Muslim Mompreneur: Registering Your Home-based Business (HBB)Written by Mahwash Fatima
As Muslims, we are obliged to abide by the laws of the land and the country that we live in. Because there seems to be general misconceptions that the legalities of running a home based business (HBB) are complicated and unnecessary, this article will address some of those misconceptions and show how simple the legalities really are.
In Canada there are four types of business structures that are relevant to home-based businesses (HBB):
Sole proprietorship - Owned and operated by one person. That person is responsible for all debts and liabilities. Business income is reported on the owner's personal income tax form.
Partnership - Two or more owners of the business. All partners share investment, risk, and profits for a registered and legally binding business. Income is declared on each partner's individual income tax forms.
Corporation - The business is treated as a person and is incorporated provincially or federally. Owners become shareholders and profits are distributed in the form of payment to shareholders. Annual corporate tax returns must be filed by the corporation.
Business cooperative - This is a special form of a corporation where each member (shareholder) works as part of the business and has one vote in decision-making. The members might each produce different items that are then marketed collectively, or they may all contribute to delivering the same product or service. For an HBB that is a business cooperative, members work from their own homes, but may use one home or a rented location as the primary business site. Consult the Canada Cooperatives Act for the specific requirements that must be met to qualify as a Cooperative. (Ottawa home based business guide)
Do I really need a business license?
You do not need to register your business if you are operating in your own name. For example, “Maham” or “Maham Khan” does not need to be registered. However, if you want to use “Maham's” or any variation on your legal name, you would have to get it registered.
You may be fined up to $2,000 for individuals (not corporations) for failure to register or for registering false or misleading information.
What's in a name?
By law, the name of your business cannot be the same as an existing corporate name or trade-mark.
You can easily find out if a business name has been registered with the Ontario government within the past five years by visiting www.services.gov.on.ca. The cost starts from $8 for the service.
How to register?
Registering a business is easy and can be done online via Service Ontario. Registration will give you a Master Business License.
It usually costs $60 to register your business name online, and the registration is valid for five years. Visit http://www.canadabusiness.ca/eng/program/2498/ to register your business name.
Other License and permits
With a few exceptions, the businesses that do require a special licence are usually not permitted as home-based businesses. Visit
http://www.bizpal.ca/en/ to search for licensee and permit requirements you may need.
Do I have to register for GST/HST?
If your new small business gross income is more than $30,000 you are legally obliged to register for GST/HST (some exceptions apply).
If your gross business income is less than $30,000, you are exempted from registering to GST/HST, but it may be a good idea to register because of “Input tax credits”. You may be able to claim all or part of GST /HST on all your business related purchases.
Maximize your tax savings.
Some people assume that by registering their home based business, they would have to pay more taxes. What they do not know is that some of their businesses expenses may qualify for deduction. For example if you use 30% of your house for conducting business activities on a regular and ongoing basis, you can claim 30% of your household expenses (utility bills, maintenance cost, house insurance, property taxes, and so forth) as business expenses on your tax return.
You may also use the Canada Revenue Agency form T2125 which contains a chart called “Calculation of business-use-of-home expenses”.
For more information please contact your nearest Small Business Enterprise Centre (SBECs). SBEC provides entrepreneurs with all the tools they need to start and grow their businesses. For more information on SBECs in the Ontario, visit
M. Fatima has studied Business Administration in Pakistan and Canada and currently runs her own small business from home in Ottawa while raising her children. Check out Maham's Boutique http://www.mahamsboutique.com/
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