Nancy asked:

I recently left a full time job to be with my kids and further my education. I decided to do home day care to supplement my husbands income. I registered a company name(sole proprietorship) and am ready to go.

My former employer has now asked if I will work contract or part-time from home. What do I do-register another company name(another sole proprietorship). If I do this how do I handle the accounting and taxes for two sole proprietorships and myself. Would it be better just to go part-time and have them deduct the taxes at source and just have the daycare business. Is it possible to have both companies operating under one name with different focuses.

Also, since, in the end ,regardless of what I do-if the best ways are two or one sole proprietorships, how do I handle the $30,000 GST issue? If neither company on it's own goes above $30,000 but together they do- at that point do I start charging only my former employer GST as I can't charge home daycare clients????

I know I should be talking to an accountant directly but I really can't afford it yet.

Julie King answered:

Thank you for writing to CanadaOne.

You've asked a number of questions, so I am going to give you some high level information that will hopefully help you take the next steps to develop your business.

The first thing I'd like to explain is how a sole proprietorship works from a tax perspective. A sole proprietorship is really the extension of an individual, so it will not be advantageous for you to register more than one. For tax purposes the activities of several sole proprietorships owned by the same person would all go onto the same tax form and the combined incomes are used to determine whether or not you need to charge GST.

Also, you can operate a business in your own name in Ontario without registering the business. However, in that case it must be your name only; for example, if you were to use Nancy and Associates you would need to register the company name.

You can learn more about sole proprietorships here:
http://www.canadaone.com/magazine/ask-the-expert10.html

The second thing you asked about is the GST. It's important to note that you could be expected to charge GST as soon are your business earns more than $7500 (a quarter of $30,000) in any consecutive 13 week period (or quarter). So, if you were to suddenly get a large contract and earn $10,000 within this time period, the government would expect you to charge GST. Similarly, you would need to charge GST if your business earns more than $30,000 in any four consecutive quarters.

This article explains how the GST works in more detail:
http://www.canadaone.com/ezine/oct03/gst.html

This leads to the next issue, which is whether or not you should work part time or bill your former employer through your business. There are pros and cons to each option and as you mentioned, an accountant is the best person to help you analyze your individual situation.

In your situation I would start by doing some forecasting to see how much money you expect to earn from each aspects of the business. You may find that you want to work part time to keep your income down for GST purposes, if the cost of GST is something that will negatively impact your home daycare business.

You'll also want to consider what deduction opportunities you would lose by working part time. Again, this can vary widely from person to person and at some point the advice of an accountant, while expensive, could pay for itself in tax savings.

Finally, there are some excellent business resources that help new business owners get their companies up and running. In your area the Brampton Small Business Enterprise Centre is an excellent resource. Most centres offer seminars and some offer free consulting as well. They may be able to arrange an appointment for you with an accountant to help you discuss your personal situation in greater depth. You'll find them online at http://www.brampton-business.com.

I hope this information helps and wish you great success in your new venture! You may wish to sign-up for our free newsletter, What's On CanadaOne, which lists the newest articles that we publish each month. To sign up for What's On please visit www.canadaone and scroll down the page; the sign-up form is on the bottom left corner of our homepage.

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