You may be feeling the pressure to incorporate your online business, because of the protection and benefits it can offer your company. Incorporating a business also makes it look more professional, which is highly appealing to online customers that do not have the option to see your company in action. However, there are a couple of reasons you might want to reconsider incorporating your online business if you are Canadian. Overall, setting up your business type is a sound idea, but until you’re well established, incorporating is not quite as easy as it looks, and in some cases, it causes more headaches than it is worth.
Taxes
Most online businesses choose to incorporate because of the tax benefits. This only works if you are doing business in the right areas and the right amounts. Smaller online businesses may find that they end up paying much more in taxes without being able to claim personal tax expenses, which incorporating does not allow. Yes, having an “Inc.” at the end of your business will look professional, but is that worth having higher maintenance, more expensive online business? In addition to taxes, if too much of your selling occurs outside your province or country, you could end up incurring any more fees than you would like to. You started this company knowing you had time for it, but expanding in any way could change up your whole schedule. This entire process requires a fair bit of research, as well.
Paperwork
It is always a good idea to talk to a lawyer before making any big decisions for your company, even if you have researched. That in itself requires fees and paperwork. If you go ahead with and decide to incorporate a business in Canada, you must make sure your company’s name is available and face changing your online business name if it is not. Then you must decide to register nationally or provincially. Both have associated fees and individual rules. Finally, you will want to obtain a GST/HST account if you make anything above $30,000 every year.
There are benefits to getting a GST/HST account even if you make less than that annually, because of tax refunds. Incorporating a business in Quebec will require registering with a number and with Revenue Quebec. This means even more fees and paperwork. The process is intricate, and even small mistakes can cost you a great deal of money. If your business is comfortable the way it is, you may want to reconsider shaking things up.
Incorporating your online business may seem like a great decision in establishing your company as a solid entity that lives on long after you do. However, every decision you consider for your online business will have a flipside. Perhaps incorporating is the perfect direction for you to take, but make sure it will actually help your business in the long run and not hurt it. If you own a smaller online business in Canada, make sure you are completely ready to incorporate your business before you go ahead with it.
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