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Supporting Community Entrepreneurs: Business Startup Basics
- 1. Supporting Community Entrepreneurs: Business Start Up Basics Links to Learning 2013
- 2. What is a Business? Getting Started Getting Organized Business, Vehicle, Home Office Expenses Money In, Money Out Record Keeping Methods CRA – record requirements Financial Reports Workers Compensation Act – Worksafe BC Overview
- 3. • CRA definition • A business is an activity that you intend to carry on for profit and there is evidence to support that intention. http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/wht-eng.html What is a business?
- 4. • You do not need to register for a business number • • • • • If revenues are under $30,000 per year and only services – no GST If total revenues under $10,000 and you sell goods – no PST There are no employees The business is not incorporated Goods are not being imported or exported • Resources • Canada Revenue Agency • Free courses on GST/Payroll • Business enquiries open 8:15 am – 8 pm 1-800-959-5525 press * to speak to an agent • www.cra.gc.ca • Small Business BC & Community Futures • www.smallbusinessbc.ca Getting Started
- 5. April 1st, 2013 – PST Returns to British Columbia • Do you sell goods subject to PST? • Do you have a storefront? • Registration is required • Revenues are under $10,000 per year and you do not have a storefront • Registration is not required • Resource – Consumer Taxation Branch • One-on-one consultations in person or on the phone • www.sbr.gov.bc.ca Getting Started
- 6. • Keep Business separate from Personal • Use dedicated bank account and credit card • Sole Proprietor vs. Incorporated Getting Organized
- 7. • Sole Proprietor? • is a type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business. • The owner receives all profits and has unlimited responsibility for all losses and debts. • Every asset of the business is owned by the proprietor and all debts of the business are the proprietor’s. • simple, year end is always December 31st Getting Organized
- 8. • Incorporated? • is a business entity that is created as a legal entity distinct and separate from the individuals who own the business. • The assets and liabilities of the business are separate from the shareholders or owners. • An incorporated business has limited liability – if the business fails owners may lose their investment (equity), employees may lose their jobs, but in most cases neither are liable for the debts of the business. • If the business is closed or wound down, the corporation must be legally dissolved • recommended when you are earning more money than you need to live on Getting Organized
- 9. • anything which is involved in generating income • • • • • • • • • Cell phone & Internet Office Supplies Meals & Entertainment Advertising & Promotion Insurance Legal & Accounting Fees Licences, Dues, Memberships Interest Private Health Service Plan Business Expenses
- 10. • Sole Proprietor or Incorporated ? • Sole Proprietors - expense proportion of business use plus a portion of the cost of the car • Incorporated – submit a mileage claim or claim a proportion of expense Vehicle Expenses
- 11. • 25% of expenses is reasonable • Record percentage use for business • Calendar with appointments and locations • Log Book • 100% Business Expense • Extra insurance premium for business use • Parking • Proportion of Expense is Business • • • • Gas Insurance Repairs & maintenance Residential parking permit Vehicle Expenses
- 12. • Home office • if this is where you primarily run your business a proportion of the total expenses is allowable • 10% is reasonable • Expenses • • • • • • • Utilities (gas and electricity) Insurance Rent (if you do not own your home) Repairs & Maintenance Strata Fees Mortgage Interest Property Taxes Home Office Expenses
- 13. • • • • • Cash Cheque Point of Sale/Debit Credit Card Electronic Funds Transfer Money In, Money Out
- 14. • PayPal • Setup is free • Request payments by email paid with credit card • Credit Card information remains with the customer • SquareUp • • • • • Setup is free Works with smart phone and can swipe credit cards Designed to work with tablets Customize the receipt Transaction fee 2.75% for swiped transactions • Email – bank to bank and some credit unions, e.g. VanCity Money In, Money Out
- 15. • Off reserve charge everyone GST. • On reserve - GST is not charged to individual Indians - needs to have status identity number on file • No GST is charged to band empowered entities – Certificate below required, to be kept on file with the invoice for the event in case of GST audit. • This is to certify that the property or service being acquired by [Insert the name of band or band-empowered entity] is for bandmanagement activities (if applicable) or for real property on the reserve. This supply will not be subject to the goods and services tax/harmonized sales tax (GST/HST). • _____________________________ Signature of Authorized Officer • _____________________________Date • _____________________________Title of Signing Officer HST/GST – when to charge
- 16. First Nations Goods & Services Tax • Has the same operating rules as GST/HST and replaces the federal portion of HST, there is nothing which replaces PST • The tax rate for FNGST is identical to the GST, or the federal part of the HST. List of First Nations who have implemented FNGST • http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gsttps/frstntns/fngstpp-eng.html FNGST – when to charge
- 17. • Shoebox / Safeway bag • Expensive – pay someone to sort it out • Inaccurate • Likely things are missed • Spreadsheet • Organizes the paper receipts • Works well for tracking expenses Record Keeping Methods
- 18. • Accounting software • Can issue invoices • Tracks HST/GST • Tracks bills still to be paid (accounts payable) and sales invoices outstanding (accounts receivable) • Can produce Financial Statements Record Keeping Methods
- 19. • Wave • • • • • • In the cloud Free Sole proprietor or Incorporated Business Recurring Invoices & Payments Accept Credit Card Payments via Stripe Add Payroll Record Keeping Methods
- 20. • Sage 50 (Sage Simply Accounting) or QuickBooks • Payroll • Inventory • Supports more detailed reporting requirements • Using a Mac or a network with both Mac and PC • MoneyWorks Record Keeping Methods
- 21. • Whatever system you use • A receipt (till receipt) for expense purposes has the GST/HST number on it and the tax amount. • Credit card receipt or direct debit is proof of payment – not a receipt Canada Revenue Agency Requirements
- 22. • Whatever system you use - Keep the Receipt • A receipt (till receipt) for expense purposes has the GST/HST number on it and the tax amount. • Credit card receipt or direct debit is proof of payment – not a receipt Canada Revenue Agency Requirements
- 25. • Record Retention • There are different rules, safe is 6 years after the date of filing. Canada Revenue Agency Requirements
- 26. • Budget for a Bookkeeper and/or Accountant • Do regard good record keeping and accurate, up-to-date financial records as an investment • Lender Expectations • Need to see Financial Statements– • Balance Sheet or Statement of Financial Position • Income Statement or Statement of Operations • Statement of Cash Flow (another workshop topic!) Invest in Good Record Keeping
- 27. • Statutory requirement for all workers in Canada – the person paying the bill is the one liable • As a sole proprietor – Optional Personal Protection • All corporations are required to register, there may be no liability if there are no workers, file a nil return. Worksafe BC – last but not least
- 28. • One Bank Account & One Credit Card • Pay Pal / SquareUp for Credit Card Payments • Wave Accounting / Stripe for Credit Card Payments No Cost Method
- 29. Business expenses, vehicle and home office expenses, record retention • • Revenue Canada Agency www.cra-a rc.gc.ca Business enquiries open 8:15 am – 8 pm 1-800-959-5525 press * to speak to an agent and bypass the messages PST Registration & Information • • • To schedule one-on-one consultation www.sbr.gov.bc.ca/ctb/ask_a_tax_specialist.htm or call 1 877 388-4440 Email: CTBTaxQuestions@gov.bc.ca www.sbr.gov.bc.ca . Seminars, courses • • Small Business BC www.smallbusinessbc.ca Outside Vancouver Community Futures Record Keeping & Payments • • • • • PayPal www.paypal.com SquareUp www.squareup.com/ca Wave Accounting www.waveaapps.com Sage 50 Canadian Edition http://na.sage.com/sage-50-accounting-ca QuickBooks Desktop or Online http://quickbooks.intuit.ca/accounting-software/small-business-accounting-software.jsp Employee Liability Worksafe BC www.worksafebc.ca Business Start Up Basics Resource List
- 30. Supporting Community Entrepreneurs: Business Start Up Basics Links to Learning 2013
Editor's Notes
- The objective of the event is to deliver a dynamic technical training forum for First Nation Economic Development Officers and Land Managers to enhance their ability to undertake successful lands and economic development ventures
- Are you running a business – or is this a hobby?
- A business is not a hobby – the intention is that the business will make a profit. A business includes:a profession a calling a trade a manufacture an undertaking of any kind an adventure or concern in the nature of trade. It is not employment income
- You do need to register for HST if your revenues are over $30,000 per year, whether or not you are on or off reserve.p. 9 of the CRA Guide for Canadian Small Business■ RT – GST/HST■ RP – payroll deductions■ RC – corporate income tax■ RM – import/export
- Reintroduction of PST
- Bank or credit union may try to say that a business account is needed – If you are using your own name a business account is not requiredCredit unions allow business tax payments to be made from personal accounts, e.g. payroll and HST
- Sole Proprietor – Incorporated – separate entity, can chose year end,
- Debts – directors can be held responsible for unpaid statutory remittances, environmental damage, and certain liabilities arising from law suitsIncorporated – separate entity, can chose year end,
- In general anything which is involved in generating incomeBe reasonable – If you are starting off – cell phone – may not be even 50% business – charge a portionPrivate Health Service Plans - sole proprietors (if more than 50% income from business) and corporations. Medical bills a deduction for the business instead of a tax credit on your personal tax return. CRA requires they have to be administered by a 3rd party Everything under the Canada Health Act is covered. Olympia Benefits provides such a service.
- There are significant standby charges if the corporation owns the vehicleInstead of a log, sometimes easier to record all expenses and claim proportion
- CRA is more relaxed about the documentation and will accept a typical month or two with documentation rather than a whole year.
- Room proportion calculationThis is based on the square footage of the space and the time you use it. For instance your dining room is 10% of the total area. But you use it 7.5 hours a day, 5 days a week. You would total up the expenses and first take 10%. Then this would be reduced again by the number of hours used as an office.In Canada there is no capital gains tax when selling your principal residence which is why only mortgage interest is used in the calculation. If part of the principal payment were also used this would mean capital gains tax on the portion claimed as a home office.Home office expenses cannot be used to reduce your income below zero.
- Different methods of receiving funds and paying for expensesAvoid cash where at all possible
- PayPal – free to set up, no ongoing fees, funds go to PayPal account and then transferredSquareUp pay as you go – now in Canada, can swipe credit cards and designate others to process cards, funds go directly to bank accountBoth PayPal and SquareUp are usefulEmailBanks and some credit cards can email funds to someone – the list continues to growTelPay – cost effective and based in CanadaCan pay anyone in Canada with a cheque if you have their name and address ($1.25 per transaction)Can pay direct deposit if you have their banking information (50 cents)Can make international payments
- HST/GST – on and off reserve when do I need to charge – statement covers all of Canada – some provinces have HST – harmonized sales taxBand-empowered entityA band-empowered entity is a corporation, board, council, association, society, or other organization that is owned or controlled by a band, a tribal council, or a group of bands other than a tribal council. This policy is applicable to those band-empowered entities situated on a reserve. A band-empowered entity is considered to be situated on a reserve when the entity maintains a presence on reserve. An entity is considered to be owned by a band, a tribal council or a group of bands other than a tribal council if:the band, tribal council or group of bands owns all or substantially all (90 per cent) of the shares or holds all or substantially all of the memberships of the entity; or the band, tribal council or group of bands holds title to the assets of the entity or controls its disposition, such that in the event of wind up or liquidation, these assets are vested in the band.An entity is considered to be controlled by the band, tribal council or group or bands if:the band, tribal council, group of bands or individual members of the band, tribal council or group of bands, appoint or elect a majority of the members of the governing body of the entity (for example, directors); and the entity is required by legislation, by-laws, or an operating agreement, to submit to the band, tribal council or group of bands, its operating budget and where applicable, its capital budget for review and approval.
- In participating provinces, the HST consists of a federal part (5%) and a provincial part. Where a First Nations tax applies, it is the federal part of the HST (5%) that is replaced either by the FNT or FNGST. There are currently no federally administered First Nations taxes that replace the provincial part of the HST.A First Nations tax only replaces the federal part of the HST. Therefore, if an Indian, Indian band or band-empowered entity were to acquire taxable goods or services on reserve lands where a First Nations tax applies, the supply will only be subject to the FNT or the FNGST at the rate of 5%.
- Wave AccountingItems imported or automatically linkedWorks well when bank account and credit card used exclusivelyCan issue invoicesTracks HST/GSTTracks bills still to be paid (accounts payable) and sales invoices outstanding (accounts receivable)Manual entries required for cash purchases
- These are the most common in Canada there are othersWave – accept credit card payments – 7 days to receive funds, can scan credit card in Payment App, no swipe device needed
- These are the most common in Canada there are others and there are options for those using a Mac and even a combination of Mac and PC e.g. Moneyworks from New Zealand
- Electronic files are OK, but make sure they are accessible. PDF is likely readable in 6 years. Your computer hard drive likely will not be working in 6 years and will anyone else know the password to your data in the cloud? I make a CD/DVD and store it with my paper copies. If paperless, make a CD each year with tax filings and know where the CD is.
- Electronic files are OK, but make sure they are accessible. PDF is likely readable in 6 years. Your computer hard drive likely will not be working in 6 years and will anyone else know the password to your data in the cloud? I make a CD/DVD and store it with my paper copies. If paperless, make a CD each year with tax filings and know where the CD is.
- The till receipt is on the left – the credit card (in this case Visa) is on the right. Revenue Canada like to see the till receipt with details of the items purchased along with the HST paid together with the HST number.
- The till receipt is on the left – the credit card (in this case Visa) is on the right. Revenue Canada like to see the till receipt with details of the items purchased along with the HST paid together with the HST number.
- Electronic files are OK, but make sure they are accessible. PDF is likely readable in 6 years. Your computer hard drive likely will not be working in 6 years and will anyone else know the password to your data in the cloud? I make a CD/DVD and store it with my paper copies. If paperless, make a CD each year with tax filings and know where the CD is.
- Good records mean that reporting is on time and accurate, it’s much better to pay a bookkeeper or an accountant rather penalties to the Revenue Canada. Lenders are much more willing to consider applicants with good financial up-to-date records.
- While this is a cost – it can be a savings…. Judi’s story
- Keeping all business income and expenses to one bank account (avoid cash as much as possible) and credit card allows items to be tracked when receipts are missed.Combining with Wave Accounting and PayPal creates a free system for full small business functionality with minimal data entry that creates automated reports come tax time.If you are not sure about setting up Wave Accounting – download the transactions each month so they can easily be imported. Generally they are not available for download beyond 2-3 months.