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Banka: Some options on how to start a business
Kelowna is the perfect place to start a business.
It’s not a small city that won’t sustain small business and it’s not yet a big city that has all the amenities.
There are still unique things that exist in a larger city that you may find lacking in Kelowna.
When it comes to opening a business, I think you need to live here for a while, take in the culture and learn about the demographics to help you determine if their is a missing business service need here you might want to fill.
While there are no shortage of business opportunities here in the ‘Wild West’ of Kelowna, t takes the right kind of person and the right kind of financial backing to make it all happen.
Some people don’t hesitate-start with a business idea, get a sign painted on their vehicle and get to work.
At the end of the year, this person brings their box of paperwork goodies into the accountant who then needs to sort out the mess.
This type of business is called a sole proprietorshipin the legal world and many other things that I can’t mention here in the accounting world.
The accountant will need to spend a lot of time sorting out and classifying the receipts to transfer the information to the tax return before they can even use their technical knowledge to search for any tax advantages for the client.
The income from this type of business is added to the individual’s personal income and is taxed at the personal rate of tax.
This type business can write off a portion of the home expenses as a home office and can write off a portion of the automobile expenses.
This type of business usually dies when the taxpayer dies. The disadvantage with this type of business is that your accounting bill will usually be quite high.
This type of business does not require any legal intervention to start up except those required by the banks.
The banks will require that you register your company name and that you operate with a business license before they will open a business bank account for you.
The opposite approach is when people get some business training, develop a business plan and learn how to do their own bookkeeping either on a spreadsheet or using a computer program such as Simply, Quickbooks, AccountEdge.
These people may also be operating as sole proprietors, so they will experience the same kinds of tax liability.
But because their records are in order when they are brought into the accountant’s office, the tax bill may be less due to the orderly record keeping.
If the accountant is registered as an efiler, they will still need to see all the back up documents to comply with the rules for efiling tax returns.
Or, two sole proprietors can get together and form a partnership. This can be a partnership based on a handshake or a registered partnership.
Again, the tax consequences are similar to that of a sole proprietor in that the profits are split between the two partners who pay taxes based on their individual tax brackets.
Partnerships can be like marriages in that they don’t always work out, so it is a good idea to have some sort of partnership agreement in place in case either party wants to dissolve the partnership.
The final type of business is the corporation. If you see Limited, Ltd., Incorporated, Inc., Corporation or Corp. after a company’s name, that means it is a corporation.
For tax purposes, the corporation is looked upon as a separate person.
There are special tax rates for corporations. If the corporation qualifies as a Canadian Controlled Private Corporation which operates an active business in Canada, the company may qualify for the small business deduction.
Setting up an incorporated company with the correct share structure to provide for the future can be quite challenging, which is why it is a good idea to get the advice of an accountant and a lawyer when setting up your corporation.
There are many tax strategies that may be available. The accounting bill will be more for this type of business due to the complexity of the tax return and the requirement for financial statements.
The federal rate for a small incorporated business that qualifies for the small business deduction is 11 per cent. The B.C. small business deduction is 2.5 per cent so the combined rate is 13.5 per cent, which is lower than the lowest combined personal tax rate of 20.6 per cent.