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Hurray! After I got my permanent residence in November 2017, I started to research how to establish my business in Ontario, Canada. If you are in the same situation, I will share here what I did, how I did it. Keep reading.

Before you continue reading, you should know that having your own business is very rewarding, but you must have discipline and some management knowledge to deal with taxes and other non-core business tasks.

Selecting my First Business Structure

You will find mainly four business structures, but the two I analyzed were Sole Proprietorship and Incorporation.

The first was really easy but as you have read on the Internet, the business is you. This means that all your business debts are your debts as well. However, you can write off some expenses like the rent, the power, the heat, the mortgage and the car expenses. However, there is a catch I did not find in my research until I did it: you may lose your government benefits. If you are doing good business, there is a point where your income could be so high and your benefits will be affected.

On the other hand, there is incorporation. An incorporated business is like a new person. It does its own taxes and it has its own bank accounts. This means, that at the end of the day you will end doing two taxes (your personal taxes, and the business taxes). As you have read, the incorporation protects you, in case of bankruptcy your personal assets are shielded.

As I was starting, and I believe I am very organized I selected as my first business structure a Sole Proprietorship.

Registering my Business

The first thing I did was registering my business name in Ontario (I live in Ontario). So I went to the Ontario website and I start my business registration. I will share the screen captures here, please note that the system may change, but it is just to give you an idea.

Don't forget to read carefully, name registration is not for everybody (for example, if you are doing business using your name and not a commercial name, you don't need it). Business registration will protect your commercial name.

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After you finish the payment, you will get in a few moments a Master Business License in your registered email.

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Registering an HST Number with the CRA

I am not an expert on this subject. Registering an HST is optional in most cases. My understanding is that if your sells are 30,000 Canadian dollars or less in one of your last four quarters, then you must register for an HST number, otherwise is optional.

However, if your sells are under 30,000 Canadian dollars and eventually you rise that number (you are growing), you will be asked to collect the missing HST. To be clear, you should contact old customers and ask them to pay the missing HST; good luck with that!

Since my business is b2b related, my customers expect to be billed with HST. So, to skip the drama, I opted to get the HST number right away.

To get an HST number, you need to sign up for a CRA business account. Your HST number would be kind of 999999999RT0001. This number must be included in all your invoices.

Some Thoughts about Running a Business as a Sole Proprietorship

These some things I have discovered the hard way, I share with you:

  • Try to put all your business-related expenses in a single account. It doesn't need to be a business account, a personal one will work. This is to make an audit easier to track if you ever get selected for one.
  • Keep track of the mileage of your car, it is related to how much you can write off of your car expenses
  • Use your home, and use the most you can use it. I used my basement, it is 25% of the total surface of my house, then the 25% of power, heat, rent and other related expenses can be written off.
  • If you are buying used items, ask for a simple receipt to write it off.
  • If you are buying things (it doesn't matter if they are new or used), if you want to write them off at 100% rate in the current year, you should get invoices of 500 Canadian dollars maximum. So, if you are getting many tools from Canadian Tire, split the receipt to get them less than 500 each.
  • Bus tickets are not subject to be written off, so if you are going to travel a long distance and you really need to write it off, take a taxi, a Uber or drive your car.
  • If your income, after deductions, is around of 70,000 Canadian dollars, you should consider incorporating.

Good luck doing business!

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