

Ask HN: What resources exist for a first-timer starting a "start-up" in Canada? - AgentConundrum

Good morning Hackers. First time caller; long time listener.<p>I lost my job a while back and during my involuntary downtime I came up with two website ideas that I would like to build. The first is a bit of a joke and I'd hope that I could get it to a point where it could support itself via advertising (e.g. AdSense). I'm planning to build this one out first in order to convince myself that I've properly learned web skills to an adequate degree before moving on to the second project.<p>The second project falls into the category of "building a better mousetrap." I was recently searching for something (tangible, for purchase) online, and found that the resources for this were rather inadequate compared to my expectations. I came up with a list of things I would prefer existed on other sites, and came up with something else which seems new and innovative (to me, at least, though nobody I've explained it to has told me it was a dumb idea).<p>This site would be selling listings (i.e. advertising for a thing, as in "car listings," "rental listings," "job listings" etc.) to interested parties.<p>What I'm interested in acquiring from this community is resources relating to such endeavours in Canada. It seems a lot of information I see online relating to startups or business in general is geared toward American audiences.<p>I should note that money is something of an object to me at the moment (unemployed, savings getting low, living with girlfriend who likely wouldn't want me to push us into debt), so I'm hoping to imitate patio11's original "$60 budget."<p>Key topics to get the discussion moving:<p>- Liability: Do I need to start an LLC/Corporation for this? I've heard you don't even need to register as a business (you can operate under your own name) until you reach $30k or more per annum, though I assume if you're selling to businesses it would be preferably to have a proper company name to use.<p>- Taxes: Do I need to collect GST? What are the mechanics of that? What about tax reporting (personal and business)?<p>- Collecting payment: What are the catches to accepting payment online in Canada? What is my liability when using a provider for this in terms of data security?<p>- What else am I just completely missing right now?<p>I realize I'm asking a lot of the community here, but I'm rather afraid of missing something dumb and getting into legal trouble. I'm slightly paranoid that way.<p>Thanks for any help you can provide.
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cperciva
I am not a lawyer, but I am a Canadian running a business, so I'm at least
partly qualified to answer these questions.

Company formation: You can operate a sole proprietorship under your own name
by saying "hi, I'm in business". There is no dollar limit on this. Depending
on your local laws, you might need to get a municipal business license. You
can register a business name for ~$50 with your provincial government -- this
is distinct from incorporating.

Incorporating: This has two major effects. 1. It creates a new "corporate
person" which can go bankrupt, thereby shielding you (usually) from liability.
2. The new corporate person is taxed independently of you, which will affect
the net tax rate (maybe higher, maybe lower) you pay and will give you
considerably more flexibility in tax planning (since you can move personal
income from one year to another).

Income taxes: If you're incorporated, you file an income tax return for the
company. If you're not incorporated, you file a "statement of business
activities" as part of your personal income tax return.

GST: You will probably need to collect GST, but only for customers who are (a)
canadian residents, or (b) registered for GST. As an exception to this, if
you're taking in less than $30k/year you probably qualify under the 'small
supplier' rule which gives you a choice of whether to register for (and
collect) GST or to pretend that it doesn't exist.

Payment processing: Canadian banks are almost completely clueless when it
comes to transacting with the rest of the world. Credit card processing sucks.
I just use PayPal.

Payment processing data security: If you're handling credit card numbers
(i.e., not going through paypal) the rules are exactly the same in Canada as
they are in the US -- they are set by mastercard and visa.

~~~
AgentConundrum
Thanks for all the information. This is really helpful.

 _You can operate a sole proprietorship under your own name_

Wouldn't this make some businesses uncomfortable, preferring to give money to
"MyProfessionalWebsite.com" rather than "Jesse Hartwick"? Is the ~$50 business
name act essentially like just an alias, telling the government/taxman "money
paid to MyProfessionalWebsite.com should be treated the same as if money were
paid directly to Jesse Hartwick"?

You also mention that this is paid to the provincial government. This is most
likely out of the scope of your expertise, but how would this work if I moved?
I currently live in Halifax, but might possibly be moving to Edmonton for work
in the near future. I'm also from Kingston, Ontario and would one day like to
move back home (to Ontario anyway, not necessarily Kingston specifically).

 _There is no dollar limit on this._

I wonder where I got the $30k number from then. Thinking back I think this
might have actually been "after $30k you're paying taxes you don't need to" or
something. Less of a rule, and more of a best practice.

 _Incorporating: This has two major effects._

I looked it up, and apparently the minimum cost for incorporation in Canada is
$200 (plus lawyers fees, if applicable). I'm almost hesitant to go this far at
first, since it feels like the risk is relatively low (a moderately well
written terms of service/use, a well written disclaimer, and a policy of
providing full refunds for even minor disputes - though I'm planning on
providing this for free for a few months to get the ball rolling anyway -
should hopefully take care of things until I get a job and can pay to
incorporate. Who knows, my new boss might take issue with the concept in
general and the business will die before it starts.

 _you file a "statement of business activities" as part of your personal
income tax return._

Sounds easy enough.

 _probably need to collect GST_

Is there a guide to such things that you know of?

 _only for customers who are (a) canadian residents, or (b) registered for
GST_

If this is targeted to Canadians, I'd assume this becomes a blanket "yes,
collect GST" statement. I'd need a GST number for this, I believe. How
hard/expensive is such an acquisition?

 _gives you a choice of whether to register for (and collect) GST or to
pretend that it doesn't exist_

Given the option, I'd just as soon collect it always, and from the beginning,
so I don't need to worry about it later.

 _Credit card processing sucks. I just use PayPal._

Duly noted, though the same "would businesses take me seriously" caveat
applies. My site would attract largely different clients than something like
tarsnap would.

 _If you're handling credit card numbers (i.e., not going through paypal)_

Given what you just said, it definitely seems like I'll just deal with PayPal
and be done with it. Have you had any problems with them, by chance? There
seem to be a lot of complaints about PayPal suspending accounts and generally
being unsuitable in a lot of cases. I've heard of other alternatives (e.g.
transaction.net, google checkout, etc.) but wasn't sure how things worked in
Canada and I haven't had the chance to really dig into the issue yet.

Again, thanks for all the information. You've been extremely helpful and
you've put my mind very much at ease about starting this. I couldn't imagine
the government really making it difficult for people to start businesses, but
you never know.

~~~
cperciva
The business name registration is just an alias, yes. It means that you can do
things like enter into a contract using your business name rather than your
personal name. If you move, I'd assume that you would need to register the
name in your new jurisdiction.

The $30k number probably comes from either GST (at that point you need to
register) or as a rule of thumb for when income taxes start to work out
better.

As long as you're not doing weird stuff like charging people in picoUSD, GST
is quite straightforward. If you go to the CRA website you'll find lots of
documentation. The registration process is simple too -- fill out a form, send
it in, and wait for a number to arrive in the mail. (I think it's free; if
not, it's only a nominal fee.)

The worst problem I've had with paypal has been a few customers being blocked
from making direct credit card payments -- but after they created paypal
accounts everything worked fine. (I'm guessing that they were borderline on
paypal's fraud-detection systems, and providing information as part of the
process of creating paypal accounts was enough to push them into the 'safe'
category).

If you're taking payments mostly from Canadians, mostly from businesses, or
mostly in >$100 amounts, you might want to skip credit card processing in
favour of cheques.

------
paulhart
Fellow Canadian here.

Incorporating a federal corporation is easy and can be done online. If you
want to have a named corporation you need to do a NUANS search first. As far
as I'm aware, the cheapest NUANS searches are from here:

<http://www.corporationcentre.ca/docen/pns/home.asp>

No affiliation, just a satisfied customer. Note that even if it finds a 'hit',
it doesn't mean that your choice of name will be disallowed.

Online incorporation is cheaper than filling out paper forms, and the online
wizard includes a bunch of boilerplate options that make life super-simple. If
you live in certain jurisdictions, the wizard will even do the provincial
registration for you.

As for collecting payments, this is a "problem". If you have good credit, you
may be able to use Beanstream to provide merchant services (they provide
merchant accounts through TD). If you don't have good credit, then PayPal is
probably the option to go for. Depending on what you're doing, this may or may
not be a positioning issue. If you're doing merchant stuff, you _definitely_
want to have some kind of corporation in place. BTW Beanstream is one of the
few Canadian merchant service providers supported by ActiveMerchant (if you're
doing the Rails thing).

I have no experience with Moneris. My experience with Global Payments is that
you can't just talk to a person - they have a (probably commission-based)
outside salesforce. If you don't have an existing business, they want to see
personal asset and liability information. All seems far too annoying.

Finally, regarding data security: if you do _anything_ with credit cards,
outsource that liability by using tokenization or PayPal. You don't want to
have to deal with PCI compliance directly. I recently completed a project for
a very large electricity retailer who needed to get to PCI compliance and took
the outsource option, so it's not like that's just a choice for "the little
guys".

Yes, you'll probably want to collect GST or HST, and remitting that back to
the government is pretty simple; make sure you don't spend "their" money! The
mechanics are: take customers' money, keep track of the amount that belongs to
the CRA, give them that money according to a schedule you must meet. As a
startup, you can remit GST annually (the mandated minimum frequency is based
on your sales, if you expect to have very low sales, you can choose annual -
but you can even file monthly if you like paperwork).

Hope that helps a bit!

------
huhtenberg
\- Liability: registering an Incorporation costs $300 if you buy a prepackaged
company documentation package. I suspect it is even less if you do it
yourself.

\- Taxes: yes, you have to collect GST from the residents of Canada, and
applicable provincial taxes (e.g. PST in BC). Talk to a CGA of your choice,
that will cost you $50 for an hour (if that much)

\- Collecting payments: nothing Canada-specific compared, say, to the US. But
being in Canada limits your choice of payment processors. Keep in mind that
you basically have two options - hosted payment page whereby you forward your
customers to an external page and pay the processor up to 10-12% of the
transaction. In this case you don't need to have a merchant account, which can
be pricey to set up and maintain, esp. if your $ volume is low. Second option
is to obtain aforementioned merchant account, sign up with a payment processor
(e.g. Moneris or Global Payments Tech <\- both are highly not recommended,
just an example) and this way you will be able accept payments directly on
your website. In your case I would strongly recommend the option #1.

\- What you are missing: build the product first, once you get the famous
"traction" with a free/beta version, _then_ think about the company and the
payment setup. In other words - validate an idea first.

~~~
AgentConundrum
_What you are missing: build the product first_

I wasn't missing that, though I definitely gave the impression that I had.

My intention had always been to just sort of throw them both online, the ad-
supported idea going first to prove to myself that I could make a website that
a) didn't look absolutely god-awful, and b) wouldn't get hacked to pieces by
every idiot script kiddie that came across it. I only have very limited
experience with web anything, and really with programming in general (after
college - community college - I ended up stuck in a COBOL job for three years,
and it burned me out so badly that most days I just didn't want to code
anything on my own time, so I've definitely rusted over in a lot of places),
so I'm validating my skills first on a trial site before moving to the more
"business-y" site.

The second site was always intended to start free first, with money being a
secondary concern to gaining an audience. If you're selling someone on
advertising with you, they're going to want an audience before they really pay
anything. Likewise, nobody wants to come to such a site if nobody is
advertising anything. The solution, fairly clearly, was to give it away free
to the advertisers at first saying all it would cost them was a bit of time to
get things loaded into the system, then if the site became popular it would
become a pay site as it came out of Beta.

My purpose for this question wasn't so much to get everything in order _right
now_ , but rather to try to collect information so that if the time ever came
I would be prepared to quickly transition to a proper business. I was rather
hoping for external sources (books, Canadian-oriented guides/blogs/whatever),
but anecdotes are definitely beneficial and appreciated as well.

Another, though by no means less important, reason was to determine my
liability. E.g. if someone writes a terrible set of directions on the first
site, and some moron follows these instructions and dies, how liable would I
be if I wasn't a proper business, let alone an incorporated one.

