Being in Canada with a work permit is hard for those who have an entrepreneur's mind like myself. The only way you can be in Canada with a work permit is as an employee. The obvious move is, that as soon as the permanent residence is granted, start looking at how to establish my own business. In short, a business can be established as a sole proprietorship, partnership or incorporation (there is also non-profit, but that is not really a business). I will write here how I did for my proprietorship.
In Ontario, I was able to register myself using this link: https://www.ontario.ca/page/register-business-name-limited-partnership It cost 60 CAD and it takes around 15 minutes to register. Although the system is very fast, they have a hard rule, if you register your business outside of business hours, you will need to wait for confirmation. So, do yourself a favour and do it during working hours.
Why a Sole Proprietorship?
It is the easiest business form. In my very specific case, it gave me several advantages as I am a technical person.
- I was able to write off all the IT-related expenses.
- Rent and some household expenses can be written off.
- No need to hire accountants to do the business tax return, it was straightforward and I just needed to read (a lot) to do it right.
However, there is also a catch here. I was the business. This means that the income hits directly my personal tax return. Some government benefits, such as child support may be affected. Also, not my case, but if I was thinking of helping someone to come to Canada, as a sole proprietorship it was almost impossible (because of some paperwork). Also, there are some grants and government incentives exclusive to incorporations.
The Process
I am sharing here screenshots of what I did.
What to Do After the Business is Registered?
As far as my understanding is, this is totally optional.
HST Number
When I registered for my first sole proprietorship, I decided to register for an HST number in the CRA. My business is (because it still exists) about technology. The CRA states that if you do not have sales over 30,000 CAD quarterly, the HST is optional. So, this kept me thinking for a while. After thinking, I decided and went for the HST number. My rationale was easy:
- 100% of my customers for this business are businesses, so they are ready and used to pay tax.
- I am already HST charged for the tools I needed to operate, without an HST number I wouldn't be able to file a return and recover that paid tax.
- The CRA states that if you do sales over 30,000 CAD in one quarter, you must register for HST. The issue here is that they also state that I should call all my past customers and charge the missing tax. This would damage my image as a business.
For my second proprietorship, I decided not to get an HST number. I doubt I would be able to bill more than 30,000 CAD in a quarter.
Bank Account
I got a bank account for my new sole proprietorship. It didn't have to be a "business account", just a separate account where I could put there all the money for the business. This was very handy when I filed my tax return and to get ready in case of an audit. For my first sole proprietorship I went with RBC I got a checking account and a master card credit card. As for the second one, I decided Tangarine was my best option.
It really doesn't matter what bank, what is important here is that all business-related incomes and outcomes are easily isolated from the personal ones.
Bookkeeping
For some, this is very frustrating. I started to keep all the receipts (this is very important) and I captured them in software. I selected KMymoney, it is free and It allows me to have control and know how my business is. There are many other software names for bookkeeping, but the idea here is to capture everything this way I was not only able to have a picture of my business but when doing my taxes, it was incredibly easy to get the numbers.
Assign a Specific Space for Business
In my case, I was not able to afford the rent of an office, so I converted the whole basement into my office. Because I was paying rent, this enabled me to write off a proportional part (not more than 25% I think) of some household expenses such as electricity, heat (gas), water and rent.
The catch here is that that designated space must be for business only. Again, in case of an audit.
Let the Canadian dream start...