Melissa Florence

Commencing a Business in Canada – Element 2 of 2


This posting is continued from Jenny’s very first posting, “Commencing a Business in Canada – Element one of 2”.

Making ready System B: WHAT IF IT FAILS?

A frequent result in of own fiscal complications is the failure of a company and the attendant company-similar liabilities individually owed by the enterprise owner. In this article are some straightforward suggestions to preemptively safeguard your own property in the occasion the company fails:

one. As we advised in the past section, take into account incorporating the company. Incorporation will give you with a stage of creditor defense. So extensive as you have been recent on spending your statutory liabilities (stated in the past section) and those creditors for which you gave a own ensure, you will be individually protected from your other company debts.

2. Consider transferring own property to a spouse’s identify or a family members believe in. Following the transfer, these property no for a longer period owned by you and are as a result not issue to statements of your own creditors.

3. If you are putting away revenue for retirement, take into account investing in RRSPs that are exempt from the statements of your own creditors for instance, segregated funds. The difference in between segregated funds and mutual funds is that segregated funds are insurance contracts. The Ontario Insurance policy Act offers that:

“wherever the beneficiary of the insurance deal is a partner, kid, grandchild or dad or mum of a individual whose lifetime is insured… the rights and interests of the insured in the insurance revenue and in the deal are exempt from execution or seizure…”

As a result, insurance goods held in RRSPs will be exempt from seizure by your own creditors.

A very vital place: you really should make these preparations in advance of you get into own fiscal difficulties, not right after you have grow to be exposed to own debts. If you have been to say, transfer your property to your partner when the lender is making an attempt to acquire on the own ensure you gave to them, these preparations will not operate. There are guidelines that can established aside transfers of property wherever the intent is to cover your property from your creditors as they are making an attempt to acquire their debts.

As a result, make preparations to safeguard yourself individually with these tips in advance of you open the doors to your company, not right after you have shut them!

Location UP YOUR Business

Acquiring a area

Numerous entrepreneurs start off their firms from property. If that suits you, then study no even further.

However, if you call for actual company premises, you really should take into account the next factors:

* How will your clients get to you? Is it conveniently found by general public transportation? Is there absolutely free parking?
* How a lot area will you need to work?
* What is the name of the landlord? Do they routinely maintain the maintenance of the setting up premises? You do not want to change off possible clients simply because they feel your location seems like a slum.
* How are the sights and lights? You do not want lease a location with a check out of the wall from the subsequent setting up. You want to produce a nice operate atmosphere for your staff so they are delighted and effective.
* Will you be capable to get the landlord to waive a own ensure for the lease?

Following considering these factors, evaluate the price tag for each sq. foot and negotiate a mutually agreeable arrangement with landlord. For instance, you might be capable to get at couple of months absolutely free lease as component of the last lease arrangement.

Interviewing and employing staff

Getting persons to post resumes is usually uncomplicated. Choosing the correct individual out of that stack of resumes is not.

It is really been mentioned that the very first 30 seconds of a career interview will finally ascertain if the applicant receives the career or not. You possibly like someone or you do not. However, even while you may “simply click” with the applicant, it would be a oversight to use someone with out accomplishing a comprehensive background check.

It is vital that you validate a candidate’s work history and references as properly as their academic background. Even if their past career experience and academic background have no bearing in any way on the situation that they are implementing for, it is crucial that you ensure that they are remaining truthful to you. If not, then this is a important character flaw – if they can lie to you so quickly, they can just as quickly steal from you.

You really should also take into account accomplishing a credit history history research and felony background check. It is not abnormal to meet career applicants who filed bankruptcy or who’ve been convicted of a felony offence. All people has designed faults in their lifetime and you really should not essentially hold this against the applicant. The genuine kinds will usually notify you up front about their past in advance of you even perform this kind of a background check. That remaining mentioned, it is a issue for you to take into account in building your last employing final decision.

Advertising and marketing your company

Whether or not you promote using “common” methods like print media and television, or “modern-day” methods this kind of as world-wide-web marketing depends on your viewers.

If for instance, you are focusing on an older demographic (say more than 55 yrs), then common marketing might be the way to go. On regular, this demographic tends to devote much more time looking through newspapers and looking at television than young persons.

On the other hand, if you are focusing on a young demographic, then world-wide-web marketing might be the way to go. It is not astonishing that common print media like newspaper providers and television stations are in severe fiscal difficulties. Their viewers (and marketing earnings) is shrinking simply because much more persons are acquiring their information and enjoyment by means of the world-wide-web.

Advertising and marketing in print media like the Yellow Pages or in newspapers can be very costly (specially in a market place like Toronto). From our own experience, we have observed that marketing on the world-wide-web is the most effective and cost productive way to achieve out to our viewers.

There are a lot of freelancers who can aid you design and style and location a web site on the world-wide-web. However, you also want persons to find your web site when a possible buyer forms in a research phrase into a research engine like Google or Yahoo! For this, you would need to use a Research Motor Optimization guide (Web optimization).

An Web optimization will in essence make your web site much more “searchable” by research engines. This is usually finished by, between other items, integrating particular key terms into the textual content of your website, setting up “hyperlinks” to your website from other web sites, making “cost for each simply click” world-wide-web marketing campaigns with Google Adwords or Yahoo Research Advertising and marketing, and listing your company in Google’s Local Business directory



* If you give a excellent or support in Canada and your annual earnings will exceed $thirty,000, you happen to be needed to register your company and acquire GST
* If you happen to be working as a sole proprietor or you are the director of a corporation, you will be individually liable if you do not acquire and/or remit.


* If you offer items to “conclusion-person” consumers (as opposed to reselling to another company
), you happen to be needed to acquire and remit provincial sales tax
* If you happen to be working as a sole proprietor or you are the director of a corporation, you will be individually liable if you do not acquire and/or remit.

Payroll tax

* You are needed to deduct profits tax, CPP and EI withholdings from your employees’ wages and remit these withholdings to the Canada Income Company each individual pay out period of time
* You are also needed to pay out CPP and EI premiums, calculated as a percentage of your employees’ wages
* If you happen to be working as a sole proprietor or you are the director of a corporation, you will be individually liable for failure to remit withholdings and/or premiums to the Canada Income Company

Company Revenue Tax

* The federal company tax level is 38 per cent of net profits
* If you happen to be working as a Canadian Controlled Personal Company (in essence a enterprise integrated in Canada whose shares are privately owned by a Canadian resident), this level is lessened to 28 per cent
* For the very first $five hundred,000 of net profits acquired by a CCPC, there is a even further reduction to eleven per cent
* In Ontario, the provincial company tax level for a CCPC is 14 per cent of net profits. The very first $five hundred,000 of net profits acquired is taxed at five.five per cent
* The merged federal and provincial company tax level in Ontario on net profits underneath $five hundred,000 is 16.five per cent
* There is no director legal responsibility for non-payment of company profits tax.



* Companies add to WSIB, which is a provincial insurance fund.
* The sum of high quality payable is primarily based on the measurement of your payroll and the incident experience in your marketplace. For instance, a mining enterprise will pay out a increased high quality for its employees than an accounting business
* Injured workers are compensated by the WSIB on a “no fault” foundation that is, payment is compensated no issue who is at fault, the employer, the personnel or someone else. In return for computerized payment, the employer is shielded from any other legal responsibility. An personnel can not sue your enterprise for negligence if that negligence leads to a operate-similar damage
* The primary aim of the WSIB process is to get the wounded personnel back again to operate as soon as attainable. If wounded personnel can not perform his or her regular operate, your enterprise might give appropriate modified operate that the worker can perform with out aggravating the damage. If the operate is, in reality, appropriate the wounded worker have to acknowledge it.
* There is no director legal responsibility for unpaid WSIB premiums of a corporation

Wages and getaway pay out

In Ontario, your obligations to your employees are ruled by the Ontario Work Requirements Act. You are needed to give your employees:

* Two months getaway
* Termination pay out, which boosts with the length of work
* Severance pay out wherever: (one) an personnel has labored at your enterprise for at the very least five yrs and (2) your annual payroll is $2.five million or much more. The sum payable boosts with the length of work
* If you happen to be working as a corporation, a director of the corporation is individually liable for up to 6 months’ unpaid wages and getaway pay out


Segregation of duties

The primary principle is this: the individual liable for the recording of property coming in and heading out of your enterprise really should not be the exact individual who handles those property. For instance:

* The individual who approves invoices for payment really should not be liable for writing and signing cheques. He has an option to defraud the company by building payments to fictitious providers
* If the purchaser orders and receives the items, he can location an get for much more than is wanted and hold the rest.
* If the individual who writes the checks handles the lender reconciliation, no just one will know if he writes checks to himself or relatives.

When commencing out your company, this usually won’t be an problem as you will be the only personnel alongside with perhaps a handful of staff. However, as your enterprise grows and you use much more staff, inner command by means of segregation of duties will become exceptionally vital.

Periodic Monetary Statements

This would contain a equilibrium sheet, earnings & loss assertion and hard cash-circulation assertion. It is crucial that you routinely observe your businesses’ fiscal functionality on a periodic foundation. This is especially vital through the very first couple of yrs of company – you need to know if you are building revenue or shedding revenue, and when to simply call it quits if you happen to be working at a loss.

Ideally, you really should put together fiscal statements on a regular foundation, so you can make the essential changes to your company functions if you ascertain that you happen to be spending way too a lot in particular places or no matter whether your sales targets are remaining fulfilled. If you wait right up until the conclusion of your company 12 months to put together the financials, you might not realize the issue places in your company functions right up until it really is way too late.


As a professional accountant in Toronto, Canada, the country’s largest metropolis and fiscal and company cash, I have appear throughout a lot of very poor souls who’ve lost almost everything right after owning failed in company. This posting was written to guide the reader in averting the pitfalls that hinder a lot of entrepreneurs. However, it is an overview fairly than a total assessment of issues struggling with a possible Canadian entrepreneur. In advance of implementing any of these suggestions, check with your professional advisor. If you reside in Toronto and are seeking for a Toronto accountant, make sure you call the writer straight.

© Copyright Jenny Lin, CGA 2009.

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