Flock Free Nation

No nonsense information on small business.

May 31, 2011 - 1 minute read - Comments - business news

Bank of Canada Holds Interest Rate

At its meeting today, the Bank of Canada decided to leave interest rates unchanged. While the Canadian economy remains strong with annualized growth of 3.9% in the first quarter, a strong dollar has kept inflation in check. The Bank has indicated that it will start raising rates as the recovery continues. Experts predict that we could start to see rate increases this fall.

May 30, 2011 - 3 minute read - Comments - banking

Opening A Business Bank Account

Business transactions should always be kept separate from your personal transactions. For this reason, every business owner should have a separate bank account for the business. Banks have business bank account products that are different than personal chequing accounts. Running your business out of a separate personal chequing account may violate the terms of service with your bank. I recommend that you open a business bank account from the beginning to avoid the hassle of switching accounts later as your business grows.

It’s best to make an appointment to open a business account. It can be a bit of a lengthy process so you want to make sure that you can set aside an hour of your time. If you are operating your business as a sole proprietor or a partnership, you will need to have documentation showing that you have registered the name that your business is operating under. The process for registering your business’s name varies from province to province so you’ll have to check with your provincial government. If you have a partnership agreement, you should bring a copy of it. If your business is incorporated, you’ll have to bring along your certificate and articles of incorporation. If you have a stamp with your corporate seal, you should bring a copy of that as well.

You will have to make a decision about signing cheques. As a control mechanism, some businesses choose to have all cheques signed by two people. This can add a layer of security but it will also be less convenient and it will limit the scope of what you can do with the bank’s online banking services. An account that requires two signatures will not be able to pay bills online because there is no way to verify that two signatories consent to the transaction. It will be impossible to issue debt cards for purchases for the same reason. I’ve seen many businesses where two partners decide to have cheques require two signatures only to have one partner pre-sign a bunch of blank cheques so the partner can pay bills. This effectively negates the safeguard that was originally intended. Think carefully about requiring two signatures and make sure you are doing it for the right reasons because the hassle involved is considerable. Everyone who will sign cheques on the account, either alone or as part of a dual signature system, should come with you to the appointment as the bank will want samples of their signatures on file.

Opening a business bank is a relatively straightforward process but you can save yourself a lot of time and hassle if you decide how you want the account set up beforehand and bring all the necessary paperwork and people to the appointment.

May 26, 2011 - 2 minute read - Comments - government

What Is A Business Account Number?

A Business Account Number is used by the Canadian government to track a number of activities related to your business. Think of it like a social insurance number for your business. If you incorporate a new business at the federal level, you will automatically be issued a business number. The business number is the basis for a number of the accounts that the Canada Revenue Agency keeps track of. These take the following format.

Business Number 123456789
GST/HST account 123456789 RT 00019
1st payroll account 123456789 RP 0001
2nd payroll account 123456789 RP 0002

You can register for a Business Number online but before you do, it will be helpful to have this information at hand.

  • Social insurance number (SIN)
  • Business structure
  • Name
  • Location
  • Business activity
  • Contact person
  • Sales amount / reporting period
  • Fiscal year-end

You will require a business number to register for GST/HST number if you:

  • Have revenues exceed $30,000 in a single calendar quarter or in four consecutive calendar quarters
  • You are a non-resident and make make taxable sales of admissions in Canada for a place of amusement, a seminar, an activity, or an event held in Canada, even if your sales do not exceed $30,000
  • you host a convention in Canada, and more than 25% of the delegates are residents of Canada
  • you solicit orders for publications to be delivered to customers by mail or courier in Canada
  • You operate a taxi/limousine service and your fares are regulated by federal or provincial laws, regardless of your annual revenues.

For most of the readers of this blog, the first point is the one to pay attention to. This works out to $120,000 annually on a gross revenue basis, which isn’t very much in today’s world. The bottom line is that most businesses will need to registered for GST/HST. If you are unsure if you meet the requirements, the government has a website that has a questionnaire that will let you know whether you need a GST/HST account. Setting this up is more straightforward than it looks but knowing if your product is taxable under the GST/HST might be difficult to determine. It’s a good to know about how your business interacts with the government but if you are ever in doubt, it is best to talk to your accountant.

May 25, 2011 - 2 minute read - Comments - business news

The Challenge Contest Offers A $100,000 Canadian Business Grant

Telus and the Globe & Mail are running a contest called The Challenge. Small and medium sized Canadian businesses can enter the contest by filling out a short one page form on the Globe & Mail’s website. The contest asks that you describe your business challenge, how $100,000 will help you overcome it, and what results you think you will achieve once you overcome your challenge. The winner will be chosen by a panel of expert judges. The winner will get a $100,000 business grant from Telus and the business will be profiled in Report on Business. The prize will paid in two parts, with the second $50,000 being paid after a report is given on how the first $50,000 was spent. The money must be spent as described in the contest application. The judging criteria is as follows:

  • 20% for the description of the challenge
  • 60% for the proposed solution
  • 20% for the anticipated results.

The contest entry form is limited to 200 words for each criteria so the application process couldn’t be simpler. The contest is open to Canadian businesses outside Quebec that have less than 150 employees. Entries are limited to one per business. Given the large number of eligible applicants and the amount of prize money involved, competition will be stiff. I recommend that you work on crafting a compelling narrative before entering the contest. The contest closes on July 6, 2011.

May 24, 2011 - 3 minute read - Comments - legal

Choosing A Provincial Or Federal Corporation In Canada

Corporations in Canada can be registered at either the federal or provincial level. If you are registering a federal corporation the first step is to order a [NUANS report][1]. This is a preliminary search that must be conducted to see if the name you have chosen for your company is available. The report can be ordered online for $20 or you can get one in person from a NUANS member organization.

The NUANS report won’t reserve the name for you. It will just give you an indication of whether the name has a serious conflict with that of another company. If the NUANS report does not seem to show a conflict you can apply for corporate name pre-approval. It isn’t necessary to file for pre-approval, you can apply for name approval when you file your articles of incorporation. You will have to include your NUANS report with your incorporation documents if you choose this option.

It is possible to file your articles of incorporation and pay your fees online, by email, by fax or by mail. While it is possible to complete and file your own incorporation documents, unless you are experienced in this area, I wouldn’t recommend it. I would recommend that you order a NUANS report and apply for corporate name pre-approval but then I would hand the process over to a lawyer or a service like legalzoom.ca.

A good corporate lawyer will give you the best set of legal documents because they will be tailored to your specific situation. Your lawyer can also look after other things like a shareholder agreement at the same time. Legalzoom.ca can be a good choice for someone on a budget as you will get a set of documents that are acceptable, but not highly customized to your situation.

Your corporation will be incorporated federally and registered provincially in the province where your head office is located. Additional provincial registrations can be added if the scope of your business operations will extend to those provinces. The procedure for provincially incorporating a company varies from province to province. It is important to note that the provinces do not recognize a NUANS report. A name search and approval must be conducted with the province in which you wish to incorporate.

It can cost less that $750 to provincially incorporate in a province like Ontario. A federal corporation will cost about $1,000 with added fees for each additional province you register in. These fees would be representative of doing it yourself or using a low cost provider. Using a lawyer could cost $2,500 or more but it could be well worth it, especially if your business is complex.

If you plan to never do business outside of your home province, a provincially incorporated company might make sense. Otherwise a federal corporation brings the advantage of being registered nation-wide with the ability to register in individual provinces if necessary. Incorporating a company might seem like a stressful task but if you look after getting your name pre-approved and then hand it over to a professional, it can be relatively painless.

[1]: https://www.nuans.com/eic/site/075.nsf/eng/home(NUANS Report)

May 19, 2011 - 2 minute read - Comments - business planning

Would You Buy This?

We came across a Kijiji ad this week advertising a completed business plan for the health care industry. Here’s the ad: Canadian business plan for sale 2,500.00 firm serious inquiries Canadian business plan completed for health industry. Will sell with powerpoint. Only selling because of lack of funding. Definite growth and profit for a growing demographic group. It looks like this guy is trying to sell a treasure map. I wouldn’t pay $0.25 for this plan. Here’s why:

  • Good plans get funded. Bad plans (mostly) don’t. There had to be some fatal flaw in this plan. Maybe the market wasn’t well defined; the financials could be too weak or too speculative. Maybe the management team’s background wasn’t a fit for this new venture.
  • Ideas are a dime a dozen. What matters is the team. You can have the best idea in the world. It can solve a real problem in the market and can be profitable. If your team isn’t right for the business, you won’t get funding. In fact, successful entrepreneurs can get funding based on their track record, even if their new idea doesn’t sound so great. Because your management team is so important, we don’t guarantee that you will get funding by using BPG.

So this ad is trying to sell a plan that hasn’t gotten funding, doesn’t have a management team attached and may or may not fulfill a market need. What do you get for $2,500? You would be far better off spending this money on lottery tickets. Better yet, build a business based on your idea, your research and your team.