The Hidden Sides of Entrepreneurship (Part 1)
Lewis starts his business and faces the first crucial decisions: incorporation, structure, and taxes.
Starting a business requires important decisions, and asking the right questions from the beginning is essential. Lewis has ten years of management experience in residential and commercial building construction.
Should I incorporate my business?
If projected profits remain minimal, a sole proprietorship might be optimal. However, if significant profits are anticipated, incorporation warrants consideration. Lewis wants to separate business and personal assets and protect personal property from potential lawsuits.
How should I structure my business?
Lewis’s lawyer suggests issuing both preferred and ordinary shares during incorporation, providing flexibility for compensation options and integrating new shareholders later. The initial capital structure is declared during incorporation, with bylaws listing each share category.
Should I register for taxes?
Businesses don’t need to register for taxes until exceeding $30,000 in taxable revenues over four consecutive quarters. Lewis anticipates generating over $100,000 in first-year revenues, so he must register for GST/HST. He also plans to purchase $50,000 in equipment before generating revenue, so he’ll register immediately to claim input tax credits.