When Do You Need To Register Your Business?

Is your business registered? TRICK QUESTION! Your response should be "it depends; registered with who?"

Many Provinces require a business to register with the province in order to operate as a business in that province. For example, in Ontario, if you are going to run the business under a business name other than your own personal name, you will need to register your business name with the Province of Ontario and get a business license to operate under that name in Ontario. It’s pretty quick'n easy. It includes a name search to make sure no one else is operating under that name in Ontario, and only costs $60. If you do this, they will give you a Business License to operate under that name, and Business Identification Number. This is NOT the same thing as a Business Number, which is a federal thing.

You do not have to register your business with the Federal Government until there is a reason to do so. There are various federal agencies, but two come to mind for business registration: Service Canada & Canada Revenue Agency (CRA). You do not have to register with Service Canada unless you hire employees (at which point, you will need to be able to issue ROEs via Service Canada’s ROE Web, and you will need to be registered with CRA before you create an account with Service Canada). You do not have to register with the Canada Revenue Agency (CRA) and get a Federal Business Number unless any one of these things occur:

• You want/need to start charging GST/HST
• You hire an employee
• You incorporate the business
• You will be importing/exporting internationally

Today's blog post will focus on the first three in the list because those are the most frequent reasons for registering with CRA.

When any one of these things occur, you create a Business Account with CRA and you are issued a Business Number. It is nine digits long, and I sometimes refer to it as the SIN number of the business. That is because it is basically a way for the CRA to track how much you owe them! Let's pretend the CRA Business Number you are issued is 1234 56789...

1. GST/HST Business Account: Once you have your business number, a business program account is now created under that number. For example, if you want/need to start charging GST/HST, a GST/HST Business account is created with your nine digit business number with RT0001 appended at the end. Your GST/HST Account Number is 1234 56789RT0001. (Think T as in sales Tax). This program account is how your GST/HST payments are tracked.
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2. Payroll Business Account: If you hire an employee, you will need to withhold and pay payroll taxes. So, you create a Payroll Account with CRA. Your Payroll Account Number is your business number with RP0001 at the end. Your Payroll Account Number is 1234 56789RP0001. (Think P as in Payroll Tax).
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3. Corporate Tax Business Account: And if you incorporate your business, now not only do you pay personal income tax on your personal income from the business, now the Corporation owes Corporate Income Tax on the Corporation's income too! And to track that, you guessed it, it's gonna need a business program account. Your Corporate Tax Account number is your business number with RC0001 at the end: 1234 56789RC0001. (Think C as in Corporate Tax).
   
   

A business can have one, two, or all three of these program accounts depending on their situation. A business can have employees but not be registered for GST/HST, or vice versa. A Corporation is not automatically registered for a GST/HST account when the Corporate Tax Account is created. If your business is not incorporated, then the program accounts are all connected to your personal name (you are the business). So it's important to remember, if you incorporate your business then you will need to close any CRA Business Program Accounts you may have had connected with your personal name, and now create new CRA Business Program Accounts (a new Payroll account and/or GST/HST account) if needed under the Corporation's new Business Number.

The real business hack is understanding how to pay to the correct business program account, and also to the correct period!  Paying to the incorrect period causes wasted time and money! More than you realize! Yes, it can be fixed, but to sort it out can take more time than you may think. Paying on time and to the correct program and period will help you to not give CRA more money than you have to!

Stay Tuned for next month's blog post; When does a business HAVE to register for GST/HST, and why would a business WANT to register for GST/HST before they have to!?!

If you have any specific questions you want addressed in that post, feel free to email me!