Sole Proprietorship/Partnership license/permit

[Eugene han]

Hello all. Just ordered my laser and am waiting the system to come in 2 weeks. It will be a home-based family business involving Husb/wife/son. No loans, all money is from my family. In Canada, you can do business without registration for revenue less than 30000 $ a year. I prefer to register a business name. Should I register as a sole Proprietorship and pay my wife and son as employees or add them as Partnerships?
What kinds of licenses/permits/insurance/product liability one should apply? How to deal with government with noise/Waste/fire/GSt/PST? Engraving and marking will be my main business. I might need a bank account to collect payments.

[Richard Rumancik]

I strongly recommend that you take a short course on starting a business - there are a lot of issues that could be dealt with better there. There are opportunities in most cities to take at least a few-day course that would give you a good start.

To answer a few questions:

1. In Canada, you don't have to register with the Government to collect GST (Goods and Services Tax) if anticipated revenue is less than $30,000. But then you can't claim any GST that you pay on raw materials either as a tax credit. In my opinion, I would register as it won't hurt you. As your revenues grow you'd have to register anyway. Most of your customers will expect to pay GST anyway.

2. Registering your business name is not the same as registering for collecting GST. You should register your business name. It is not very expensive and you don't need a lawyer (if not incorporating the business).

3. As far as licenses/permits needed you have to check with your municipality.

4. You will want business insurance on your laser, inventory, tools. You will need additional fire and liability insurance regardless of where you put the laser. Your home insurance won't cover business assets.

5. I doubt that many people making awards or doing engraving would get into many product liability situations. (Defective product causing injury.) If you are concerned about a product you are making you will need to investigate further. General liability (someone getting hurt on your premises) is a more likely scenerio.

6. "How to deal with government with noise/Waste/fire/GSt/PST?"
Easy - find out what you have to do and then comply.
PST: you will have to apply for a PST (sales tax number) to avoid paying PST on purchases on production material and to be able to collect tax on sales. You do not have a choice on this.

7. You will HAVE to have a bank account. (Whether you collect payments or not!) You can't run a business without using a bank. Don't run it through your personal account or you will have a mess and the accountants won't talk to you . . .


Again - take a short course and it will give you a chance to ask specific questions. They can also advise on how to structure the business (sole proprietorship or other.)

[Bill Cunningham]

If your business name is going to be Eugene han engraving, you do not have to register a business name, but if you name it 'something.. something' engraving you will have to register the name. If your going to make money in this business, you 'have' to register with the feds and get a G.S.T. number.. If you don't you will have to pay gst on everything, and that gst will be hidden in the final price. If thats the case, it's not likely you will get any industrial or commercial jobs, a GST# identifies you as a 'real' business, and your industrial clients want to get 'their' gst back and if you can't provide them with your number, they loose the 6% that will be embedded in your price because you paid it!.. If your selling anything, like Richard said, you have no choice, you will have to have a PST number, if you don't, and if your in Ontario, 'Daltons Raiders' will come looking for you:eek: . Put those two taxes together, and sound them out loud.. Thats the general attitude regarding these taxes
GST PST :mad:
There are some benifits though.. What ever percentage your using of your home for your business, which includes water/heat/elec..etc..you can claim that portion of the gst back as well, and that can equal a few hundred bucks..
Just one note though.. When I started my business 18 years ago, I set up in my garage, then distributed my business cards. One of the very first people to walk through my door was the 'Municipal/County' tax man.. YES a home business will increase your property tax (when your caught:D )

[Eugene han]

This site is great. I will register my business and get the GST number. I will also try to apply a PST number so that I can get PST exampt. I just still not so sure about the zone since I am renting an apartment. I will not have the clients to come to my apartment for pick up. I asked some people here, however, still not so clear about this kind of business. I am living in a smaller city. I was told that One can get the PST examption from buing the laser system, just pay the GST.

[Richard Rumancik]

Were you planning to install the laser in your apartment? If so how will you vent it?

This isn't the best situation from an insurance point of view. If you install a laser in your home that is one thing, but if you put it in an apartment there could be complications.

As far as Provincial Sales Tax I don't understand how you could be exempt on the laser purchase. The general rule of thumb is that the end user (last person in the purchasing chain) has to pay provincial the sales tax. Since you are not reselling lasers you are the last person in the chain so I think you will have to pay tax.

If you sell your product to the consumer you need to charge PST. If you sell to a store that will re-sell your product to a consumer, you do not charge PST. However, they need to supply their PST number to you and it should show on your invoice. Check with your accountant.

GST works differently. You have to pay GST on purchases and you have to collect GST on sales. But you can subtract the GST you paid (input tax credits) from what you collect and then submit the difference to the government.

Input tax includes GST paid on equipment, materials, utilities, etc.

[Bill Cunningham]

As far as Provincial Sales Tax I don't understand how you could be exempt on the laser purchase. The general rule of thumb is that the end user (last person in the purchasing chain) has to pay provincial the sales tax. Since you are not reselling lasers you are the last person in the chain so I think you will have to pay tax.

If you are using the laser and any associated equipment/supplies/tools In Ontario to produce items that are sold retail, and you are charging (read MUST charge) PST it is considered to be production equipment, and you can claim exemption on the PST (if you have a PST number) If you are a manufacture not selling retail, you do not need a number to claim the exemption, you simply 'claim' exemption using the standard exemption form. You do not have to pay PST on production equipment. (but you better be ready to defend that position. If the taxman thinks your laser is a 'hobby' tool, your going to have to prove you use it in a legitimate business, and have sales to prove it ).. If you have a GST number, you pay the GST, and can then claim a GST input credit, and/or claim the entire GST amount back from the government, and they will send you a cheque.. It's as simple as that..

[Eugene han]

Thank a lot. I will try to install a DC with filters so that most of the time I just use it indoor instead of venting out. I will try to lower the noise and will not run at night. I would like to follow the law and try to apply a PST if it not complicate my situation. Lots of people get PST exampt for their laser purchase. I am living in a smaller city and as a newcomer I just do not know how did they do that. MY clients will not come to my apartment to do business. I would like to apply a PST number. The reason I posted this wuestion is it will help us a bit if we have no need to pay for PST for our purchase. So I really appreciate all the inputs which help me a lot.

[Dave Jones]

It sounds like you really need to sit down with an accountant for an hour and have them give you all the details of dealing with the different tax issues. Most accountants will charge a reasonable price for a one time consult and answer whatever questions you have. A lot of times the various people you might talk to who have businesses in their home have invalid or out of date information and might give you bad advice. A CPA or tax specialist should be up to date on those kind of things. It's a small price to pay for the info, and often they can give you other tips that might save you a lot more money than the fee itself cost.

[Bill Cunningham]

Yup Dave is right.. Talking to a accountant before you set up, will save you far more money than the accountant will charge you.. You don't need a 'storefront' to get a vendors permit (PST number), but you do need one if your trying to earn even a partial living from your laser work.. I personally think your biggest problem will be running the machine in an apartment.. If you stick to Glass, Marble/Granite, and anodized, you will probably get away with it, if any vibration from the vent and machine are isolated from the floor.. But if your planning to do wood, even with a 'real good' air purification system (BIG bucks) when it gets dirty you will probably get a visit from the fire department, and 'then' the landloard..You don't even want to 'think' about doing acrylic, or worse, a rubberstamp:eek:

[Ed Maloney]

Eugene - I agree with some of the other posts. You may have a big problem on your hands with venting. By any chance do you live on the top floor?

[steve mark]

Hey friends what you think which is best sole proprietorship or partnership? In my opinion sole proprietorship is best than partnership as you have to make a lot of agreements with partner but in sole proprietorship the entire business is under your control and the entire profit is for you.

[Rodne Gold]

I'm not sure why you would want to get into the red tape of a formalised business UNTIL you have bypassed the $30 000 revenue mark...

[Dan Hintz]

Hey friends what you think which is best sole proprietorship or partnership? In my opinion sole proprietorship is best than partnership as you have to make a lot of agreements with partner but in sole proprietorship the entire business is under your control and the entire profit is for you.
As a sole proprietor, you also take on all of the risk and all of the work. The reward is greater, but so is the risk. Something to keep in mind when you're working 80-hour weeks to get things up and running.

I'm not sure why you would want to get into the red tape of a formalised business UNTIL you have bypassed the $30 000 revenue mark...
If he's in the States, the government (local, state, and national) wants their cut of the pie... the limit varies from locale to locale (I've heard as high as $10k, but never seen it myself), but anything above the limit constitutes a business (rather than a hobby), which means permits, licenses, etc. All of that entails becoming a business entity, even if it is just a sole proprietorship.

[steve mark]

Hey friends what you think which is best sole proprietorship or partnership? In my opinion sole proprietorship is best than partnership as you have to make a lot of agreements with partner but in sole proprietorship the entire business is under your control and the entire profit is for you.
Please share your ideas with me

[Rodne Gold]

Dan , I think he said $30k is the limit in Canada , he seems to come from Canada. I would try to be under the radar as much as possible till the business is ACTUALLY a business....unless of course by registering an enterprise , you can get some subsidies and breaks..

[Dan Hintz]

Dan , I think he said $30k is the limit in Canada , he seems to come from Canada. I would try to be under the radar as much as possible till the business is ACTUALLY a business....unless of course by registering an enterprise , you can get some subsidies and breaks..
<chuckle> This was a 2007 thread bumped by a new poster... I thought your comment was to the new guy, not the OP. I didn't even bother reading the old posts, just answered the new one.

[Rodne Gold]

Old age creeping up on me ...I didn't see it was from 07...duh!!!
I wonder if the OP got the business off the ground...

[steve mark]

Hey friends what you think which is best sole proprietorship or partnership? In my opinion sole proprietorship is best than partnership as you have to make a lot of agreements with partner but in sole proprietorship the entire business is under your control and the entire profit is for you.
Please share your comments.

[Dan Hintz]

Please share your comments.
What else can we say? It's a personal decision as to what business type is best for you... I already outlined the major pro/con. Risk vs. reward, which side of the coin do you want to be on?

[Bill Cunningham]

Taxes have all changed in Ontario since then, It's now Federal HST (13%) A combination of the old PST and GST.. It's always best to get the Fed Registration and HST number regardless of what your sales are. No business will buy from you unless they can get your number, and recover the 13% as a input credit.