Starting a Business

By incorporating your business, you are creating a separate and distinct legal entity. It even has its own tax return.

If this business is still just a side hustle for you, it might make more sense to keep it simple and easy and operate as a sole proprietor. When tax time comes around in April, you will report your business activities on your regular tax return and pay tax on your net business income.

Don’t Forget About Local Rules and Regulations

Unfortunately, just because you have a great idea for a business doesn’t mean that you can operate it immediately. If you operate within the City of Medicine Hat, you will require a business license to operate. Yes, even if you operate a home based business you still need a business license.

On top of that, you may need to obtain permits. For instance, if you are installing an outdoor sign, you need a sign permit. You might need an occupancy permit if you are planning to renovate the space or change its use.

Be Aware of GST Requirements

I think it is fair to say that the majority of us are familiar with GST. We know that if we buy something for $100 that a $100 bill doesn’t cut it. We are going to need another $5 to cover the GST. On the rare occasion, we find ourselves buying a product or a service that will be exempt from GST such as the rent we pay for our home.

If you are starting your business or if just doing it on the side, you might not need to register for GST. The general rule of thumb for GST is that if you make less than $30,000 over four consecutive calendar quarters, you aren’t required to register.

Sometimes, even though you don’t need to register for GST, you may want to if you know that you are going to be crossing that threshold within the year. Better to get your prices in place so you don’t surprise your clients with an extra 5% four months down the line!

Keep Your Business & Personal Life Separate

It is important to have a clear separation of your personal and business funds. Nothing will be more frustrating than looking through your bank statements next year and trying to remember if that Costco purchase was for your company or your personal groceries.

Open up a separate bank account for your business transactions and if possible, obtain a separate credit card as well. When you go to Costco and have a mix of business and personal items, do two separate transactions! You won’t be the first person who does this and your future self will thank you.

That’s a Write Off, Right?

Perhaps one of the most common misconceptions of new business owners is that once you start a business, everything is now a deduction. After all, that haircut that you got was to make you presentable, which is going to bring in more business, right?

Personal expenses are still just that – personal! However, you will be able to deduct expenses that are work-related such as office supplies, licences, accounting fees, and work related travel. Ask yourself how this cost is being used in your business. Would another person (who wasn’t running a business) still have that cost?

If you decide to start a business, there are great resources out there for you. Don’t hesitate to reach out with an email to me and ask any questions that you may have.

by Jillian Koch - JMH & Co

Starting a Business

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