In this day and age, it is now common for people to want to start their own business. From online services to brick and mortar stores, there are many opportunities on what kind of business you can establish. However, despite the wide range of possibilities, there are many obstacles to actually starting a small business. To start any business in Canada, you need to make sure that you are legally allowed to own a business in Canada. From citizenship and regulations to skills and qualifications, be sure that you have the required status and certifications for the type of business you want to run. If you have never operated or owned a business before, we have a starting primer on how to start a business. Here you will find all the info you need to know in order to start and finance your small business.
The first step, before you even start the process of forming the business, is to make sure you feel you have the right skill set, a base of expertise, or the willingness to work hard and take risk in order to succeed. There is no set formula for success, but having skills and a good work ethic can set you apart from the competition.
How to Start a Business
When starting a small business, it is not enough to have an idea. In fact, your idea will only be the starting point. From the first draft of your business plan to the day of your grand opening, you need to plan in detail and do your research.
Make a Business Plan
By asking yourself important questions about your business, you will be able to draft up a well thought out business plan. This is a tool to keep the development of your business on track. It should be designed to include things, such as your overall goals and business strategy. A business plan can also be used to help secure financing from banks and investors. Thus, you should design your business plan with long term development in mind, being flexible enough to accommodate any unexpected changes.
Because a business plan is meant to help turn business ideas into a feasible plan, you should first consult with a corporate lawyer on any legal issues your plan of action may imply.
Find a Business Name
Once a business plan is drafted up, the next step is to officially name your business (if you have not already) and get it legally registered. When you carefully craft your business name, you should conduct a name search to ensure that the name is not taken. You can search Canadian business registries or pay for a report to be generated. If your business name clears, you can then move on to structuring and registering your business.
There are different types of structures your business can take. A Sole Proprietorship, for instance, is one type of business structure that puts you in control as the owner. However, as owner you become financially liable for the business.
Partnerships are business structures that involve two or more people. This allows you all to share in the business’ profits or losses. Note that when you do set up a partnership there are two types–General and Limited, which you can create. Be sure to research both options thoroughly as they each have their own advantages and disadvantages when it comes to financial and liability issues.
Some licensed professions, such as dentists, lawyers, accountants and doctors, can be run as a Professional Corporation, which is a particular type of incorporation that is generally sanctioned by the governing professional body and specifically authorized by statute.
A general Incorporation is considered a separate legal entity on its own. As a corporation, your business can be taxed, held liable, and also make a profit. If you are considering this type of business structure, you should consult with an accountant and lawyer first. Once you decide upon a structure, you can then move on to registering your business. You can tell if a business is incorporated or not, because the legal business name must include a designation such as Inc., Ltd, Limited, Unlimited, Corporation, etc. in the business name.
Register a Business
To register your business name in Ontario, you can do it online for a small fee ($60 CAD). Registering your business will provide you with a business license and a business number you will use to identify your new business as you interact with the Canada Revenue Agency (CRA). You will need to renew your registration every 5 years.
Moreover, as a business you will need to sign up for a business account with the CRA and determine which CRA programs you need to join. These programs will assist you in any transactions you perform as a business, such as payroll and GST/HST.
Get Business Licences
Lastly, be sure to look up any municipal or provincial permits or licenses you may need for your particular business. This includes liquor licenses, parking permits and any on-site construction. It is the business owner’s responsibility to ensure the business complies with existing bylaws.
If you are new to Ontario and looking for basic information, there are many online sources and websites to which you can turn.
Financing Your Small Business
Financing can be a major challenge when starting your own business. How do you finance a new small business? What options are there? These are just a few questions that can help you find the type of financing you need.
When you finance a business, your personal assets and funds will perhaps be the first source you turn to. Your savings will more than likely not be enough to cover the full cost of opening a business, however. This is where you will be turning to other avenues. There are a number of financing options to consider.
A few to consider:
-Bank Loans: Banking and financial institutions are the most common avenues you will probably turn to. However, it can be very difficult to get a loan. Your credit history, for instance, will be one important factor in getting your loan approved.
–Government Financing: This avenue of finance includes loan guarantees, tax refunds and credits, loans and cash advances, wage subsidies, equity investments, and grants, contributions and financial assistance. There are options for financing small businesses out there that you can tap into. Find out which, if any, government programs you qualify for.
–Private Sector Financing: There are private sector investors that are looking to invest in your business. Common types of this avenue for financing include debt financing, venture capitalists, and equity financing. The decision will be based on the assessment of risk and potential your business poses. This is where a strong business plan will come into play. There are also special types of investors that focus on new business opportunities and ideas, often referred to as Angel Investors. Angel investors are often successful entrepreneurs or former entrepreneurs and can provide both financial and business advice – so having an angel on your side could be a competitive advantage. Again, a strong business plan, a unique idea, and a good pitch deck, typically 15-20 slides that describes your business and the opportunity, are critical to capturing the attention of angel investors or other private equity participants.
-Family and friends: Though they say family and business never mix, you may want to try reaching out to family and even friends who believe in the potential of your business. A small loan can be considered an investment in the business, giving them an opportunity in your business’ future as a partner or shareholder. Often referred to as “love money” or seed financing, this is typically the most common method of financing a new business.
–Checking Ontario local and municipal government websites as well can help in hunting down other financial assistance programs that are offered specifically to local businesses. Rest assured, looking into any one of the above options as a start can help you give your business the chance it needs to get off the ground.
In all cases, you need to assure your financier that you are capable of paying back the money if borrowed or growing the business to provide them returns if they’ve made an equity investment. This includes a detailed plan of how you will be using the money.
Because starting a business is an ambitious and challenging undertaking, you should get as much guidance as possible. At OMQ Law, our business lawyers can provide you with the proper legal counsel needed to ensure that your new business is setup properly. For answers on your most pressing questions, call in for a brief consultation free of charge.