Business Adventures

[Raven]

This thread is more or less to request advice/help from those who have experience or some knowledge in establishing an internet based business.

Here's the situation...

There is a web software company in Germany that I do volunteer work for in a number of different areas like translating software, documents, support ect. I want to actually work for them now. The thing is since I'm not a European citizen they cannot technically employ me in their company. So the idea was tossed around that I should start up my own company as a branch of them here in Canada. Basically I'd be self-employed and I would do work for them and I'd bill them for the necessary wages.

In actuallity I'm pretty lost in this whole thing. I don't know where to start or what exactly I need to do here to get things rolling. I've searched online for some Canadian government business sites and there seems to be lots of links to related pages, but that's it. Every link leads to a page with more links of the same kind!

Does anyone have any experience in this they could share, or help me get started in the right direction?

[Connie]

Are you going to be selling their software, or just consulting? In the US it's pretty easy to set up a business. Select a name, open a checking account. In some areas you might be required to get a business licenses, but that would not normally be the case if operating the business out of your home.

I would think the procedure would be similar in Canada.

[jason]

Like Connie said, in the US the process is pretty simple--just do it. In fact, in the US you don't even need a business name to be a sole proprietor, you can operate under your given name if you wish (as many doctors and lawyers who are in private practice do).

In New York I had to file a "Certificate of Individual Doing Business Under an Assumed Name," more commonly known in the US as a DBA (doing business as) certificate with my county clerk's office. That document gives me the leagl right to use my business name and prevents anyone else from doing business in the state with the same name. If I only wanted to do business under my own name, however, I could have skipped this step. To open a business bank account I needed to show the bank a certified copy of my DBA certificate to proove I had the right to use that name.

If you are selling any products then you may need to register to collect sales tax and you'll need to collect the tax and send it to the government on their set schedule. In the US most services aren't taxed, so since in my business I do not sell any physical products I do not have to collect taxes. Things may be different in Canada. I know that you guys have the GST which might complicate things. We don't have anything like that here.

Most US states provide a lot of resources for business start ups (since more business means more tax dollars to them). New York, for example, has an extensive NY Loves Small Biz site that las lots of resources for people starting up new businesses. They also have several business development centers around the state where you can go to meet with counselors to get your questions answered. Your province may have something similar.

The best source of help that I've found for getting my business off the ground is other business owners. I'm fortunate to know several people who own their own businesses in the area, but I'd suggest talking to anyone you can find that owns his or her own business--even if it is the owner of your neighborhood deli or gas station. Even if they are in a completely different industry from yours, they were all in the same place as you at one time. You probably should also talk to a business attorney. This probably will cost you some money, but at least you'll know that you're doing everything right.

--Jason

[Raven]

Thanks for the input.

We have GST and PST for pretty much everything that is sold/purchased, but I won't personally be selling anything. They'll have the website in Germany that does all of that kind of stuff. I'd be a behind the scenes worker pretty much.

I managed to find a website with an email though, so that's some progress! Hehe! I emailed them and the guy provided me with some links to a "step-by-step" page, haven't looked at it yet, and some phone numbers to talk to business advisors to help me out if I want. Since it's an 800 number I'm assuming it won't cost me anything which will be great. But he said since I'll be "exporting services" the process is a little different and more complicated that usual.

So I guess I'll keep looking into that on the weekend when I've got some time off my day job.

I didn't anticipate this being overly complicated, yet what do I know as of now. I figured I'd have to buy a name, copyrights/trademarks, and figure out some way to pay Canadian income taxes. But then I thought of business taxes. Do you guys pay business taxes or anything of the sort?

[Ron]

Yes and no.... sorta kinda.
As a person, you can run your business as a "Sole Proprietorship". On your income taxes theres a "Schedule C" to file that is a really quick business expense/income sheet. Not like a CPA-for-a-business kind of thing, but a sheet with instructions and forms behind it. The most difficult part is if you purchase equipment and need to depreciate the equipment, but we're off the hook for that as they allow something called a section 179 depreciation, which allows businesses to fully, in one year, depreciate small amounts.

There's also something called the "Self Employment Tax", but it's really just the normal Social Security payroll tax that is normally split by an employee and thier employer. Since you are both employee and employer, you have to pay both sides of it, to the tune of about 15.3%. But a little relief comes for that a little later.

That Schedule C flows to the main income tax form on a single line, and then another line allows you to deduct some of your healthcare expenses and some of your "self-employment" taxes from your personal income.

Any income that you then have which includes your business income, is taxed at the personal income rate, which is a graduated "progressive" system.

I really expect that we will have to move to a consumption based tax system some day, for a couple of reasons, but mainly because the way things work in the world with global trading, we need to be able to export our good minus the taxes built in, and the easiest way, and only feasible legal way, to do that is by making all the taxes be paid at the time of final sale. We will also nationalize healthcare in the workplace through this same route, moving healthcare expenses out of the products and into the sales tax.

Then the US will be in a much stronger position to trade with the rest of the world, as imports will be taxed to the consumer at the US sales tax rate, and US goods would flow out of the country sales tax free.

Hey, you asked.

Kinda.

[Ron]

PS I'm not in favor of a national healthcare single payor, but I'm a realist... this is the only way we'll be able to compete in the world. It'll just take time for the pols in Washington to figure it out, then there'll be a gigantic flip-flop:

The Republicans will be pushing a scheme to have a national sales tax to pay for healthcare for the good of business, and the Dems will be fighting against it on the grounds that..... it wasn't their idea.

(But they'll be saying that it's a corporate welfare program, only to benefit the big corporations at the expense of little Johnny, who'll have to pay a 20% sales tax on his school supplies).

They'll compromise, and give a "tax break" (read: welfare for everybody not wealthy) by giving people money on their income tax returns, unless you earn over $200,000, in which case, you'll have to pay for everyone else's healthcare, and a special surcharge of 25% to pay for Social Security benefits and interest payments on the debt.

The Dems will NEVER allow income taxes be done away with, because then they wouldn't be able to track and additionally tax wealthy people. That's why there'll never be a sales tax or a flat tax to eliminate the current system.

Just my prediction. See ya in 20 years, to find out if I came close.

[Gwaihir]

I don't quite understand why they can't employ you in the first place. They are probably not allowed to have you come over and work in Germany - you'd need a permit for that that might be hard to come by, but I think you could be on their payroll as a Canadian employee.

That would move all the fuss of registering and paying up for the right social security and wage taxes to them though. I think they are trying to avoid that in this way. Up to you whether you consider that fair or not; on the one end you are closer to the fire, on the other hand they have the experience with this sort of thing, even though in a different country.

[Raven]

Ron> That must be an American thing... as an employee I can say I've never had any such taxes deducted from my paychecks.

Wim> According to their lawyer/accountant, whomever they checked with I can't remember off hand, because I'm not a citizen of the European Union they are unable to have me on their payroll. Employees on their payroll must be members of the European Union (or have a a close blood relative like a parent that is). So because of that it isn't possible.