Our clients ask this question very often. There is abundance of information on the internet including both federal and provincial government websites. Surprisingly enough, despite all this, one can spend hours searching and reading and still be in the dark about this fundamental question.
In general, opening a business is quite simple. The exception would be opening an incorporated business. But one needs to incorporate mostly when either there are some legal constraints (like requirement for limited liability, multiple owners, patents and so on) or there is a substantial amount of money at stake. Since, the questions related to incorporation are unique for each case we will concentrate only on unincorporated businesses.
So, you’ve got an idea and you want to try. Good news is that there are just three simple things you need to be aware of – the operating name, HST and business records.
If you are OK to use your personal name as the business name then you are good to go. You don’t need to do anything else. But if you want to use a name different from your personal name then you need to conduct a name search to make sure there is no other business with the same name. If the proposed name is unique - you will be issued a Master Business License which will specify your operating name; if there are businesses with the same name – you will have to change the proposed name. Name search and issuance of Master Business License are provided by Service Ontario.
In general, if your sales in the last four quarters are below $30,000 then you don’t need to do anything. If more than $30,000, you have to register for HST and start charging HST from your customers. The HST collected must be remitted to the government. The good news is that if you are registered, you will deduct HST you paid on your business expenses from the amount of HST you need to remit. Thus you save money to your business. This is why it is often worth registering for HST voluntarily. You can check the CRA website for more information on HST registration or contact us and we will be happy to assist you.
This is the easiest part. Since you have a business now (or had for some time during the fiscal year) you must reflect this in your personal taxes. This is not difficult if you have good business records. This means that you must keep all the receipts and invoices, and all other information that would allow you to calculate you income and expenses for the reporting period and to prove your numbers in case of the CRA audit.
This is it. It is not complex. If you have question you can always contact us and we will help you.