6 Best Practices on How to Incorporate a Small Business
If you are a small business owner and you want to incorporate your business, that is a great idea. Incorporating a small business will provide you with massive advantageous when it comes to protecting your personal and business finances. Incorporation can also help with improving your business’s credibility, allowing for expense deductibles, as well as protecting your business’s name and unique products or ideas.
All of the aforementioned benefits are very important to the long-term growth of your small business, even if the business is comprised of only one or two employees! In order to teach you how to incorporate a small business, here are the six key aspects of business incorporation:
1. Decide if you should incorporate the small business
Before you learn the process of how to incorporate a small business, you should ask yourself as to whether you are ready for this next step. You need to be informed about the benefits that come with incorporation, alongside the administrative and financial responsibilities you will incur.
Your small business incorporation will lead to some more administrative and financial work than you are used to, which you need to ensure you account for over the long-term. This means that you need to think about allotting your time (or staff time) to this in the future. For the more complex legal documents, you can seek the expertise of business lawyers to help you understand how to incorporate a small business.
2. Name the business
If you have not already done so, you need to come up with a name for your small business. In order to ensure that this name is unique and has not been incorporated before, you will need to do some online digging in advance. This is an area where you want to take care, as you don’t want to get sued in the future.
3. Obtain a business number
Before you proceed with the required paperwork, ensure that you obtain a business number (BN). A BN will identify your small business as long as it is in existence, and it will be used for finance reporting purposes.
If you are incorporating your small business in Quebec, ensure that you obtain a Quebec Enterprise Number (NEQ), which is required for business incorporation within the province.
4. Decide if you need to incorporate federally or provincially
Before you submit all of the necessary paperwork to incorporate a small business, it is important to consider whether you need to incorporate federally or provincially. Federal incorporation allows you to do business under your small business name across all provinces and territories. The downside is that it is pricier and does require more work to maintain.
If you will be operating exclusively in your province, then a provincial incorporation will be sufficient for your business and will save you some funds. Indeed, many small ecommerce businesses go this route.
5. Register for GST/HST
If your small business earns more than $30,000 of total revenue per year, then you need to register for a HST/GST account. However, many small businesses who make less than the set amount register for this anyways, as you can get a portion of your taxes refunded by the government. This is especially critical for those who use their personal expenses to finance business activities.
For instance, if you are a freelance writer who works from home, you can get some money back during tax season. Indeed, you can expense your laptop, printer paper, pens and notebooks, and much more. You can even expense your hydro and electricity, since you are working at home after all.
As a result, the HST/GST can go a long way in saving you money over the long run. If you are not sure in terms of how to proceed, it is always advisable to seek the help of a legal professional who can advise you of your next steps. Indeed, it is cheaper to pay for legal advice from the get go, rather than paying for mistakes after the fact.
6. Get educated about how to incorporate a small business
Before you go through the process of incorporating your small business, it’s always a good idea to get educated about incorporation. You need to consider how incorporation fits into your larger business goals over the long-term, and how best to get the process done.
In order to make life easier, it’s always a good idea to seek the help of professionals. If you cannot afford legal advice or if you don’t have the time to set up an appointment, consider checking out various business seminars available in your region. Your regional Business Service Centre should offer up free seminars, networking opportunities and/or information sessions to get you informed about small business incorporation.
Incorporating a small business is a big step towards growing your business and clientele. Although it comes with numerous benefits to help your business flourish, it’s always important to be informed. Your small business will thank you for it!
