How To Start a Business

by Mr. Cheap

The Baglady recently mused about setting her blog up as a business and earning income from it. A number of bloggers who have typically been employees and are thinking about trying to earn some cash running a business probably go through this thought process and don’t know what to do.

When I was starting a business years ago, I kept thinking “I’ve got to make sure I do the paperwork right or the business police are going to come and throw me in jail”. Or charge me outrageous late fees. Or something else bad that I hadn’t thought of yet.

Often you can see the strength of an economy by how much the government keeps its nose OUT of private business. The easier it is to start a business, the stronger the economy. Countries that limp along economically often have convoluted, bureaucratic processes required to “hang your shingle” on your door and start running a business (and they suffer, in part, because of this).

In Canada (and most Western countries), all you have to do to “start” a business is start making money. You report this on your tax return in the appropriate place. Say you have a garage sale and sell $200 of your old junk, congratulations, you’re in business! Its considered a “sole proprietorship” and from a legal perspective you are the business. Revenue Canada couldn’t care less as long as you report (and pay taxes on) what you earn.

No one will show up in the middle of the night and beat you up. Isn’t it great to be a Canadian?

The “threshold” when you have to do more is once you are forced to start collecting GST. Until you earn $30,000 in a year, you’re considered a “small provider” and you don’t have to collect or charge GST unless you want to. Once you earn $30K over the previous 4 quarters (or immediately if you earn $30k in a single quarter), you are required to get a GST number and begin charging and passing along tax collected to the government. This is a very easy process, requiring about 15 minutes at this website.

There are obviously reasons why you might consider incorporating, forming a partnership, or other business structures. However, if you’re just starting out and testing the waters with a new venture all you have to do is keep track of your revenue (and pay taxes on it), and drink a toast to capitalism!

What has your experience, if any, been starting a business in Canada or other countries?

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