Many people ask the question of how to start a business in Ontario or anywhere else in the world. The main reason behind this question is that they are afraid to fail. The simple and straight answer to this question can be when you start a business, then you are in a better position to control your surroundings, and by becoming your own boss, you can create a better future for yourself.
Hence the most important thing than any other is to get over the fear of failing before starting any business venture.
To know how to start a business in Ontario, you must find an answer to the question, what is the need to start a business in Canada ?
You need to be disciplined and willing to invest your valuable time and energy in the short term to reap the benefits afterward.
1. Benefits of Starting a Business in Ontario
1.1 Create Your Own Environment
You can set the formality and culture of your environment. The environment makes a think the way we do. Hence a creative a positive environment should be a priority.
1.2 Get Higher Flexibility
In business, you decide your own working hours. Hence you get more free time to enjoy your freedom.
Here freedom means the absence of any control, which gives you the authority to decide and act according to your likes and dislikes. Successfully handling your own setup can give you more time to live your personal life.
1.3 Quit 9-5 Job
Job is employment based on your skills, and the boss dictates in office. But in business, there is no boss, so you can pursue your passion and do the things that make you happy. Whereas business is a versatile responsibility. In a Job you have to complete the work given by your employer and your salary is that high.
In a Job environment, you need to follow the organization’s rules, and the growth potential can be less, and you need to be accountable every time.
1.4 How to Start a Business in Ontario- Meet New People
In business, you can grow your network and become more visible to the public eye. You can develop your network and work for society.
And with good networking, you can advertise your business well with word of mouth.
1.5 Become an Expert
With business, you learn new things all the time, and they make you the expert in your area of work. So business gives you an opportunity to become an expert in the field you choose which is different than a job. But the important thing is to take that first step to learn the things you like and then master them.
1.6 Achieve Big Dreams
When you achieve success in your business, then you can inspire others and make a change to the world through your creativity. Our life will only change to the degree to which we change our thoughts. We achieve only in proportion to what we expect.
Hence it is important to set big goals and thinking big. In business, you create an asset for future generations.
1.7 Getting All the Rewards
In business, the hard work you take to complete the tasks gives you all the rewards, and that is a lot different in the job. Hence you are in a better position to gain financial stability in business when you do everything correctly. As we all know, profits are always better than wages.
In a job, you have a limit on your earnings because even if you become CEO still, your board of directors will decide how much money you can get. Whether you start a full-time passive income or part-time passive income, you need to have a passive income.
You should also consider the tax brackets on income generated from jobs and businesses. In Ontario, the tax is applied to the total gross income of your salary, and in the case of business, the tax is applied to net income, so there is no tax on expenses of business.
In the case of a job, the tax is deducted immediately, but in the case of a business, you can keep the pretax income for the whole year and pay the taxes in the next financial year. So you can invest that pretax income somewhere, but that is not possible in the case of a job.
Remember, many of today’s successful businesses were started with a minimum budget. Hence you do not need a big amount in your bank account to start your business. You need to have a good idea and the will to take the hard work to get the job done.
2. How to Start a Business in Ontario- The Types of Businesses
2.1 Sole proprietorship
Firstly in Sole proprietorship, you are the owner of the business, and it is the simplest way to start the business. All the business income and the net income are going to be taxed in your name. Eventually, you can choose to incorporate the business. In this type, if your business is sued, then there is a danger that your assets will be lost.
If you want to start a Sole proprietorship business, you can start it without registration or paying any fees. This is the most recommended type of business for budding entrepreneurs. In this type of business, all your business income is your income, but all the risks that come along with that are also yours.
A separate bank account is not mandatory in this type of business. You can also operate this type of business with your personal bank account. But having a separate bank account for your business is recommended to understand your expenses and bookkeeping clearly.
2.2 Corporate Business
Second is Corporate Business; in this, you and your business are both separate entities. You can be the owner of this, but your money and business income will be taxed separately.
It gives you protection, and you are safe if your business is sued; your assets will still be untouched. This type of business also comes under a lower tax bracket.
2.2.1 What is Corporate Business
It is important not to rely on job income and start a part-time income to manage your expenses. It will require you to work late nights, or you will have to work on weekends when other people relax. But you can have a better future and manage your finances well.
When you start a business with a company name, you need to look for a business name with no profanity or obscenities which is not misleading to the consumers. Registering the business name is required for protection. Also, it needs to be available to register the business.
2.2.2 How to Start a Business in Ontario in the Corporate Sector?
You can check the NUANS database for available business names among the already registered business names. While registering your business, you can choose English and/or French names.
In Ontario, it requires $60 to register a business name, and it is a tax-deductible amount as a business expense. This business registration is valid for 5 years. Every 5 years, you must renew the license and pay the fees.
Opening a corporation will cost you more than $500, and you will be paying a similar amount to file your corporate tax returns. This is a significant amount of money. Hence it is recommended when you are in a high tax bracket above $100,000.
2.2.3 Different Kinds of Licenses Required
After registration, you will obtain Master Business License. Now you can operate in your province with the registered business name. This master business license will help you open a mandatory bank account. Since you are not using your personal name, you can not use your bank account, which is opened under your name.
After registering your business, you should follow some steps to protect your brand. You need to register a website domain, Facebook, Instagram, and other social media profile with your business name. While registering a website domain name, make sure you register for .com and .ca domain names for better protection. You can register for a trademark after consulting your lawyer.
After you register with the provincial government for business, you need to register with the federal government for taxes. Once you complete registration formalities with the provincial government, it gives you Master Business License, which gives you Business Identification Number (BIN).
When you register with the federal government through CRA, they give you a Business number or BA. BIN and BN both have 9 digits, but both are different. The Ontario government uses the BIN to identify your business, but the Federal government uses the BIN for tax purposes. BN works as a social insurance number for your business.
In case you want to hire employees, then you need a payroll account, and you need to register with CRA. Also, If your business earns more than $30,000 over the period of four quarters, then you need to register for GST/HST account, and for that, you need a business number (BN).
2.2.4 GST/HST Management
Remember, the threshold of $30,000 over the period of four quarters is on the revenue of your business before expenses and not on net income.
Once you have registered for GST/HST, you must charge your customer this extra sales tax for your services. In Ontario, the HST is 13%. Remember that 13% belongs to the government, and you must repay it.
You can charge extra GST/HST to your customers only when you are registered for GST/HST program. Keep that extra money safe in your bank account and pay it back to the government along with the tax when it is due.
When you are getting started with your business, then start with a proprietorship. As your business grows and your income increases, and you get into a higher tax bracket, convert your sole proprietorship into a corporation to benefit from these lower tax rates.
Some business activities are more likely to face lawsuits than others. So, If you are worried about the personal liability risk, you might want to incorporate your business earlier on.
It will cost you more money in accounting fees, but it will protect your personal assets, which have nothing to do with the business, in case your business faces any lawsuit. It is recommended to discuss this thing with your lawyer and accountant.
Hope this will clear the questions in your mind on How to Start a Business in Ontario. For similar articles about online business expansion, you can click here.