(And Some Other Stuff You Should Know, Too )
My Name is Vikki
Before you get to reading, please allow me to introduce myself: My name is Vikki Velenosi. I am an artist and multi-passionate, multi-hyphenated, creative-entrepreneur and coach. I help artists reimagine themselves as artist-bosses so they can turn their passion into a purpose and their creative-skills into a paycheque, without losing the art.
I started the Artist-Bosses Community so that artists everywhere can learn the business skills they didn’t teach us in school.
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So! You’re an artist and you are thinking about registering your company. How unexpected. This is NOT what good little artists do.
Good. For. You!
Maybe you’ve finally had enough of your joe-job and you’re taking the plunge into working for yourself. Or maybe you’ve been operating your company for a while and feel it’s finally time to put a ring on it. Or maybe you’re just sick and tired of being exploited and you’d like to take back some control in your career. In any case, there are some options on how you can do it and some important factors to consider when registering a company in Ontario. There are benefits and drawbacks for all options. I believe the decision is as much about practicality as it is about personal preference.
Please note: If you didn’t already know, my name is Vikki Velenosi. I am an artist who became a business owner by accident and had to learn all of this stuff as I went. I am not an accountant, a lawyer or an insurance broker. However, there is no shortage of articles online that have been written by all of the above. And trust me when I say, they are DRYYYYYYYY. I will put as many links here as I can to references and government websites for further reading from experts in these fields.
My hope for you is that you will take everything below as an easy to swallow way to learn the basics. Then, go forth to do further research, while sounding like you know exactly what you are talking about! Always consult an expert.
In this article, I’ll provide an overview and summarize each option, based on what I have experienced in relation to my finances, taxes, operations, liability and my personal preference.
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I was 2 years into running my first company (a rehearsal and performance studio called The Box Toronto) when I finally decided to officially register. I did it because a large and established Theatre company (*cough*Stratford*cough) wanted to use my theatre and told me they could only pay by cheque. The thought of asking them to write a cheque to my personal name made me feel queasy. I wanted to seem legit! So, I started looking into how I could accept cheques in my company’s name. Turns out, I needed a Master of Business License before I could open a bank account in a business name and so, the journey began! In the last decade, I have registered businesses as sole-proprietorships, partnerships, Not-For-Profit and For-Profit corporations. Here is what I have learned and all of the resources I believe will help you decide if and when to register your business or company, too.
Side bar: Before I go any further, I want to dispel a myth that I know goes around the arts community. You may have gathered at some point that registering your business has a lot to do about taxes. And it does. Many artists put, “knowing how to do my taxes,” at the top of the list of business skills they feel they should learn. The truth is, most business owners, CEO’s and entrepreneurs do not know how to do their taxes! That means, YOU DON’T HAVE TO EITHER! JUBILEE CELEBRATION!!!! It would be nice if you didn’t have to DO your taxes. But, alas. We all still have to make sure they are done.
If you like doing your taxes, by all means, please do all the research you can and learn everything. But if you haven’t been doing them, consider that you just are never going to and that is OK. You have NOT failed. They are hard on purpose. It’s not your fault. Hiring a bookkeeper to keep everything in order and an accountant to file your taxes can seem out of reach, especially when finances are tight. I look at doing your own taxes like doing your own dental surgery. I mean… you can... But I want so much better for you! It can be done by someone else for a few hundred dollars a year and actually potentially save you thousands and SO much stress. I have spent money on doing my bookkeeping or taxes and never regretted it. You can find a list of local accountants and their hourly rates at www.upwork.com. (PS: Bookkeepers are inexpensive and keep everything organized so you spend less with an accountant. Accountants are more expensive file the taxes in a way that saves you as much money as possible.)
Ok. Rant about taxes over. Back to our regularly scheduled program about registering a business.
The first thing to consider is what or where or who are you registering with, anyway. When people talk about, “registering a business,” they almost always mean, “with the government.” They are the only registration that really matters. (Unless you are registering your company for a contest or a sweepstakes. In which case, fingers crossed for you!)
Here are your most popular options for registering a business or company with the government of Canada:
Option 1) Don’t Register:
You rebel you!! Just like burning your fingerprints and moving to Alaska, this option gives you some freedom but also comes with its drawbacks and risks. And you might not be as off-the-grid as you think.
Let’s say your name is William Shakespeare. You have started a company called “Billy Shake’s Shake Shack” and you sell milkshakes out of a renovated ice-cream truck, styled to look like it belongs in a marketplace straight out of the renaissance period. (Side note… this is an amazing idea…If you take it and run with it, I support you. Just please cut me into your profits.)
Starting a business is not the same as registering a business. If you start to operate this business without registering it with the government, there is nothing stopping you from making a Facebook page or Instagram Account or a website www.billyshakesshakeshack.com.
However, as far as the government is concerned, you are just William Shakespeare, bringing in money. They want you to pay taxes. But they also require you to officially register the name you are operating under if that name is not just your personal, legal name. The government of Canada website says “If you are a sole proprietor operating a business under your legal name (for example, Jane Doe), you generally do not need to register your business name. In all other scenarios, you will need to register your name either as your legal corporate name or a trade name.” Read more here: http://www.ic.gc.ca/eic/site/053.nsf/eng/00004.html
If your name is William Shakespeare and you are a contractor, hired for odd jobs or working for yourself just under your personal name, as far as the CRA is concerned, you don’t need to register and you are automatically a sole-proprietor anyway. In our Shake Shack example, if you call your operations Billy Shakes Shake Shack, you must register that name with the government. However, all your operations and money earned from the Shake Shack will still just be under “William Shakespeare,” and get filed under your personal taxes along with any other income you earn from anywhere else.
As a sole-proprietor/contractor/non-employee, there is a threshold of earning that you will reach where the government requires you to obtain an HST number, charge HST on your goods and services, and then give that money to them, less any HST you paid that qualifies as a business expense. Even if you are not a registered business, you may still be subject to this threshold (usually $30,000/year, before expenses, but there are exceptions). Further reading: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/account-register.html
Many indie film production or theatre companies come together only for one show or one film and so it doesn’t make sense to officially register anything. However, keep in mind that someone will have to handle the money. And that money will need to be accounted for on somebody’s taxes. Money in and money out (unless it’s a gift) always needs to be attached to someone or a corporation. If you take in enough money in ticket sales or donations you could unknowingly push yourself past the threshold of needing to obtain an HST number. If you should have applied for an HST number and you did not, the CRA can ask you to backpay HST. So it’s important to talk to an accountant before you start selling any goods and services (or tickets) to make sure you are in the clear.
Decided you not registering your business is the way to go? Here’s a quick note of what I wish I knew when I started:
Finances: Save a bit of money on registration. ($60.00)
Liability: You might be on the hook for government fines if you are not operating under your own personal, legal name. If you get sued or if anyone gets hurt, you will be personally liable and any current or future assets could be on the line. You cannot legally enter into contracts as your business as the business doesn’t exist. It is just you. If you are leasing a space, you are personally on the hook to pay the rent.
Taxes: The CRA will just consider every dollar you and your business makes and spends are personal income and expenses. You still may need an HST number once you hit $30,000/year in sales. If you are a partnership or group (ie: there are more people “running” the company with you) and you are not registered but you are the one taking in all of the money, you will have to account for that money and earnings and expenses on your taxes.
Operations: You cannot have a bank account in any name other than your personal name. All e-transfers and cheques will go through your personal name.
Personal Preference: It might sit well with you to be less official with your company. Or maybe you’re just testing the waters and you don’t want anything permanent. There’s nothing wrong with that! Just don’t let your fear of commitment get in the way of your success.
Option 2) Register the business name as a sole-proprietor:
When you register your business name with the government of Ontario, you will receive what’s called a “Master of Business License” to operate as a company name. It’s like your ticket to the party!! That is, if the party was being thrown by the CRA…
In reality, this is just a ticket to being able to have a bank account in your company’s name, and so you can brag to your family and friends that you are finally a “master” of something and finally possibly receive a small shred of approval from the people you wish to impress the most. Once you have a Master of Business License, opening a bank account is really the only advantage. It can be a big one in the legitimacy department as you can then send and accept cheques and e-transfers in this name.
The Government of Ontario also recommends that you do what’s called a Nuans Name Search to see if anyone else is registered under the same name in Ontario. This means you get a TINY bit of protection from someone else trying to use the same name as you. (Although there are very few consequences if someone uses the same name, other than confusing your clients/audience).
You can, however, go through the process of registering a trade mark. I have never done this, personally, but here is some information online https://www.ic.gc.ca/eic/site/cipointernet-internetopic.nsf/eng/wr01369.html
When opening up a bank account, beware that banks sometimes charge way more for business accounts than personal ones. I recommend using Meridian Credit Union which has a $9 business account that gives you basically anything and everything you would need. And they now have branches EVERYWHERE! (I’m not paid to say this, just a happy customer). For income tax purposes, when you register the business, nothing really changes. You will still be a sole proprietor. Everything that is stated in the above section about not registering still applies.
Finances: Registering for a Master of Business License cost: $60.00
Liability: No protection. If you get sued or if anyone gets hurt, you will be personally liable and any current or future assets could be on the line.
Taxes: The CRA will still consider every dollar you and your business makes and spends are personal income and expenses.
Operations: You can have a bank account in your business’ name. All e-transfers and cheques can be made out to your business name.
Personal Preference: It can feel really validating to have something official. Your master of business license can be printed, framed and hung up. It’s symbolic as much as it is practical if you are looking for that touch of legitimacy.
Read more and register here:
https://www.ontario.ca/page/registering-your-business-name
3) Register a business name as a Partnership:
If you have someone you know that has different yet important skills than you and you don’t want to punch them, you can register your business as partners.
“But Vikki! Shouldn’t you like them a lot and shouldn’t they be your best friend?” My advice is, if you value your friendship, you won’t become business partners. It’s like ruining a good friendship by thinking that hooking up just one time won’t really change things. But hey… I know if you’re an artist you are probably excited by the challenge. And maybe you two will be the exception! I support you either way. In any case, it will still be worth it because you’ll learn a lot! The University of Life is cheaper than real university.
To register a partnership, you will be going through the same process as registering a business name to obtain a Master of Business License. You will be prompted near the start of the process to declare if the ownership of the business will be a partnership. You will be asked how the partnership will be split. Traditionally, a business partnership will be split 50/50. This means that you will be both responsible on your respective personal tax returns for claiming taxes on 50% of the sales and expenses of the business. The same HST requirements exist under this option also, but not until you reach $30,000/year in sales, as the partnership. If you have a personal income as a sole proprietor, this income will not count toward the $30,000 threshold for the partnership before you need an HST number. Even if you have a personal HST number, you will need a separate HST number for your partnership. Whether you are applying for a Master of Business License as a sole-proprietor or partnership, do it through ontario.ca. Don't go to a third party company as they will just charge you unnecessary fees and it is very straightforward on the Ontario website.
When you open a bank account together, in a 50/50 partnership, you will both have control over all the money in that account, unless you set up that you will require 2 signatures over a certain withdrawal threshold. I recommend you talk to your business banking advisor about this.
Do not underestimate the power of a good partnership agreement. Sign this in the beginning. Get a lawyer involved to draft it up. Don’t skip this step.
Here is more info on how to go through the process to register your partnership under a master of Business license: https://www.ontario.ca/page/register-business-name-limited-partnership
Finances: Registering for a Master of Business License costs $60.00
Liability: No protection. If you get sued or if anyone gets hurt, you will be personally liable and any current or future assets of you and your partner could be on the line. You can also be liable for the actions of your business partner. (This is the number one reason why I don’t generally recommend unincorporated partnerships).
Taxes: The CRA will still consider 50% of every dollar you and your business makes and spends as your personal income and expenses and the same for your business partner. $30,000 in sales for the PARTNERSHIP is the usual threshold for needing an HST number (there are some exceptions).
Operations: You can have a bank account in your business’ name. All e-transfers and cheques can be made out to your business name.
Personal Preference: It can feel really validating to have something official. However backing out of a partnership gets trickier, especially if the company has assets or makes money. If you really, really want to form a partnership, consider going all in and incorporating. Get lawyers involved and partnership agreements. You could always register as a sole proprietorship and hire your friend instead of bringing them on as a partner.
Option 4) Incorporate:
It may not be the grandchild your parents always dreamed of but this would still mean that you created a new entity, separate from yourself. It’s an exciting and brave step!
When you incorporate, you will be asked to choose a name for your company. Alternatively, you can select a numbered company. The numbered company is always the best option, in my opinion, as you can be officially the numbered company and get a master of business license in order to operate as the name of your choosing. For example, my company Space Space Revolution is actually 2683682 Ontario Inc. and the corporation holds a Master of Business License to operate using the name “Space Space Revolution.” But at any point, it is fairly simple to change my company’s operating name or add another one.
While you are registering, you will be asked about shares of the company. You can be the only shareholder and have full control and stake in the company. This is the most straightforward way of doing things. Because it is a separate company, it gives you some protection and separation from your own personal assets, should you default on any of the corporation’s payment obligations or get sued. This also means that you will be required to file separate taxes for that incorporated company.
You can register as a “for-profit” or “not-for-profit company.” If you register for a not-for-profit company, only then can you eventually apply for charity status. When you have charity status, you can accept donations and access more grants. I do not recommend becoming not for profit in today's current lack-of-grants climate, as it comes with drawbacks. Those drawbacks are really only made up for by the potential to access donations and grants but that's a whole other kettle of fish that needs a whole other article.
Here is some further reading about incorporating https://www.ic.gc.ca/eic/site/cd-dgc.nsf/eng/cs06642.html
Most people I’ve spoken to obtain the services of a lawyer to incorporate. I didn’t go that route. Instead, I used www.ownr.co to incorporate. It is the easiest option I have found and they have made it incredibly straightforward and affordable (Around $650-$700). They are available to support you the entire way.
If you go the incorporation route, just remember that it's a whole separate bookkeeping and tax filing when you incorporate. Having your corporate taxes done by an accountant can cost around $1000.00 and they have to be filed yearly. You can do them yourself if you’re into that sort of thing.
It is important to note, as a corporation, you are taxed differently. This might be higher than it would be if you were taxed as an individual. An accountant can help you decide.
All the financial planners/accountants I’ve ever heard speak say don’t incorporate until you’ve reached $75,000 in revenue as your tax bracket (how much percentage of taxes you pay based on how much you earn) will only be lower as a corporation when you get to this point. I didn’t follow this advice. Nothing exploded. Nobody died.
Finances: Registering for a Master of Business License costs $600.00-$2000.00
Liability: Protection and separation. If you get sued or if anyone gets hurt, you will not be as easily personally liable. That doesn’t mean you will never be personally liable. Always talk to a lawyer and insurance broker.
Taxes: You will have to do your taxes completely separately for the corporation. Your personal taxes will still have to be done. Double the taxes, double the fun.
Operations: You can have a bank account in your business’ name. All e-transfers and cheques can be made out to your business name. You can apply for credit or loans or financing under the business name. (Although banks and lenders want you to be in business for a while before they let you do this).
Personal Preference: Ok so, real talk… I LOVE that I have a corporation. I feel official and legitimate and some days, when things get tough, that is all I have to hold on to. It also allows me to have some personal boundaries and separation between me and the business. It is no longer as tied to me. It’s like how I will always be my mom’s kid.. but now I’m out of the house. Or at least, in the basement.
Some further reading:
HST Registration:
You may have heard about needing to charge HST as a company or business. Even if you are not a registered business, and only a sole proprietor, there are still HST number registration requirements. You will have to register an HST number and charge HST on all your sales and give that money to the government once you are making $30,000/year in sales under your operations as a sole-proprietor. If you are an employee somewhere, the money you make from that employer doesn’t count toward the $30,000/year in sales. Only money brought in where you are considered a contractor, or when you charge a client or business directly for your services, counts toward this threshold. If you’re already making more than $30,000/year as a sole proprietor.. GIRL…. You need to be charging HST! The government can demand that you pay back HST that you should have been charging in the past. Stop what you’re doing and read more here:
https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/account-register.html
Keep in mind, you can also register even before you have to and there are some benefits. A great article from Ownr outlines why applying for an HST number early can help you save money. https://help.ownr.co/en/articles/1156151-when-to-register-for-gst-hst
Liability:
Talk to a lawyer. For all of this. I have been bitten in the ass because I didn’t. You can get a free 30 minute consultation from the Law Society of Ontario. https://lsrs.lso.ca/lsrs/welcome
Always get liability insurance. Front Row Insurance Brokers are great brokers to talk to regarding insurance in the arts. A broker is not an insurance company. They work for you and the company to get you both what you need. (At least the good ones do. These guys are good.)
Are you an employee or a contractor:
If anyone is paying you for your time, goods or services and you are not sure if you are an employee or a contractor, the first thing to do is take a look at any pay stubs. If they are taking off income taxes, CPP contributions (Canada Pension Plan) and EI Premiums (Employment Insurance) that income is almost certainly employment income and you are considered an “employee” by the CRA. Another way to tell is if your work doesn’t have an end date and you were just “hired.” Any income you earn in that case is also probably “employment” income. As many artists piece together their income from many sources, you may be an employee at one location and a contractor at another. It is always always always wise to seek out the help of an accountant when it comes to tax time to make sure you’re clear.
(Side note: Where this gets a little tricky is that sometimes an employer should be considering you an employee but they, instead, hire you as a contractor because it is less paperwork for them and you have less rights. This is shady and can be reported to the government of Canada. Here is a link to the Government of Canada website that will help you determine if you should be an employee when you are being considered a contractor and what to do if you think your employer has classified you incorrectly.) https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4110/employee-self-employed.html#workers_employment_status
Why are we doing all of this anyway?:
In short, we do it all for the good ol’ government. More specifically, we do it for the Canada Revenue Agency (CRA). There are tax laws that we all have to follow anytime we earn money that are enforced by the CRA. Like any laws, if you do not follow them, you can be fined or jailed. An accountant is always a good investment. You can find a list of local accountants and their hourly rates at www.upwork.com.
Now is the part where I will give you the advice that no business or financial person will probably ever give you: When all is said and done, it’s about what is going to feel the best. You’re an artist! You know the power of going with your instincts and choosing the path that feels right. You have to live with your choices and get up every morning with the motivation to keep going, against all odds! Maybe being the CEO of an incorporated company gives you the edge you need to finally be able to answer that shitty-ass question at parties, “what do you do for a living.”
Bottom line, if either you or I were excited by the idea of doing what makes the most financial or practical sense… we wouldn’t be here, now would we? And I think that’s special and should be honoured at all times (within reason of course!) So in conclusion, know the facts, and then you do you!
Disclaimer: The above information is meant for informational purposes only and is not to be taken as tax, financial or legal advice. Please seek the help of a professional before making any decisions or taking any steps.
My name is Vikki
My name is Vikki Velenosi. I am an artist and multi-passionate, multi-hyphenated, creative-entrepreneur and coach. I help artists reimagine themselves as artist-bosses so they can turn their passion into a purpose and their creative-skills into a paycheque, without losing the art.
I started the Artist-Bosses Community so that artists everywhere can learn the business skills they didn’t teach us in school.
Looking to take your business and art to the next level? Our first 1-on-1 discovery coaching call with me is free.