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How Much For Sole Proprietorship

Register A Sole Proprietorship

How to Prepare Sole Proprietor’s Income Tax

Most sole proprietorships need to register with Registry of Joint Stock Companies to operate in Nova Scotia.

Use the Sole Proprietor Registration Form to register your sole proprietorship.

Most sole proprietorships need to register to operate in Nova Scotia.

You dont have to register your sole proprietorship if youre:

  • a sole proprietorship registered in New Brunswick
  • an individual using only your personal name
  • a sole proprietorship that has the sole purpose of farming or fishing

Who Should Operate As A Sole Proprietor

There are certain types of businesses that are well-suitedfor sole proprietorship status:

  • Business consultants and speakers. Professionals in this space may take on a few gigs a year, or operate as a full-time business.
  • Freelancers. Photographers, copywriters, web developers and more are typically a business of one contracted on a per-project basis by their clients.
  • Home health carespecialists. Home care assistants typically work as contractors and provide services to clients in their homes.
  • Professional cleaning. Residential and commercial cleaning can easily be done as a side job or a full-time business.
  • Landscapers. These businesses often begin with one person who does all the work. As demand increases, the sole proprietor may hire employees or outside contractors for assistance.

Businesses like these are ideal sole proprietorships because they are inexpensive to start and typically dont need investors or financing to cover overhead expenses like storefronts or specialized equipment. They are also primarily built on the owner’s personal reputation and skill set.

Why Is It Important To Create A Business Plan

It defines a new business, supports a loan application , raises equity funding, pin-points business strategy, tracks responsibility performance and manages money goals for sales, costs, expenses and cash.

Researching your industry, future customers, and competitors , can only help when running your business. A business plan is a plan of action, giving investors confidence that everything has been thought through. A business plan should be a crystal clear plan, mapping future profitability and sustainability.

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Does Registration Protect My Business Name

The Business Names Act does not protect the exclusivity of a registered name. You may be able to protect your business name by registering a trademark under the Trade-Marks Act . It may be useful to talk to your lawyer or contact the FedDev Ontario – Small Business Services for more information on trademarks.

The Business Names Act does not prohibit registration of identical names, but if you decide to use a name that is the same as or confusingly similar to that of an existing business, it could result in a lawsuit. The person registering the name also assumes full responsibility for any risk of confusion with an existing corporation, business name or trademark.

You may also wish to do some research to see if incorporating is a better alternative for your business. Identical corporation names cannot be incorporated in Ontario. If you incorporate and carry on business under the corporate name set out in the Articles of Incorporation, there is no requirement to register under the Business Names Act. However, if the corporation is operating with a name that is different from its corporate name, the operating name must be registered under the Business Names Act.

Liability

Central Production and Verification Services Branch staff cannot provide specific advice on name selection. If you are not sure about the use of a name, you should consult a lawyer.

Penalties for not registering

Choosing a business name

Restrictions on business names

Filing As A Partnership

The Sole Proprietor

A partnership does not file income tax on its earnings and is not required to pay tax. The income earned from a partnership is divided between the partners, and each respective partner files her own return. The income, deductions and any other credits or losses are divided according to the partnership agreement in place. Each share of income must be reported whether it was received in cash or as a credit. Special rules apply to a partnership concerning capital gains and losses and recapturing cost allowance. If a partnership is dissolved or an interest is sold or disposed, CRA has special guidelines in place.

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Sole Proprietors Are Commonly Called Self

When you operate as a sole proprietor, you arent actually an employee of your business. Rather, youre the owner.

On top of that, you arent an employee of your customers or your clients. Instead, youre classified as an independent contractor, which is an individual that performs services for clients and customers without being considered an employee. All sole proprietors are independent contractors.

Forming An Llc Is Easier Than You Think

With all the advantages that forming an LLC can offer, you may be worried that it is a complicated and expensive process. However, forming an LLC can actually be done fairly easily and inexpensively.

To learn more about how to form an LLC for your business, visit our step-by-step How to Form an LLC guide and choose your state from the drop-down menu.

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The Qualified Business Income Deduction

The Tax Cuts and Jobs Act of 2017 set up a new tax deduction for pass-through entities which allows you to deduct up to 20% of net business income earned as an additional personal deduction.

However, âSpecified Service Businessesâ are limited in how much they are able to apply this deduction. If youâre one of the following business owners, youâre considered a Specified Service Business:

  • Lawyers

S To Starting A Sole Proprietorship

Sole Proprietor in Canada. What you should know!
  • Pick a good name that is memorable and verify that your name is available
  • File for a DBA or fictitious business name
  • Confirm your website domain name is available and register it
  • Register with your city and/or county and pay any required fees
  • Obtain any necessary licenses or permits
  • Register with your state tax authority
  • Obtain an Employer Identification Number if you plan to hire employees or want to set up a retirement account
  • Check zoning requirements if you work from home
  • Open business banking accounts

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Types Of Sole Proprietorships

A sole proprietor may operate as an independent contractor , a business owner, or a franchisee.

  • Independent Contractor: An independent contractor is a self-employed sole proprietor who takes on projects on a contract basis with clients. They have the freedom to choose which clients they take on, but they are often subject to the processes and methods that the client requires.
  • Business Owner: Business owners can also be self-employed sole proprietors, but unlike the contractor, there is much more autonomy in how the work is completed for clients, and the operation itself may even be more complex with employees and/or intellectual property.
  • Franchisee: Franchise owners may also be sole proprietors. The franchisee benefits from the guidance, brand, business model, etc. in exchange for royalties paid to the franchisor.

Take Your Alberta Registration Information To A Service Provider

Go to an authorized Corporate Registry service provider with:

  • your business name information
  • Business Name Report
  • valid ID
  • fee payment

If your information meets the requirements, it will be entered into the Corporate Registry and you will get a proof of filing. You will receive an email when your federal business number is issued, unless one has previously been assigned to you as an individual or corporation. In that case, you will use the business number you already have.

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Starting A Sole Proprietorship

Sole proprietorships are strapped with big risks. Increased personal liability, difficulty raising capital, and a perceived lack of professionalism are a few pitfalls sole proprietors must navigate.

Still, the potential financial rewards could be more than worth the risk especially if you plan thoroughly before launching a new business and weigh the benefits and disadvantages.

Below, well look at the pros and cons in more detail.

Registering Your Business Name In Ontario

How to Improve Productivity as a Self

Business names are registered with the Central Production and Verification Services Branch of the Ministry of Government and Consumer Services and are placed on the Public Record maintained by CPVSB for public disclosure. Anyone may search business name information contained on the Public Record for a fee to find the owners or principals behind a business name.

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State Sales Excise And Franchise Taxes

Sole proprietors are required to pay state sales taxes on taxable products and services sold by the business. In addition, the sole proprietor may have to pay excise taxes in the same manner as other business types.

Check with your state department of revenue for more information on sales and excise taxes. Sole proprietorships are not typically liable for franchise taxes, because these are levied by states on corporations and other types of state-registered businesses.

Position Your New Sole Proprietorship For Success

Starting a business as a sole proprietor is one of the biggest choices youll ever make. Though the risk is great, so is the reward and the best part is that you can start it on your own without leasing a building, hiring others, or requiring expensive training. With the steps I shared in this post, youll build a strong foundation to ensure lasting success.

Editor’s note: This post was originally published in September 2018 and has been updated for comprehensiveness.

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Resources That Help Sole Proprietors

These resources provide additional guides for how to set up a sole proprietor in California, among other entities. These offices can administer, issue permits and licenses, and registrations for your business needs. The agencies below can help inform your sole proprietorship on outstanding requirements by different levels of government, county, state or federal.

Governors Office of Business and Economic Development .

California Business Portal.

Its always a good idea to contact your local chamber of commerce and ask them questions you might have concerning your business.

At Stone & Sallus, our attorneys are also available to help answer questions on your sole proprietorship. Visit our other business resources and contact us for all your legal questions.

Where Can I Register A Business Name And Obtain A Master Business Licence

How to Pay Yourself as a Sole Proprietor 2020

Ontario.ca provides access to the governments electronic services that simplify and streamline registration, renewal and reporting processes for Ontario businesses. New entrepreneurs and existing corporations can electronically complete the most important applications to register their business at one location, including applications for Business Name Registration, Retail Sales Tax Vendor Permit, Employer Health Tax and Workplace Safety and Insurance Board. When registering via Business Registration Online and some provincial governments including Ontario), you may apply for the above programs as well as for a Federal Business Number and other CRA programs.

Business names can be searched and registered through ServiceOntario via the following channels:

Note: you must enter the business information yourself when using BRO and the ServiceOntario website. For more information about fees and processing times or to obtain ServiceOntario applications, please visit the ServiceOntario website or call:

Toronto: 416-314-9151

TTY toll-free: 1-800-268-7095

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Central Production And Verification Services Branch

Business names may be searched and registered in person from 8:30 a.m. to 5:00 p.m. on regular business days at:

Central Production and Verification Services BranchMinistry of Government and Consumer ServicesSecond floor, 375 University AvenueToronto, ON M5G 2M2

To reach the Central Production and Verification Services Branch Public Office, take the escalator from the lobby of 375 University Avenue to the second floor.

Registrations submitted to the Branch should be addressed to:

Central Production and Verification Services BranchMinistry of Government and Consumer Services393 University Avenue, Suite 200Toronto ON M5G 2M2

The Ministry fee for registering a business name:

  • Through ServiceOntario, electronically $60 by mail $80.
  • Through the Service Providers $60 however the Service Providers charge a separate service fee. Contact the Service Providers directly for information about the fees they charge for the immediate online service they provide.
  • In person at the Branch or by mail is $80.

Keep Every Receipt And Expense Everything

The best thing you can do to reduce how hard you get hit by taxes is to expense every single dollar you pay to run your business. Again, this may seem like easy stuff to some, but its worth noting how this stuff works.

You only get taxed on net income, not gross income. So, if you get paid $1,000 for a project, but spent $200 on hosting for it, you will only be taxed on $800.

So, think of every little thing you use to run your business. Buying a new laptop, conference tickets + flights, printer ink, online subscriptions, software licenses… It all adds up quickly and can really help you reduce your taxable income.

As a business, you also don’t have to pay HST. So any receipt you have that includes 13% HST, you will get that back from the government when you pay your taxes.

Max out your RRSP

This is a good tip for anyone around tax time. Up until the end of February, you can contribute to the previous years RRSP. Anything you contribute to your RRSP is not taxed, so you can treat it as a huge expense. The amount you con contribute depends on your previous years income, but it could be as much as around $20,000. In Canada, this money is meant to only be taken out at retirement, but there is a special clause that lets you cash it out, without penalty, when you buy your first house.

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Changing Your Legal Structure

You can change your legal structure from sole trader to private limited company . One of the advantages is, that not you but the bv will be liable for the company, including its finances and debts. Also, if your company’s turnover has grown, you may claim certain tax benefits if you have a bv. There are several ways in which you can turn your sole tradership into a private limited company.

You can also decide to join a commercial or general partnership or, if you practice a regulated profession , a public partnership . Joining a partnership doesnt change your liability, but enables you to collaborate and share costs.

for advice on changing your legal structure.

Simpler To Take Care Of

Sole Proprietorship Startup Costs: 14 Costs to Consider

Creating and running an LLC provides you much of the very same perks as running a corporation, however without much of the problem.

First of all, LLCs have looser demands for meeting compliance requirements. As such, they do not require the very same business formalities as a corporation with regard to board authorization and also routine conferences.

Because of exactly how quickly compliance requirements are met, maintaining LLCs in great legal standing is fairly easy.

Normally, with less procedures comes much less documents. When launching your LLC, nonetheless, make sure to compose an LLC Operating Arrangement.

Doing so allows you to develop unique regulations that govern your service. Or else, the default guidelines of your state will immediately apply to as well as regulate your business.

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How To Calculate Your Ei Contributions

I want to make it clear that contributing to the EI program is not mandatory when youre self-employed. It is 100% voluntary. However, by not contributing to EI, that means you are ineligible to take advantage of all the benefits EI has to offer, such as maternity/parental leave or being a caregiver to a family member who is ill or injured. Then again, it may not be worth it to you and instead you may prefer to just have a very cushy Emergency Fund.

But if you are interested in it, heres how much it costs. As of 2021, the EI rate is 1.58% for self-employed individuals. This means that for every $100 you earn, you need to pay $1.58, to a maximum of $889.54/year . And for insurable earnings, this refers to your gross salary, or your business revenue after youve deducted business expenses but before youve paid income tax and CPP.

Using my earlier example:

  • Hi Jessica,Thank you so much for this informative post.I registered my business, as to avoid anyone from taking my name. I definitely wont be making more than 30k, Im thinking 10k-15k however I do work for a company with an annual salary of $42 500. With that said, since Im operating my business as a sole proprietorship, when doing my taxes I will need to combine both incomes together correct? How much taxes would I need to pay on that amount? I currently only pay about ~1000/year since I contribute to my RRSP, and I am located in Quebec.Thank you!

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    The above article is intended to provide generalized financial information designed to educate a broad segment of the public it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

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    Determine If A Sole Proprietorship Right For You

    A sole proprietorship is ideal if you want to dip your toes into the waters of entrepreneurship. There are no major upfront costs, and youre only responsible to yourself for the continued operation of the business.

    On the other hand, if you already have a very strong business plan, are hiring employees, or are concerned about liability, you might be better off starting your business as an LLC or corporation.

    Ultimately, a sole proprietorship is best for you when you have an idea and want to start immediately.

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