Questions about small businesses

[Tilas]

So I recently ordered my button maker (so excited!), and I want to make buttons for people/companies/non profits in the community (since we're so small and northern, little businesses here can't get promotional items in small bulk- a little niche I think I could fill), but I was told "oh you should get a business license!" But... is something where I may only make like $1000 a YEAR really worth the investment to a business license and everything that entails? I honestly was thinking just working in cash... I mean it's a very small thing, more of a basement hobby, not a "business" per say. My dad says not to bother, my mom says I should, and I'm just horribly confused. I want to talk to Town Hall about it and see what their requirements are, but dad warned me they "probably wouldn't even know aside from selling you the license". Which only confuses me more.

So my question is to anyone who has a small business (in any form) what did you have to go through, and how small is your business? I know rules are different in different countries, but I'm curious to know how things work for you. I mean, does artwork even classify as "a business"? Is there a certain "earning range" where you can earn and not qualify as one? Any info anyone can offer would be appreciated!

[Koudoawaia]

I just had to close down my business because it was costing a whole lot more in taxes and such than it was making in profit which was pretty much nothing the past two years. Plus there were all the harassing phone calls from people wanting to sell me crap instead of wanting to buy my art. If you're only making $1,000 a year you should be alright to go ahead and make buttons without setting it up as an official business. Just look into if you'd have to pay taxes on it when tax season rolls around and keep track of all your sales in case you do have to. Personally, I still feel bummed and like my dreams are dead after having to shut down my art business so save yourself the same disappointment if you can.

[pinkkittywinks]

i can't really offer any sort of advice being in the UK as the tax and business laws are different here. i do suggest that you do a lot of research, phone the tax office, check your home insurance (if you are running the business from your home, you need to be covered) do you have citizens advice? they might be able to help you. i do suggest covering you back and doing it all by the book and properly, no matter what your dad and brother say. you can get in very big trouble with the tax man if you are not careful.

i sell my art work and craft creations and in the UK that is classed as self employed/my own business. if you are making stuff to sell and selling it, then it IS a business here no matter how much or little you make even if i make a LOSS (my expenses are more than my earning) i have to fill in a tax form. the form is not too hard to fill in since around 90% of it does not apply to me!

make sure you keep really good records and have a good filing system. i have a file i keep all my paper work in for each year. i use excel to keep track of my money in and money out. keep every single bit of paper! oh and i run my business to the same dates as the tax year, april to april, it is easier than messing about going it january to december.

i hope this helps and good luck

love pkw xxx

[lovesbabysquirmy]

Canadian business law is MUCH MUCH different than other countries', particularly the USA. 

If you are interested in starting a small business, Google a company called MKS - they teach people how to start their own companies, doing the accounting, taxes, expenses, paperwork, etc.  I know they have offices in Alberta, so maybe they would have info on similar services in your province. 

I know in AB, you can't file for a GST number and charge GST to your customers if you make below $30k annually.  So maybe that gives you a high figure for when you should be incorporating yourself?  You also can't have an incorporated company that records losses for 3 years running, so if you don't think you will be making profit for the first few years, it's not worth it to incorporate.   

[ashes]

When I taught art classes from my home studio, I had a business license through the city where I lived.  But since I had "clients" I saw face-to-face, I felt having it gave more authenticity to what I was doing (aside from having multiple degrees in my field and being a working artist).  I had it framed and displayed in the studio (which was a requirement that it be placed in a notable spot at the place of business).

As for taxes, I just kept 30% of all my income in a separate savings account.  That way it was readily available come tax time, and I didn't have to scramble to come up with the money.

[StoryDreamer]

Totally agree with 30% of the money earned in an account for tax time. Best advice you can ever get - trust me, we've had many a day with accounts lately..

[Tilas]

30% of the money earned in the business, or 30% of my money earned in total?

This is so horribly confusing. I called town hall who referred me to the territorial agent who referred me to corporate affairs who referred me to the city of Whitehorse who referred me BACK to my town hall! >.<  In the end all I really learned is that if I make under 30K a year I don't have to register with the CRA for GST or charge GST. Town hall here said that all I *should* need to do is buy the $50 six month license and just record everything I buy or sell for the business in a spreadsheet to give to H&R Block when they do my taxes. 

It can't hike my taxes that badly, can it? I mean, all I want to do is sell a few buttons, I didn't even really plan to make a "business" out of it. I just wanted to sell them like I do my key chains on Etsy and the arena, but to locals! The only real difference is a local company may want 100 and not 10...

[Chrissytree]

Not sure about anywhere else but in the UK you can find all sorts of information on a government website. It can be a bit confusing but the info is there you just have to do the right searches to find it.  not sure if these would have the info you need?

http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=2&cad=rja&ved=0CDMQFjAB&url=http%3A%2F%2Fwww.cra-arc.gc.ca%2FE%2Fpub%2Ftg%2Frc4070%2F&ei=9GSIUMiIAsaS0QWeoIGgBQ&usg=AFQjCNFP9eaemzav4rGzpovourevAqNkVw&sig2=J6i_AAppZI-ZWKV91eChLA

http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&frm=1&source=web&cd=3&cad=rja&ved=0CDkQFjAC&url=http%3A%2F%2Fsbinfocanada.about.com%2F&ei=9GSIUMiIAsaS0QWeoIGgBQ&usg=AFQjCNF_xWd4NXe5brRXXn9i7pXjE4F9Yw&sig2=XOtxVLME9752Kcnqze773A

[Eviecorn]

I don't want to give you any bad advice seeing as I'm in the US, but I've always claimed that kinda stuff on my regular income tax return and never bothered with a "business" license as it's more like freelance work. (I never make more than $2k a year with it.)  Then I just pay applicable taxes at my yearly return.  It's usually taken out of what I would have gotten back.  *shrug*

But yeah, I digress.  Check on Canada's laws with that and go by what they say.

[kaoskat]

Nothing to add but Good luck!

[ashes]

30% of the money earned in the business, or 30% of my money earned in total?

30% of the money you earn from your small business.

[lovesbabysquirmy]

30% of the money earned in the business, or 30% of my money earned in total?

If you are NOT incorporated as a business, then you would be claiming ALL monies earned from this venture as part of your personal income.  If you are employed elsewhere as well as making buttons, you will need to keep detailed records of supplies purchased and client payment records/invoices.  Excel is great for this.  You will need to add a few more things to your personal filings but you would still be paying the tax rate for whatever your income bracket is.  If you ARE incorporated, your companies bottom-line earnings would be taxed at corporate income tax brackets, whatever they may be, though typically lower than personal income taxes. 

GST can be very confusing but basically, if you charge your customers GST, you have to pay that money to the CRA.  Obviously by registering a GST number you are now a middleman of the CRA to collect on taxes due.    If you don't have a GST number, you have to absorb the costs of the GST your company has paid for various things (operational costs, supplies, inventory, assets, etc.) as income and you can't charge GST from your customers.  This only applies for $30k and over though as I mentioned.  Incorporation allows you to tell the CRA, "These GST amounts were a portion of my business costs and expenses so they aren't considered income." 

What I would do is check out some materials from the library on bookkeeping... start a spreadsheet, and record everything.  Don't be afraid to be wrong... CRA is all about compliance - they will help you if the mistake was made from not-knowing!  If they have to tell you "no" a second time, that's when they get irritated.    I am sure that if you are not making thousands and thousands initially, that you will be just fine without incorporation.  Incorporation really only becomes important if you want to be able to claim tax exemptions.