How should small business owners set up their finances as they start their company?

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From whether to incorporate to how to collect sales tax, first-time entrepreneurs have many decisions to make to steer clear of financial mishaps

Pandemic-weary Canadians thinking about launching a new business in the new year, whether it is a side hustle or a full-on career change, should know there’s a lot to prepare for.

“One of the biggest differences when you incorporate your business, it’s no longer simply an extension of your work,” Ms. McIsaac said. “It actually becomes its own distinct legal entity.” Steve Bridge, a certified financial planner at Money Coaches Canada, said first-time small-business owners shouldn’t feel a rush to incorporate. He said he’s seen many clients incorporate too soon.

Taxes are a big issue when starting a new venture and come in two main forms: sales tax and income tax. “Every time you get paid from a client, you carve off that HST … and you put it in that account and you don’t touch it,” Ms. Schieck said. Ms. Schieck said one of the most common financial pitfalls she sees from new entrepreneurs is undercharging for their services, which is important for both their business planning and personal finance planning.

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