izzi81

Before anyone asks, I will likely be seeking some professional advice on this, but I know there are knowledgeable people on here so I thought I'd enquire

My sister and I run an online mail order business back in the UK. We started it 1.5years ago, and when I came to Canada she did all the practical stuff and I did all the online/admin stuff.
We're now looking to expand the business to North America; she'll run the UK side, I'll run the North America side.
Which all sounds fine, until I start thinking about business registration and taxes and then my brain liquifies. So I'm hoping for some general advice, though I'm happy to give more details through PM.

Do I: set up the business here separately, as a partnership with my sister as a partner in the UK?
Or is what I'm doing here just an arm of the UK business - which is now an international business?
If it's an international business (the thought of which makes me laugh.. it's still very small!) do I still register the business here? Do I need business insurance here (don't think we have any in the UK..)
I'll need a bank account here to handle payments in $ (or should we try to set up a $ account in the UK?).
Where do we pay tax? I understand the UK tax form for partnerships has a section to declare international earnings. Do we put *all* the business earnings into the UK business, and I'll declare it here as income from a UK business? (even though some of the money coming in will be from Canadians?)

If I'm getting goods delivered here to be shipped out, and they're coming from abroad, I presume I can't get out of the import charges if we're a UK business? What about HST - is this where being registered in Canada might help?

I know... I need an accountant! But I'd appreciate some early guidance

Aviator

Most businesses are individuals operating under a business name, unless incorporated. All your liabilities for tax and reporting would be where you (which is in Canada) operate your business as an individual, regardless of whether you do so in conjunction with your sister in another country.

If your business is a partnership with your sister, wherever you are tax resident is where you are liable for reporting income and tax as is your sister. If your business is incorporated, the business pays tax wherever it is registered and you pay tax where you are tax resident as an employee.

Import duties and tax rules apply to all goods coming into Canada.

It would be simpler to operate as independent businesses one in Canada and one in the UK. Whether you incorporate or not depends on your circumstances. You can still send money to each other, then report it as income in the country you reside.

If you have income (not just profit) over the HST threshold ($30k) you have to register is you sell taxable goods within Canada. You can also reclaim the GST/HST paid on imports.
http://www.gst-tax.com/GST/Do_I_need...er_for_GST.htm

You should have business insurance, even if all you need is liability. If you operate from home, have you told your home insurer, as this may invalidate your home insurance.

http://novascotia.ca/snsmr/access/bu...o-register.asp

izzi81

I am not a fan of navigating the tax minefield

What if the scenario is as follows:
I have a partnership, registered in the UK, with my sister. I live in Canada. We expand to run the business reaching North America because I'm based here. But all the money is still going into the UK based online payment processor, and then into our UK business bank account.
In that situation, am I just declaring income from the UK business to the Canadian tax people? Therefore not registering the business here, or having business insurance here etc.? Instead it is as if the UK business has an 'office' in Canada?
(edit: just read the link, I see I will have to register here regardless. Does that mean all international businesses doing business in Nova Scotia are registered here?)

You said
Which I understand, but if the business is in the UK, and all the income goes in to the UK, therefore I just need to inform Canada of the income I receive from the business, not all the business accounts?

I'd rather not split this into two businesses, as the UK business will be funding the setup of the North American business, and certain things like payment processing and webhosting are shared....

This is me currently ->

Steve_

There's no way of doing it without dealing with the CRA if you have a "permanent establishment" in Canada and it sounds as though you do.

If it's really small then the simplest way to do it is to register as self-employed and use T2125 with your T1 but you may want to incorporate a CCPC.

But either way you will need a business number, so you can get a GST/HST account and if you're shipping across Canada you will need to register for PST in whatever province.

If you set up a corporation you will need a payroll account and a corporate account with the CRA as well.

You could register the UK business with a GST/HST account but that's excessively complex because you've got to get paid somehow so the UK business would also have to register for a payroll and corporate account in Canada and the tax situation would get very complex if you did that.

It's simpler to have them separate and just invoice each other for services rendered, GST/HST on exported services are zero-rated and ditto for VAT in the UK.

Yes, if they have a permanent establishment. Which you would be as it is your principal residence.

Any small business accountant can talk you through this plus you should read the CRA self-employment guide, GST guide, payroll guide for corporations or anything else relevant.

You will rapidly realize you are not self-employed but in fact work for the government.

Steve_

Also I've just got to say this "mail order" business idea seems to come up a lot on here, Canada is not a good place usually to run a mail order business because of the postal rates and how long deliveries take. Plus there is no way of fiddling the VAT like there is in the UK. People find it more convenient to go to a shop than they do in the US or the UK.

Aviator

As per previous poster, what you want to do won't work here and to set up something is going to be unduly complicated. 'Registering' a business makes no difference if you are an individual or a partnership, you are still treated as an individual dba.

In anything but a corporation or LLP, you are treated in a business as an individual. Your liabilities extend to where you reside and nothing to do with where you have a partnership registered or payments go to or come from.

The only time this could work, with some tweaking is to incorporate in the UK, you can be an employee, then the UK corp need a CAD payroll and GST account and submit taxes to CRA or you are a contractor to a UK corporation, but as a part owner as this may not fly either.

I would also suggest speaking to an insurance broker. Not having insurance is very risky. If you run your business from home and don't have business insurance, someone comes to your home on business slips and sues you, your insurance likely won't pay out, it will be on you.

izzi81

An appointment with a small business accountant is in my near future! Thanks for the info, I have a starting point of understanding at least for what they might say.

I do have to say though, it's a bit negative saying our business 'won't work' when you don't actually know what it is? All I said was mail order... could be absolutely anything It's not something people can buy in shops, it's sort of a service and a product rolled into one. I'll try it and report back in a year or so

rivingtonpike

Who said it "won't work"? I thought you got some pretty sound advice - for free.

Aviator

Nobody said your business won't work, what was stated was that the business structure you wanted won't work. You should understand how each entity of a business structure works. Unless you comply with the regulations, your business won't work.

Without doubt you need to get professional advice (Canadian) if this is where you propose to be living for the foreseeable future.

izzi81

What I read was Steve saying the mail order business model doesn't really work in Canada, and then Aviator saying in the next post: 'as per previous poster, what you want to do won't work here'.

To me that read as if the general consensus was the business idea wouldn't work. Apologies if that's not what you meant. I certainly wasn't dismissing the advice, which as I said has been useful! Next stop - Canadian professional (and likely someone to do the books for the first year at least )

the undutchables

I agree, Izzi, that's how I read it!

Aviator

I would disagree that a mail order business won't work. You don't know until you try. You may want to consider having a US address as well as a Canadian one, Americans tend to prefer to buy from America. Many people by online and suppliers use couriers as well as Canada Post. Customers are willing to wait for as long as it takes, provided the product is unique enough or the cost saving over bricks and mortar are sufficient. Perosnally, I go with gut feeling and listening to a few opinions, but still make my own decisions. There are plenty of successful businesses that did not look like they would make it and plenty of entrepreneurs who have winged it and done well. Largely it is up to you as the owner, hope it goes well and I would be interested to hear more about iot.

We buy lots online and wait up to a week to receive it, even crossing the border to pick up packages. We'll also shop in Aus and the UK for product we cannot get in North America. It comes down to the product, possibly the price and the service.

The postal service in North America may not be a quick as the UK, but the consumer is aware of this, it is no big surprise, its what we're used to and if you want it quicker there is overnight courier. Mail order has worked well in NA for years, it's how e.g. Eaton's, Sears & Can Tire.

However to reiterate to the OP, I don't believe your proposed business structure will work, your accountant should advise you.

Lastly, I would use an accountant for tax stuff, a lawyer for corporate structure and a bookkeeper for keeping the records. They all have specific roles and an accountant who does books is likley going to be way to expensive. An on staff bookkeeper is around $20-25 and hour, freelance $20 - 35.

Steve_

I'm not saying it definitely won't work, I'm just saying it comes up on here a lot and the mail order business game is different in Canada. If it's something you can get in a shop locally, people are more likely to go to a shop because of the postage costs/time and lack of tax advantage.

Also on the GST/HST registration - you may be exempt from registering if you do under $30,000 of business but generally speaking you should register your business because otherwise you can't claim input tax credits, which tend to be more important the smaller the business is, say you have to buy a computer and shipping materials.

Siouxie

Regarding insurance, it's a simple add-on to your home insurance (presuming you are operating from home). I pay $7 odd a month for a home based business insurance add on with TD.

http://www.melochemonnex.com/en/resi...l/inhomeoffice

Aviator

Depends on the risk, not all home insurers will do a business add on.