometimes financing and training are supplied, so a franchise can be a good turnkey operation. Usually you must buy goods or services from the '''franchisor''' (the person or company who grants you the franchise) on an ongoing basis, as well as pay for your initial investment. And there are almost always restrictions on how you run the franchise. Sometimes these are so strict you're the boss in name only. And there's a danger you may end up paying substantial royalties or supply premiums. Also, franchisors often require a deposit to apply. Don’t give the deposit until you’re sure you qualify for the franchise. | ||
====Do your due diligence==== | ====Do your due diligence==== | ||
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===Option 1. Sole proprietorship=== | ===Option 1. Sole proprietorship=== | ||
A | A sole proprietorship is the simplest form of business. It has several advantages: | ||
*It’s the least expensive form of business to set up. | * It’s the least expensive form of business to set up. | ||
*You don't have to share the profits with anyone. | * You don't have to share the profits with anyone. | ||
*Decision-making is quick, and management is relatively easy — there's no one to consult but yourself. | * Decision-making is quick, and management is relatively easy — there's no one to consult but yourself. | ||
*You can do business under a business name even if you’re a sole proprietorship. For example, as John Smith, you can do business under the name of “The Sandwich | * You can do business under a business name even if you’re a sole proprietorship. For example, as John Smith, you can do business under the name of “The Sandwich King.” (But make sure you’ve registered the name before using it.) | ||
But there are disadvantages too: | But there are disadvantages too: | ||
*If you die, the sole proprietorship comes to an end. | * If you die, the sole proprietorship comes to an end. | ||
*You have unlimited personal liability for the debts of the business. If the business fails, you may risk losing your personal assets, such as your house and car. | * You have unlimited personal liability for the debts of the business. If the business fails, you may risk losing your personal assets, such as your house and car. | ||
If the business makes money, it will be taxed as your personal income — you don't get the benefit of the lower, small-business tax rate. On the other hand, as many businesses don’t make money in the first few years, you’ll have tax deductions you can use personally. A good rule of thumb is to save a percentage equal to your potential taxes so you don’t have a large tax bill at the end of the year. | If the business makes money, it will be taxed as your personal income — you don't get the benefit of the lower, small-business tax rate. On the other hand, as many businesses don’t make money in the first few years, you’ll have tax deductions you can use personally. A good rule of thumb is to save a percentage equal to your potential taxes so you don’t have a large tax bill at the end of the year. | ||
If you start with a sole proprietorship and things go well, you can always incorporate a company later and transfer the business to the company. Then you get the benefits of carrying on a business through a company instead of personally. This is called a | If you start with a sole proprietorship and things go well, you can always incorporate a company later and transfer the business to the company. Then you get the benefits of carrying on a business through a company instead of personally. This is called a '''roll-over''' in tax language. | ||
===Option 2. Partnership=== | ===Option 2. Partnership=== | ||
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But there are disadvantages to a partnership. As a partner, you’ll be personally responsible for all the debts of the partnership and, generally, you'll be bound by the acts of your partners, even if you don't agree with them. | But there are disadvantages to a partnership. As a partner, you’ll be personally responsible for all the debts of the partnership and, generally, you'll be bound by the acts of your partners, even if you don't agree with them. | ||
The biggest disadvantage of a partnership is '''joint liability'''. Any partner can be held wholly liable for the actions of another partner who acted within the scope of the partnership and incurred liability. | The biggest disadvantage of a partnership is '''joint liability'''. Any partner can be held wholly liable for the actions of another partner who acted within the scope of the partnership and incurred liability. | ||
====A way to limit your liability==== | ====A way to limit your liability==== | ||
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In addition to filing tax returns, each year a company must file either provincial or federal corporate returns with the corporate registry in the jurisdictions where it operates. | In addition to filing tax returns, each year a company must file either provincial or federal corporate returns with the corporate registry in the jurisdictions where it operates. | ||
For more information on incorporating a company, see our information on [[Incorporating a Company (No. 267)| | For more information on incorporating a company, see our information on [[Incorporating a Company (No. 267)|forming a private company (no. 267)]]. | ||
==Next steps== | ==Next steps== | ||
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===Business licence and name approval=== | ===Business licence and name approval=== | ||
Whatever form of new business you choose, you’ll need to get a '''business licence''' and '''name approval'''. | Whatever form of new business you choose, you’ll need to get a '''business licence''' and '''name approval'''. | ||
You get a business licence from your town or city hall. The cost will vary depending on the type of business and whether it's operated from commercial or residential premises. | You get a business licence from your town or city hall. The cost will vary depending on the type of business and whether it's operated from commercial or residential premises. | ||
You can get the [https://www.bcregistrynames.gov.bc.ca/nro/ name approval] from the provincial government. | You can get the [https://www.bcregistrynames.gov.bc.ca/nro/ name approval] from the provincial government. | ||
Many banks won’t give you financing until you have a business licence and name approval. | Many banks won’t give you financing until you have a business licence and name approval. | ||
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===Employee accounts=== | ===Employee accounts=== | ||
If you plan to have workers, you’ll have to set up a [https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/payroll-overview/employer-responsibilities-payroll-steps/opening-a-payroll-program-account.html payroll program account] with the federal government. You use this account to withhold your workers’ income tax deductions, Canada Pension Plan contributions, and | If you plan to have workers, you’ll have to set up a [https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/payroll-overview/employer-responsibilities-payroll-steps/opening-a-payroll-program-account.html payroll program account] with the federal government. You use this account to withhold your workers’ income tax deductions, Canada Pension Plan contributions, and employment insurance (EI) premiums to pay to the government. | ||
You’ll need to [https://www.worksafebc.com/en/insurance/need-coverage/employers-responsibilities register with WorkSafeBC] so your workers are covered in the event of a workplace accident or illness. | You’ll need to [https://www.worksafebc.com/en/insurance/need-coverage/employers-responsibilities register with WorkSafeBC] so your workers are covered in the event of a workplace accident or illness. | ||
You may also have to set up accounts for Goods and Services Tax (GST) and Provincial Sales Tax payments. | You may also have to set up accounts for Goods and Services Tax (GST) and Provincial Sales Tax payments. | ||
===Zoning and bylaws=== | ===Zoning and bylaws=== | ||
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Depending on the business, regulations may apply to your product or service. For example, some products have labeling requirements, and door-to-door sales are regulated. | Depending on the business, regulations may apply to your product or service. For example, some products have labeling requirements, and door-to-door sales are regulated. | ||
== | ==Who can help== | ||
===With more information=== | ===With more information=== | ||
[ | [https://www.smallbusinessbc.ca/ Small Business BC] has information and guides on starting a business. Call 604-775-5525 in Vancouver or 1-800-667-2272 elsewhere in the province. | ||
[ | [https://www.ic.gc.ca/eic/site/icgc.nsf/eng/home Innovation, Science and Economic Development Canada] has information and guides on starting a business and incorporating a federal company. | ||
For more information on incorporating a BC company, check the BC [ | For more information on incorporating a BC company, check the BC [https://www2.gov.bc.ca/gov/content/employment-business/business/managing-a-business/permits-licences/businesses-incorporated-companies Corporate Registry website]. | ||
Many school boards and colleges offer seminars on starting a business. Your public library has a wealth of information including trade directories and information on sources of government assistance. Talk to other people who have started their own business. A lawyer, accountant or bank manager can advise you on certain matters. | Many school boards and colleges offer seminars on starting a business. Your public library has a wealth of information including trade directories and information on sources of government assistance. Talk to other people who have started their own business. A lawyer, accountant or bank manager can advise you on certain matters. | ||
===Registering your new business=== | ===Registering your new business=== | ||
The provincial [ | The provincial [https://onestop.gov.bc.ca/ OneStop Business Registry] website lets you apply for various business licences and registrations at one time. It also refers you to “kiosks” where you can get a real person to help. The OneStop Help Desk number is 250-370-0332 in Victoria or 1-877-822-6727 elsewhere in BC. | ||
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