Starting a new business is an exciting time, whether you're in a new industry or have came across a niche product or service which can open up a ton of opportunity. There are several considerations when starting a new business. After this article we hope that you will be more prepared to proceed with your new business venture.
There are many considerations when setting up a business, but let's start with the structure. Having the correct business structure that not only works in the start up phase, but also supports the business growth you are expecting in the near future is critical. It is best to get the structure correct in the start so your business does not have to incur expensive corporate re-organization costs down the road.
Depending on many factors such as expected profits, partners, and investors you typically will want to set up either a partnership or corporation. With a partnership, for tax purposes this is a flow-through entity, meaning the benefits include partners writing off start up losses against their personal income. This may make sense in the earlier part of the business, however there are legal liability considerations to factor in as well. To limit the liability of the companies owners a corporation may be better suited as this structure provides limited liability up to their original investment only.
No matter what structure is selected, you will need to consider both tax, legal and equity structure of the business to allow for flexibility as the business grows.
Ensure that you register your business with CRA and also set up an HST number once your business structure has been set up by your legal council.
Company bank accounts and line of credit, etc.
Set up a company bank account and line of credit upon inception of the business to ensure to keep all business transactions under the legal entity.
Invest in an accounting system from the start to ensure that your bookkeeping is up to date, accurate and complete. This will save you a lot of headaches down to the road if you invest in a good system upfront. It's always been to invest now and be organized, then to leave this step out and run into problems in the future. A lack of financial information, budgeting process, and a plan of action to achieve business objectives is the number one reason why businesses fail. You will want to have up to date financial information that is useful for making critical operational decisions.
We hope you found this helpful, and for more information please contact on MP Group Advisor. We would be happy to assist you with your new business structure and discuss all the considerations.