Author Topic: Setting up a business for potential one-time gig [CAN]  (Read 1688 times)

lizi

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Setting up a business for potential one-time gig [CAN]
« on: October 25, 2017, 01:26:17 PM »
There is a new company starting up in my town that wants to hire me as an independent contractor to help them get off the ground. The business is right up my alley in terms of interest and expertise, but I'm not sure I'd be able to find any new clients afterwards. I assume I'd only be able to claim expenses and deductions for the year that I earn income in, but if I go a few years between clients does filing/reporting get messy? I'm based in Ontario, Canada, and likely to stay here for the next few years with maybe a move to AB/BC after that.

More details: my business would be a craft brewery consultant, as I have a ton of relevant education, homebrewing experience, and experience as a GM of a startup brewery. I'm also up to date with trends in the field and how to provide an A+ customer experience (i.e. I visit a lot of breweries and drink a lot of beer).

Is there a way in Ontario to be an independent contractor without starting up a business?
Is sole proprietor the best set up for this type of work?

I have many other questions but I need to sort the basics out first so they make more sense.

sencha

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Re: Setting up a business for potential one-time gig [CAN]
« Reply #1 on: October 27, 2017, 03:45:42 PM »
I'm not a total expert but have looked into this quite a bit for my own similar situation, it sounds like a sole proprietorship will be easiest and cheapest for your situation. I didn't end up taking the role for other reasons, so I don't have the practical experience of what you are describing. From what I've read, you definitely want to avoid having a corporation which is pegged as a "personal services business" (CSB) by the CRA, as this will result in double taxation on income (~30% corporate tax, and then personal tax on income paid to you as dividends.) Some of the common things which trigger the consideration of a PSB are a lack of owned capital equipment, and acting in a manner consistent with an employee of your client (for example having a fixed schedule for work attendance, using their equipment to perform your duties, not having other clients etc...

All this being said, it sounds like this is an excellent opportunity for you - don't let these concerns get in your way! I would set up a 1-2 hour long meeting with a local small business tax accountant for expert advice that could save you big $ over time. I recommend asking such things as which expenses will end up being tax-deductible, what kind of entity (if any) you should set up for your undertaking or if it should be done as a sole proprietorship, how you should structure your bank accounts for this project, how to avoid the PSB categorization, and what the bookkeeping and filing/reporting requirements will be for each option. If you can afford it, this will likely be a huge time-saver and a wise investment in your business. Good luck!

Disclosure: I have no affiliation with the accounting industry, or really anybody associated with it.

99to1percent

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Re: Setting up a business for potential one-time gig [CAN]
« Reply #2 on: October 29, 2017, 09:39:02 AM »
-Since you are starting small, and there's no S corporation in Canada, sole proprietor would be better for you. It's cheaper and easier to set up. 

-If you are going to earn more than $30K, you will need to apply for HST tax ID and charge your client the HST.

-You will need to make sure you negotiate a good rate and good payment terms. On demand, 15 or 30 days payment terms are ideal.

-Is your client/contract requiring you to have business insurance? If so, you will need to get one.  If not, and you see no risk, you can skip the insurance (will save you about $2K/yr.
« Last Edit: October 29, 2017, 09:41:29 AM by 99to1percent »

 

Wow, a phone plan for fifteen bucks!