The Legal and Tax Obligations of Starting a Small Business in Quebec
Entrepreneurs know that being self-employed is hard work, but for the right person, it can also be fun and rewarding. The start of the business is a very busy time. Not only are you marketing, taking care of staffing needs, creating an inventory and sourcing the best service providers to help you grow, you also have several legal and tax obligations.
Determine the legal scope of your business
Your business will be legally recognized as an individual company, stock company, partnership, limited partnership, joint venture, non-profit corporation, homeowners association, cooperative, or a trust operating as a commercial business. It is important to first determine the best legal fit for your business, and then to fill out the appropriate paperwork so you can register it accordingly. Each scope’s tax breaks and obligations differ. To learn more about these scopes, visit Revenu Québec.
Unless your company is legally recognized as a sole proprietorship operating under the owner’s name, a government agency, municipality, association or joint venture, you must register your company. This can be done online and there are costs involved.
Name your company
Before you register your company, you have to give it a name. Spend some time thinking of a name that both conveys what you want your company to stand for and one that complies with Revenu Québec’s standards. This means, the name must be in French; cannot contain immoral, hateful or obscene words or ideas; and cannot falsely hint that your company is a non-profit if it is not. These are just some of the compliance rules – be sure to familiarize yourself with all of them before you register.
Get ready to pay your taxes
Revenu Québec collects taxes from businesses and self-employed persons. That means, you pay and/or remit tax for the both company and your “paycheck” or “take home monies” from your company. When you work for a company, taxes are usually deducted from your paycheck thanks to the accounting department. When you work for yourself, you must figure out and deduct those taxes yourself.
How will you remit your business and personal taxes? Monthly by using online forms? At the bank? Installments? Review which options are applicable to you and which options best suit you and your business. The important thing to remember is not to try and hide or disguise business or personal income and don’t procrastinate in learning your tax obligations. It is illegal to avoid paying taxes and if caught, you face stiff fines and very costly interest. Failure to file your returns can cost you $25 per day!
Based on your type of company, you may be required to remit: source deductions/employer contributions, fuel tax, QST/HST/GST, tire duties, alcohol tax, taxes on insurance premiums, lodging tax or tobacco tax. Make sure you know what you have to remit and when before you open your doors for business.
As you can see, you have several legal and tax obligations to consider before you launch your business, but like every good entrepreneur, you know that this is just part of the overall process, and it is a process that helps you become the best business you can be.
Let AF Accounting help you start your business by consulting with you about your tax obligations, how to structure your bookkeeping for ease of tax management, and the best way for you to remit.