Do I have to form a company to start a business?
No. You don’t need to formally register as a company to start a business. There are three main business structures to choose from when starting: a sole proprietor, where you run the business under your own name (and tax number); a partnership, where two or more people share ownership — though you report earnings under your own name and tax number like a sole proprietor — and finally; the company structure, where the business is a separate legal entity with its own tax number.
Do I need a business bank account for my business?
Yes. Once you’ve determined the structure of your business, the next step is to set up a business account. Most financial institutions will require a separate account and services agreement related to business transactions. Along with a business chequing account, you may also wish to consider other products and services to help you run your business more efficiently. Online banking, merchant services, and business credit cards are key tools to support your business.
Requirements to open a business account
To open a business account in Canada, the following information is required. Full details can be found on our website: Opening a business account.
- Sole Proprietorship: Personal identification, business registration (if applicable), and a business name registration (if applicable).
- Partnership: Personal identification, partnership agreement, and business name registration.
- Corporation: Personal identification, corporate documents (e.g., Articles of Incorporation), and a Business Number (BN) from the CRA.
Talk to a Coast Business Advisor to learn more: Contact Business Advisor.
Do I need business skills or experience to start a small business?
No, but it helps. You’ll greatly improve your chances of success if you do. Industry experience is crucial, as every business type has its own characteristics (if you’re starting a café and have never run one before, managing staff, food costs and menus may prove more challenging than you expect). Business experience is also handy, primarily around cash flow management; making sure more money is coming in each week than going out. If you’re unsure, there’s plenty of online information, workshops, and courses to help get you up to speed.
Do I need to develop a business plan to get started?
No. But like going on a long trip, it’s useful to have a map of where you’re going. A business plan will help define your goals, marketing strategy, and customer targets. It helps you allocate resources properly, handle unforeseen complications, and make the right decisions. If you’re raising capital or borrowing money, a business plan is often required to help the lender understand your business potential. Find out more about business planning here, including our free Business Plan Template.
How do I create a cashflow forecast?
A cashflow forecast is simply a record of what you expect to come into your business month by month and what could go out — usually over the next 12 months. Each month you’ll be able to predict if you’re up or down, giving you time to either cover the shortfall or reinvest the surplus. For each month you’d have a starting balance, and add your predicted income minus estimated outgoings — which leaves a running balance. Use your accounting software or download our Cashflow Template.
How do I to set up my record keeping/ accounting software?
Legally, you need to keep all your business records (proof of money coming in and going out), so you can work out the net profit you report to the Inland Revenue Service. You can use a spreadsheet, but it makes sense to use accounting software linked to your bank account. Then, you’ll know nothing will be missed by mistake. Ask your accountant what software they recommend.
How do I work out how much to sell to make a profit?
The easiest way is to divide your predicted gross profit percentage into your estimated overhead. For example, if your gross profit is 25%, and monthly salaries, rent, power, internet and everything else is $50,000, then if you divide the 25% into $50,000, you’ll get $200,000 as the answer. This is what you need to sell each month to cover your overhead, also called your break-even point.
What insurance do I need?
There are three main insurances to consider. Business assets, liability, and interruption insurance in case your business gets damaged or something happens to prevent you operating. Then, business life and disability insurance in case something happens to you. The third is to consider startup income protection (if you’ve been trading for fewer than three years).
What type of business structure is best?
It depends. A sole proprietor, where you run the business under your own name (and tax number) is best if you’re working on your own, or you’re testing the feasibility of your business and want to limit any cost. A partnership (two or more people share ownership) is also free to set up, managed by a partnership agreement, and useful if you need another person to help you out. Finally, a company (a separate legal entity) can be useful if you want to limit your liability or want to issue shares to several owners.
When should I contact an accountant?
Technically, you can file your own tax returns without ever needing to consult an accountant or bookkeeper. But it does make sense to get some expert help if you’ve never been in business before. Ask friends already in business for recommendations. Furthermore, your accountant should be able to save you money and stress by advising on what you can claim and how. It’s also a smart idea to consult a lawyer about your business intentions, particularly if you intend to sign a lease or any legal document.
Where’s the best place to get the cash to start up?
Sources of capital vary. The most obvious is your own, from savings or anything you can sell to convert to cash. Then it’s a matter of cost and control. For example, if you borrow money, you’ll pay interest. If you have someone to invest in your business, they may want to be involved in the business itself. Talk to your advisers (accountant, banker, other business owners) to get help based on your individual circumstances and the amount of cash you need.
Who should I talk to first for advice?
As a startup, it’s often friends and family who’ll help the most at first. It’s then useful to get input from people who are less connected, such as other business owners or those involved in your industry. Going up a step you can then consult mentors, professional consultants, local chamber of commerce, and accountants or lawyers for specific legal queries. Try to get as much information as you can from the free services.
How much working capital do I need?
It depends. If you’re starting a service business from home and you’re the only employee, you may only need to cover your phone, internet and salary for a few months until you start covering your costs with income. If you’ve managed to get work from day one, your working capital could be a few weeks’ worth of costs. At the other end of
the scale, such as a software company developing a new product, you may require 12 months or more of salaries, rent and marketing. Consider using a Cashflow Template and Break-Even Calculator to predict how much you need to cover overheads.
How much can I borrow?
There is no definitive answer to this question, as every business application for lending will be based on a multitude of different variables. In general, the amount you can borrow is dependent on how much you need, the purpose of the funds, the cashflow available for repayment and the potential security for the loan.
Should I use my house as security?
If you borrow money and use property as collateral, the interest rate is usually lower (when compared with unsecured loans). In that sense, it is a practical option — but that isn’t always the case. If there are multiple owners of a business, when there’s a partner who shares property ownership, or if you want to keep business and personal assets separate, it may not be the right solution. Talk to your Coast Capital Business Advisor to find out more.
What are business mentors and how do I find them?
A mentor is someone who has no ownership in your business but is there to give friendly advice and support. Often, they’re existing or retired business owners, or people with relevant industry experience. A good place to start is futurpreneur.ca (ages 18-39), who can help match you to a mentor. There are also lots of other support groups, such as Chambers of Commerce, industry associations, and government help.
Do I need cashflow projections to borrow money?
You should know your business can afford repayments without putting undue stress on you or your working capital. A cashflow projection isn’t always compulsory, but it’s not a bad idea.
Where can I get a decent business plan template?
Download our free Business Plan Template here.
Where can I get a decent cashflow forecast template?
We have a Cashflow Template you can download here.
Connect with a Coast Capital Business Advisor to help you get started.
Visit our website to learn more about products and services to support your business’ needs.
A business credit card is an invaluable tool to support your cashflow.
We offer a variety of services to help you manage and support your more complex banking needs, such as Payment Services.
