Small Business On The Rise.
Beginning a business can be supremely fulfilling but it can also be a challenge. In the spirit of small business leadership we have begun to discuss the ins and outs of getting your business off of the ground.
In part one (here) last week, we outlined 14 key points and areas for which to be prepared, when starting a business. This week we will finish off with part two by examining the challenges of choosing a location, filing for business permits, choosing insurance, and finally taxes and accounting.
Choosing Your Business Location.
15. What Specific Building Features Does Your Business Require?
Determine ahead of time what specific needs your business has in regards to building features.
- How much room?
- What type of electrical?
- What type of plumbing?
- Shelving, racking and storage?
You may find it useful to create two lists. First, a list of everything essential to running your business, such as specific electrical requirements. Second, list of non-essentials – or items useful to your business, but that are not required.
As you source locations, check your essentials first. Then check your non-essentials against your lease or rental costs and verify the best value for your dollar.
16. Determine What You Can Afford.
Affording a location that includes everything on both of your lists may be a challenge. Determine ahead of time what your budget looks like and allow for some flexibility in your needs. Do not short essentials like plumbing and electrical for non-essentials like flooring. Your place of business will still need permits and must be safe.
Be honest about your budget, set a red-line and do not cross it. Your business needs to be able to sustain itself financially until it can gain some impetus.
17. Choose A Neighborhood.
When choosing WHERE to place your business there are several factors to consider:
- Neighboring businesses.
- Foot traffic.
- Vehicle traffic.
- Competitor location.
- City zoning & bylaws.
- Building age.
- Average lease or rental costs.
18. Zoning & Bylaws.
Always check that the location you are considering is, or can be, zoned to meet your businesses requirements. This also pertains to home based business, which are often started without checking local restrictions.
Zoning restrictions can be checked quite easily via your local municipal office or often even with your local Chamber of Commerce.
19. Carefully Examine Your Lease Contract.
This statement goes for every legal document pertaining to your business. Examine the lease carefully before signing it. If you have questions or concerns, make sure they are adequately addressed first.
By locking yourself into a faulty lease agreement you could sacrifice the stability of not just your business, but your personal well being.
File For Licenses And Permits.
20. Get A Business Licence.
This is not necessary for all businesses. Nonetheless, many new businesses do need to get business licenses in order to operate as a legal business within their municipalities. This can be verified on many city and district websites, it is also included in the blue pages of your phone book.
21. Other Licences and/or Permits.
Depending on your business type, you may need to look into additional licensing or permits. Check to see what permits and licences you will need to move forward with your business idea.
Industry Canada provides a helpful tool: BizPaL, which can be used to discern which permits and licenses you’ll need to do business. In it you will find a detailed list of business documents you will need, spanning the various levels of government.
You may also visit the Canadian Government Online Business Registry
Set Up Tax Reporting and Accounting.
22. Understand The Tax Regulations For Your Business Structure.
Each of the four primary Canadian Business Structures will have slightly different regulations to follow. Understanding the regulations for your structure type is imperative.
The four primary Canadian Business Structures are:
- Sole Proprietorship
23. Source All Of The Necessary Tax Documents.
All of the necessary Canadian Revenue Agency forms are available here:
The type of form required for your business will vary based on your business structure.
A single owner or partnership means you and your small business are not separate legal entities, therefore a T1 personal income tax form is used. Whereas if you are incorporated you are considered as a separate legal entity from your business and a T2 income tax form will be required (Note that as you are considered a separate legal entity, you will also have to complete and file your own separate T1 personal income tax return).
24. Thoroughly Understand What Can Be Counted As A Deduction.
- Accounting & legal fees (related to business activities).
- Advertising expenses.
- Automobile expenses.
- Travel expenses.
- Promotional expenses.
- Bad debts.
- Bank charges.
- Business taxes & business licenses.
- Collection agency fees.
- Conference and Convention fees.
- Consultations Fees & expert advice.
- Interest expenses (on money borrowed to run your business).
- Insurance expenses (for buildings, machinery or equipment).
- ISP fees (business use).
- Membership dues (for business-related organizations).
- Meals and entertainment expenses.
- Office rental expenses.
- Office supplies expenses.
- Postage & courier expenses.
- Private Health Service Plan (PHSP) premiums.
- Property Taxes.
- Repair & Maintenance expenses.
- Salaries of employees – including salaries of family members.
- Telephone/Telecommunications expenses.
In addition, many home based businesses can also deduct business-use-of-home expenses. If you are doing business where you live, your expenses will be a percentage of your home expenses. This is most easily calculated if you have a specific room dedicated for your business, such as a home office. Simply take the area of your work space and divide it by the total area of your house.
Example: You have a home office that is 10 x 10 feet and a house that is 1800 square feet. Your calculation of allowable portion of business-use-of-home expenses would be: 100(10×10) divided by 1800 = 5%.
25. Set Up Your Books.
Whether you are hiring an accountant or not, you need to implement a system to take care of your books.
- Consider hiring a bookkeeper or accountant when first getting set up.
- Consider purchasing QuickBooks (Intuit) or similar software to assist you with day to day records.
- Implement a thorough recording system for ALL payments to and from your business.
26. Register For A GST/HST Number – SMALL SUPPLIER Exemption.
Registering for GST is mandatory for all Canadian businesses with one exception. Any business grossing less than $30,000 is considered a “Small Suppliers” and need not apply until they begin to exceed this amount.
Note: The Canada Revenue Agency defines a GST Small Supplier as: A single owner, partnership or corporate structure whose taxable revenues before expenses are $30,000 or less annually.
There are a few exceptions to the “Small Supplier” rule and it is best to verify for yourself. About.com explores this concept further here and the Canadian Government has this to say. You may also try speaking with your local accountant to get the specifics.
27. Register For A GST/HST Number – 30,000+ Income.
If you are uncertain that you will make or exceed $30,000 gross in one year, then you may also wait until your business closes in on the $30,000 mark. Many businesses do not apply for a GST number until they are sure they will exceed this amount. However keep in mind that if, within one calendar year you surpass expectations and your revenue exceeds $30,000 – the Canada Revenue Agency considers you a GST registrant, as such your business will:
- Collect GST HST on the products or services that made your revenue go over $30,000.
- Have 29 days from the date supplying the product or service, to register as exceeding $30,000.
Should you not exceed $30,000 in a calendar year, but do so in four consecutive quarters, the following pertains to your business:
- You will be considered to be a small supplier for this period and up to one month after the four consecutive quarters.
- You will lose your Small Supplier status upon the day which you make your next sale after this period. You will have to register for the GST within 29 days of this date.
Even if you’re not making much money to start you may want to register for GST/HST immediately because of the input tax credits (further explored here). These will enable you to get back the GST/HST which has been paid by your business for business use.
To register for a GST/HST number visit here:
28. Registering (Or Transitioning) For PST.
If you own or have begun a small business within the last three years in British Columbia this will pertain to you. For a thorough understanding of the transition from HST to PST and the history behind the decision we recommend the following links:
29. Determine What Business Property Requires Coverage.
First off, it is recommended that you do not consider small business insurance as an extra expense. Consider it an essential component of starting a business, and budget for it. Accidents happen, and this could be the “expense” that saves your business one day. Below are some of the key areas to consider for insurance:
- Health Insurance: For yourself and for your employees.
- Disability Insurance: In the event of injury or illness, disability insurance will guarantee at least some income.
- Life Insurance: Life insurance ensures that, should you meet an untimely death, your family will receive some financial security. Some lenders will require that you have life insurance before they issue a loan.
- Business Property Insurance: Business property insurance protects you against loss of inventory, raw materials or equipment due to in a flood, fire or other disaster.
- General Liability Insurance: Comprehensive general liability insurance can be necessary in instanced where your small business will require having clients or customers in your home. This includes meetings, the sale merchandise or services or any other reason. Should a member of the public be injured while on your property, this insurance will protect you and pay for your legal defense should you face a lawsuit.
- Business Interruption Insurance: This will assist your business with any loss and subsequent recovery due to disaster. It will pay for operating expenses that may accrue during prolonged closures or rebuilding.
- Workers’ Compensation: Without workers’ compensation, you will be responsible for any medical expenses arising from injuries employees sustain while working for you.
30. Be Prepared When Speaking With Insurance Companies.
When sourcing insurance be prepared to supply the following:
- The Nature of Your Small Business: The bad news is that if you are looking to start an amusement part, many insurance companies will simply shake there head “no”. The good news is that other insurance companies exist to supple for this specific market. Make sure you find the company that makes sense for your business type.
- Location and Building Specifications: A primary question to be prepared for is whether your business is run out of a commercial location or your home. If your answer is commercial be prepared to supply the following:
- How old is the building?
- What is the total area supplied for customers?
- What types of tenants occupy the building?
- Company Overview: Another primary question all insurance agents will want to know how long your business has been operating, your projected annual income and current gross annual income. They will also require the number of employees.
- Storage Of Chemicals: Most carriers will want to know about any chemical supplies and where they are stored. If you are mobile and store the chemicals in a vehicle, they will want to know where the vehicle is kept.
- Business Vehicles: Operating a food truck, or other mobile business? Be prepared to supply the names, social security and drivers license numbers for every employee authorized to to drive the vehicles (Best rule of thumb: be prepared to provide as much information as you can).
31. Source Quotes On Insurance From More Than One Suppliers.
Do not settle for the first quote you receive. Visit multiple companies and see who can compete best for your business. Remember that to them, you are a customer and they should be fighting for your business. Do not be afraid to tell one company the quote you received from another – leverage to get the best price possible.
Transition Marketing Services. Our passion is educating and equipping small business owners with the tools and strategies to succeed. We have made it our priority to know Specialized Marketing. We keep up to date on what is new, what is available and what makes the most sense for businesses of all sizes and backgrounds. We recognize that every Small Business is unique, and their Marketing needs to be as well. Visit us at our website and let us know how were doing or if you have any questions. TRANSITION MARKETING SERVICES – Small Business Marketing Specialists.