Canada College

PREPARE A BUSINESS PLAN

Why be in business if you’re losing money all the time?

• Legal fees if you’re incorporating your business
• First and last months rent if you’re operating from rented premises
• Costs of setting up an IT network, phone and fax system
• Office furniture

Monthly operating costs

• Rent
• Wages
• Inventory purchases if you’re selling goods
• Professional fees (accounting, legal)
• Leasing costs for business equipment
• If you’re fortunate enough to have them believe in your ability to succeed, family and friends may be willing to provide a business start up loan
• Never, ever approach friends and family unless you have a detailed business plan that will demonstrate why your business will succeed.
• If you cannot factually demonstrate how your business will succeed, and how you’ll repay them, you are just throwing their money away
• We’ve seen this scenario play out, which results in broken friendships and strained family relationships

Canada Small Business Loan Program

• Administered by Industry Canada.
• Provides up to $500,000 of financing
• You must be carrying on business for profit with gross annual revenues of $5 million or less
• Loan proceeds can only be used to purchase business equipment, leasehold improvements to leased premises, or to purchase land for business operations
• You cannot use the proceeds to finance working capital, like inventory or accounts receivable
• If the bank decides to grant you a loan, they register it with Industry Canada
• If you give a personal guarantee, you’re only personally liable for 25 percent of the initial amount borrowed. This is a big advantage over conventional loans, which usually require you to personally guarantee 100 percent of the loan borrowed by your business

Canadian Youth Business Foundation

• There is a mandatory 2-year mentoring program where you are matched up with an experienced businessperson to allow knowledge sharing and a higher business success rate

Business Development Bank of Canada (BDC)

• BDC is a Crown corporation owned by the Government of Canada
• Its goal is to support small businesses in Canada, by providing consulting and financing services

If needed, borrowers can postpone principal payments for 12 months

• The program targets businesses in manufacturing, distribution, services and tourism
• Loan proceeds can be used to finance working capital, fixed assets, marketing and start-up costs as will as purchasing an existing business or a franchise
• Must be able to demonstrate realistic market and sales potential
• Must also be able to demonstrate relevant experience and knowledge about your industry
• Must be able to give personal and financial references

WHAT IS THE BEST LEGAL STRUCTURE?

• GST collected by your business but not remitted to Canada Revenue Agency
• Payroll taxes deducted from your employees’ wages, but not remitted to Canada Revenue Agency
• Employer premiums for EI and CPP
• Up to 6 months unpaid wages and vacation pay of your employees
• Retail Sales Tax collected by your business but not remitted to the Ontario Ministry of Finance

Also, if you gave any personal guarantees to any of your business creditors, for example, the bank for your loan or your landlord when you signed the lease agreement, incorporating your business will not protect you personally if you fall behind in these obligations.

SETTING UP YOUR BUSINESS

Is there free parking?
• How much space will you need to operate?
• What is the reputation of the landlord?Advertising your business
  • If you provide a good or service in Canada and your annual revenue will exceed $30,000, you’re required to register your business and collect GST
  • If you’re operating as a sole proprietor or you are the director of a corporation, you’ll be personally liable if you don’t collect and/or remit.

  PST

  • If you sell goods to “end-user” consumers (as opposed to reselling to another business), you’re required to collect and remit provincial sales tax
  • If you’re operating as a sole proprietor or you are the director of a corporation, you’ll be personally liable if you don’t collect and/or remit.

  Payroll tax

  • The federal corporate tax rate is 38 percent of net income
  • The combined federal and provincial corporate tax rate in Ontario on net income under $500,000 is 16.5 percent
  • Employers contribute to WSIB, which is a provincial insurance fund.

  An employee cannot sue your company for negligence if that negligence causes a work-related injury

If the work is, in fact, suitable the injured worker must accept it.

• There is no director liability for unpaid WSIB premiums of a corporation

Wages and vacation pay

• Two weeks vacation
• Termination pay, which increases with the length of employment

Starting a Business in Canada