Starting up a Company in Canada – Component two of two

This post is ongoing from Jenny’s very first post, “Starting up a Company in Canada – Component 1 of two”.

Preparing Program B: WHAT IF IT FAILS?

A regular induce of particular economic complications is the failure of a enterprise and the attendant enterprise-similar liabilities individually owed by the business proprietor. Here are some uncomplicated solutions to preemptively defend your particular property in the party the enterprise fails:

1. As we recommended in the former section, think about incorporating the enterprise. Incorporation will deliver you with a level of creditor defense. So long as you’ve got been latest on shelling out your statutory liabilities (listed in the former section) and people collectors for which you gave a particular promise, you can expect to be individually safeguarded from your other enterprise money owed.

two. Take into account transferring particular property to a spouse’s name or a spouse and children belief. After the transfer, these property no longer owned by you and are thus not issue to claims of your particular collectors.

three. If you are putting absent revenue for retirement, think about investing in RRSPs that are exempt from the claims of your particular collectors for illustration, segregated resources. The distinction in between segregated resources and mutual resources is that segregated resources are insurance coverage contracts. The Ontario Insurance policy Act delivers that:

“where by the beneficiary of the insurance coverage deal is a wife or husband, child, grandchild or guardian of a person whose lifetime is insured… the rights and passions of the insured in the insurance coverage revenue and in the deal are exempt from execution or seizure…”

As a result, insurance coverage solutions held in RRSPs will be exempt from seizure by your particular collectors.

A very essential issue: you ought to make these arrangements ahead of you get into particular economic trouble, not just after you’ve got develop into exposed to particular money owed. If you ended up to say, transfer your house to your wife or husband when the lender is attempting to collect on the particular promise you gave to them, these arrangements will not perform. There are rules that can established aside transfers of property where by the intent is to conceal your property from your collectors as they are attempting to collect their money owed.

As a result, make arrangements to defend yourself individually with these recommendations ahead of you open the doors to your enterprise, not just after you’ve got shut them!

Setting UP YOUR Company

Getting a place

Numerous entrepreneurs begin their businesses from house. If that suits you, then read no more.

Nevertheless, if you involve real enterprise premises, you ought to think about the subsequent variables:

* How will your prospects get to you? Is it conveniently situated by community transportation? Is there free of charge parking?
* How substantially space will you have to have to run?
* What is the popularity of the landlord? Do they often retain the repairs of the creating premises? You do not want to turn off prospective prospects because they assume your spot appears like a slum.
* How are the sights and lighting? You do not want rent a spot with a see of the wall from the following creating. You want to make a good perform ecosystem for your workers so they are delighted and productive.
* Will you be capable to get the landlord to waive a particular promise for the lease?

After thinking about these variables, review the price per square foot and negotiate a mutually agreeable arrangement with landlord. For illustration, you may well be capable to get at couple months free of charge rent as component of the final lease agreement.

Interviewing and choosing workers

Obtaining individuals to post resumes is generally simple. Employing the correct person out of that stack of resumes is not.

It’s been explained that the very first 30 seconds of a occupation interview will eventually ascertain if the prospect receives the occupation or not. You both like somebody or you do not. Nevertheless, even even though you may possibly “click” with the prospect, it would be a mistake to employ somebody without the need of accomplishing a extensive qualifications check out.

It is essential that you verify a candidate’s work history and references as well as their academic qualifications. Even if their former occupation encounter and academic qualifications have no bearing by any means on the posture that they are making use of for, it is very important that you ensure that they are staying truthful to you. If not, then this is a considerable character flaw – if they can lie to you so very easily, they can just as very easily steal from you.

You ought to also think about accomplishing a credit rating history look for and prison qualifications check out. It is not unusual to satisfy occupation candidates who submitted personal bankruptcy or who’ve been convicted of a prison offence. Anyone has built errors in their lifetime and you ought to not essentially maintain this from the applicant. The straightforward ones will generally explain to you up front about their previous ahead of you even conduct these a qualifications check out. That staying explained, it is a variable for you to think about in building your final choosing final decision.

Advertising and marketing your enterprise

No matter if you promote working with “standard” solutions like print media and television, or “modern day” solutions these as internet advertising and marketing depends on your audience.

If for illustration, you are concentrating on an more mature demographic (say about fifty five years), then standard advertising and marketing may well be the way to go. On ordinary, this demographic tends to spend far more time reading through newspapers and seeing television than more youthful individuals.

On the other hand, if you are concentrating on a more youthful demographic, then internet advertising and marketing may well be the way to go. It is not stunning that standard print media like newspaper companies and television stations are in serious economic trouble. Their audience (and advertising and marketing profits) is shrinking because far more individuals are acquiring their news and leisure by the internet.

Advertising and marketing in print media like the Yellow Webpages or in newspapers can be very costly (in particular in a marketplace like Toronto). From our particular encounter, we have identified that advertising and marketing on the internet is the most powerful and price tag economical way to achieve out to our audience.

There are many freelancers who can enable you design and spot a website on the internet. Nevertheless, you also want individuals to obtain your website when a possible customer kinds in a look for expression into a look for motor like Google or Yahoo! For this, you’d have to have to employ a Look for Engine Optimization specialist (SEO).

An SEO will essentially make your website far more “searchable” by look for engines. This is generally completed by, amid other things, integrating particular keywords into the textual content of your web site, creating “one-way links” to your web site from other web-sites, producing “price tag per click” website advertising and marketing campaigns with Google Adwords or Yahoo Look for Advertising and marketing, and listing your enterprise in Google’s Area Company directory



* If you deliver a superior or provider in Canada and your yearly profits will exceed $30,000, you might be expected to sign-up your enterprise and collect GST
* If you might be functioning as a sole proprietor or you are the director of a company, you can expect to be individually liable if you do not collect and/or remit.


* If you provide merchandise to “end-consumer” consumers (as opposed to reselling to yet another enterprise), you might be expected to collect and remit provincial product sales tax
* If you might be functioning as a sole proprietor or you are the director of a company, you can expect to be individually liable if you do not collect and/or remit.

Payroll tax

* You are expected to deduct revenue tax, CPP and EI withholdings from your employees’ wages and remit these withholdings to the Canada Profits Company each individual pay period
* You are also expected to pay CPP and EI rates, calculated as a share of your employees’ wages
* If you might be functioning as a sole proprietor or you are the director of a company, you can expect to be individually liable for failure to remit withholdings and/or rates to the Canada Profits Company

Company Cash flow Tax

* The federal corporate tax level is 38 per cent of web revenue
* If you might be functioning as a Canadian Managed Non-public Corporation (essentially a business included 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 web revenue gained by a CCPC, there is a more reduction to 11 per cent
* In Ontario, the provincial corporate tax level for a CCPC is fourteen per cent of web revenue. The very first $five hundred,000 of web revenue gained is taxed at 5.5 per cent
* The combined federal and provincial corporate tax level in Ontario on web revenue underneath $five hundred,000 is sixteen.5 per cent
* There is no director legal responsibility for non-payment of corporate revenue tax.



* Companies add to WSIB, which is a provincial insurance coverage fund.
* The total of quality payable is based on the size of your payroll and the accident encounter in your market. For illustration, a mining business will pay a bigger quality for its employees than an accounting company
* Hurt personnel are compensated by the WSIB on a “no fault” foundation that is, payment is paid out no issue who is at fault, the employer, the staff or somebody else. In return for automated payment, the employer is shielded from any other legal responsibility. An staff are unable to sue your business for carelessness if that carelessness results in a perform-similar damage
* The most important target of the WSIB technique is to get the hurt staff again to perform as quickly as attainable. If hurt staff are unable to conduct his or her typical perform, your business may well present acceptable modified perform that the worker can conduct without the need of aggravating the damage. If the perform is, in point, acceptable the hurt worker ought to settle for it.
* There is no director legal responsibility for unpaid WSIB rates of a company

Wages and holiday pay

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

* Two weeks holiday
* Termination pay, which improves with the duration of work
* Severance pay where by: (1) an staff has worked at your business for at the very least 5 years and (two) your yearly payroll is $two.5 million or far more. The total payable improves with the duration of work
* If you might be functioning as a company, a director of the company is individually liable for up to six months’ unpaid wages and holiday pay


Segregation of responsibilities

The standard idea is this: the person liable for the recording of property coming in and heading out of your business ought to not be the identical person who handles people property. For illustration:

* The person who approves invoices for payment ought to not be liable for producing and signing cheques. He has an opportunity to defraud the enterprise by building payments to fictitious companies
* If the purchaser orders and receives the merchandise, he can spot an get for far more than is wanted and maintain the relaxation.
* If the person who writes the checks handles the lender reconciliation, no one particular will know if he writes checks to himself or relations.

When beginning out your enterprise, this generally will never be an concern as you will be the only staff alongside with maybe a handful of workers. Nevertheless, as your business grows and you employ far more workers, inside manage by segregation of responsibilities will become extremely essential.

Periodic Money Statements

This would include a balance sheet, profit & decline assertion and cash-move assertion. It is very important that you often monitor your businesses’ economic effectiveness on a periodic foundation. This is notably essential for the duration of the very first couple years of enterprise – you have to have to know if you are building revenue or dropping revenue, and when to get in touch with it quits if you might be functioning at a decline.

Preferably, you ought to get ready economic statements on a every month foundation, so you can make the required adjustments to your enterprise functions if you ascertain that you might be paying also substantially in particular places or no matter whether your product sales targets are staying achieved. If you hold out till the end of your enterprise yr to get ready the financials, you may well not understand the dilemma places in your enterprise functions till it is really also late.


As a experienced accountant in Toronto, Canada, the country’s major metropolis and economic and enterprise funds, I have come throughout many very poor souls who’ve dropped everything just after getting unsuccessful in enterprise. This post was prepared to aid the reader in keeping away from the pitfalls that hinder many entrepreneurs. Nevertheless, it is an overview relatively than a comprehensive examination of challenges dealing with a possible Canadian entrepreneur. In advance of making use of any of these solutions, check with your experienced advisor. If you reside in Toronto and are looking for a Toronto accountant, please call the author directly.

© Copyright Jenny Lin, CGA 2009.