Me and my brother are starting up an online business that sells templates online. We expect to make 20,000$ in our first year. Should we register with the government? What advantages and disadvantages does it have? I costs about 100$ if you do it online. We plan on registering as a partnership. Here's what I heard:

1- If we create a partnership we can treat our online endeavor as an actual business and substract expenses. Meaning that if I make 20,000$ in sales I could extract 8,000$ in expenses and have a profit of 12,000$. Is this true?

2- If the partnership makes 12,000$ in profit does it have to pay income tax? And if me and my brother take 6,000$ each would we have to pay income tax? Now I understand we wouldn't pay taxes for 6,000$ but imagine it was more, would we have to pay taxes again. If yes is there any way to not pay taxes as a company and then as a person?

3- I've heard that if we make less than 30,000$ in profit we don't have to charge TPS TVQ which are the provincial and federal sale taxes. If we make more than 30,000$ we would have to charge TPS TVQ to anyone who buys our products from Canada.

If anyone has started an online business and lives in Quebec, I'd greatly appreciate a little help clearing things out.

Hi dany27227,

1. Regardless of whether you register your business or not, you need to keep proper financial records and legitimate business expenses are treated as such in either scenario.

2. With a limited company (regardless of whether it is a partnership or not), the corporation pays taxes and the principals pay taxes on money they draw from the business. With an unlimited business, the partners pay tax on the annual profits regardless of whether they withdraw any monies from the business.
If you are incorporated your salaries are a business expense so you aren't dealing with double taxation on your salaries.

3. The $30,000 figure is correct but it is based on sales, not profits. If you don't register and charge GST you cannot claim back your input credits (GST you paid out for business expenses).

Hope that helps.

__________________
Margaret
Christmas Ornaments by Tree Treasures