Quote:
Originally Posted by Locke
NO! Wait until she makes the 30K. Trust me, it'll save you/her a bunch of money.
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This is misguided advice. You have the option to register for GST early, which might be wise depending on your customer base. By registering for GST, you are allowed to claim the input tax credits on all GST you pay on all qualifying expenses and expenditures. This means you receive a refund for 100% of the GST you spend. If you don't register for a GST number, you don't get to claim any of this back and it all just gets added into the cost of the asset or the expense. Any GST you collect gets remitted to CRA, so you are cash neutral on your revenue side and cash positive on your expenses/asset side.
The only reason you would not want to register for a GST number is if your customers are also not registered. If your customers are also registered, they don't care if you are GST registered or not, as they will be able to claim the refund for any GST spent. If your customers are non GST registrants, they might be inclined to go with a competitor that is not registered. Make sure your terms are listed up front and your customers know if you are to be charging tax or not. Most people do charge tax, so it shouldn't sway it with many people.
As a CA, I have an employer and I also do consulting on the side. I registered my consulting part of my business for GST and it has saved me a bunch of money, as all my purchases that have GST get refunded directly back to me.
As for having a year end of July 31, that depends on how you structure your business. Do you incorporate, have a sole proprietorship or partnership? How are you paying yourself? It may be beneficial to have it as January 31 if you are a corporation and are paying yourself by a management fee to yourself personally. This way you can take the expense in January, giving yourself the cash in January, and if your personal year end has a December year end, you won't have to remit your tax on that until the following April 30th. July 31 might be the right date, but you have to decide on how your business is structured legally, how you move money out of the company and what your payment goals are. Do you want a salary so you can contribute to your RRSP? Do you want less risk, but more taxation by having a corporation? Do you want more flexibility on the timing of the cash moving in and out?
These are all questions that need to be asked by a professional accountant and/or lawyer? Spend the few hundred dollars now and save yourself thousands later. The amount you spend on fees can be written off against your income, so from a cash flow, you aren't even spending the full amount.