Joan asked:

I got an e-mail from someone regarding multi-level marketing (making money through e-mail). I would like to register and start my own business for income tax purposes at my own house in Winnipeg. How would I go about doing this? Does it cost me money to start my own business? Do I have to make a business name? And what if I don't charge GST; what will happen?

CanadaOne answered:

You have a lot of questions rolled into one here. We had to go to several sources to find a complete answer. Here's a breakdown of what we learned:

Assessing the Business Idea
As you look at the costs and proceedures associated with starting a business, you should also assess your business opportunity very carefully.

Many multi-level marketing (MLM) opportunities exist, and each should be scrutinized carefully before money is invested. If the opportunities look too good to be true, they probably are.

Ask for referrals, try to independently find others who are already associated with the MLM that you are considering and ask those people for honest feedback on the opportunity. Also, remember that what works well for one person may not work at all for another. Always be very careful before investing any money.

As long time Internet veterans, we would definitely suggest that you be very skeptical about any opportunities to make money through email.

Costs of Starting a Business
Two home-based businesses can vary greatly, which makes it impossible to assign a specific cost to starting a home-based business. However, it won't be difficult to calculate a range of start-up costs for your intended business.

To determine how much it will cost to start your business, look at the resources that you already have, and what needs to be purchased before you can start. What sort of equipment do you have already? What needs to be bought?

Will you need to register your business, and are any special permits required in your area? Will you have employees? Are you allowed to have employees in a home-based business in your area? How will you market your business?

When getting started you may only need some promotional materials, a computer, fax, Internet connection, and a few specialized items.

Marketing expenses can be a necessary - but expensive - compenent of your start-up costs that you will need to assess carefully. Ask yourself how you will advertise your services or wares, and if you need to do any formal advertising. Some people can get started with a $200 - $2500 investment in a company brochure, while others will need to spend $10,000+ on advertising as they get started in business.

Create an itemized list, detailing the resources that you already have, and those that are still needed. At the end of this process one person may be able to start up a business for under $5000, while another business could require extensive marketing, pushing its budget to more than $30,000.

If money is tight, examine your expected expenses for items that are an absolute priority. Purchase according to the priority of the item, and the return on investment that the item will generate. While some things, such as an email address and business cards, are becoming a necessity in today's business world, other items, such as a cell phone, may not be necessary from the outset. The final decisions will depend on the specific needs of your particular company.

Naming Your Business
To start your own company, you have to first decide whether you want to operate under your name or register the business under its own name. If you will be operating under your own name, you have the option of not registering. However, if you plan to operate your business under another name, it is a good idea to register. To do a name search and reserve your chosen name, it will cost $15, plus another $30 once you register your name.

To reserve and register your business name in Manitoba, contact:

Consumer and Corporate Affairs, Companies Office
10th Floor - 405 Broadway Ave.
Winnipeg, MB R3C 3L6
Phone: (204) 945-2500
Toll free in Manitoba: 1-800-282-8069.

GST Requirements
You also need to decide whether or not to register for the GST. A business number (BN) is a single number that the federal government uses to keep track of businesses. Upon registration for the GST, businesses are given a business number rather than a GST number.

You won't need to collect GST until you have taxable sales over $30,000 in any four consecutive calendar quarters or in any one calendar quarter. However, there are several advantages to registering for the GST immediately:

• You cannot claim GST taxes that you pay on purchases unless you are registered for the GST.
• You will probably have a number of up-front costs as you launch your business, and registering for the GST right away will enable you to claim a credit to recover the GST that you paid on those purchases.

For a full explanation of the GST and how it affects your business, see Revenue Canada's section on the GST in the Guide for Canadian Small Businesses.

More Info
For more information on starting your business, check out these ask-the-expert articles from the CanadaOne archives:

CanadaOne's Guide to Starting a Business

Setting up a sole proprietorship

Corporations vs. sole proprietorships

And here are some useful Internet sites on starting a business:

Online Small Business Workshop

Industry Canada's Strategis document: "Are You Considering Starting a Small Business?"

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