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Top 7 Myths About Starting a Small Business
Here are some of the most common (and enduring) myths about starting a small business. Many of these myths seem to be the result of wishful thinking; the world would be a much nicer place to do business in if we all had less paperwork, paid fewer taxes and had people showering us with free money.
But that’s fantasy, not reality. What’s the truth about starting a small business? Read on.
Myth 1: Starting a small business will let me write off all my expenses.
Reality: There are many rules governing business expenses.
Some things don’t qualify as business expenses at all. In other cases, the item is a legitimate business expense, but you can only claim a portion of the expense or only claim the expense if particular circumstances apply. You’ll never be able to “write off” all your expenses. See the Business Expenses Index for more on business expenses as tax deductions.
Myth 2: I don’t have to register my business if it’s really small.
Reality: Registering your business is a provincial requirement when you’re starting a small business; it has nothing to do with the size of your business. That being said, if you choose the sole proprietorship form of business ownership and run your business under your own legal name with no additions, you do not have to register it with your province or territory. For details on business registration procedures in different provinces, see the Business Registration section of this website.
Myth 3: If I’m not selling much, it doesn’t count as a “real” business.
Reality: The corollary of this myth is that therefore the business owner won’t have to register the business, charge and remit taxes, or perhaps even declare the income from the business on income tax. After all, “it’s just a few items”.
Like Myth 2, this idea is based on the belief that the size of the business matters. It doesn’t. Whether you’re selling four things or four million things, the government expects you to declare the income and follow all the regulations that any legitimate business has to follow.
Does Your Small Business Need to Be Registered? will lead you through business name registration, GST/HST registration and Workers’ Compensation Insurance registration.
Canadian Income Tax and Your Small Business explains how to prepare and file your business income tax return.
Myth 4: I don’t have to charge and remit taxes if I’m selling online.
Reality: If you think about this, you’ll realize why this is a myth. If it were true, everyone would just buy everything online and no one would pay any taxes! (I know; you love it and I love it but we don’t make the rules.) But all the same rules apply to online businesses that apply to any other business. If you are selling GST/HST taxable products and/or services over the Internet, you are responsible for collecting and remitting GST/HST just as if you were a “brick-and-mortar” business with a downtown storefront. For details see Starting a Small Business: Register for the GST/HST and Charging Tax on Online Sales.
Myth 5: There are all kinds of tax breaks for people who start home-based businesses.
Reality: Unfortunately not. Home-based business owners are able to claim some expenses on their income taxes that non-home-based business owners can’t, such as their home heating costs or the cost of cleaning the home, but they are only allowed to claim a portion of these expenses based on actual business use. There is a business-use-of-home expense that may be claimed, but only by home-based businesses that qualify. See 6 Home-Based Business Tax Deductions You Don’t Want to Miss and Calculating the Home-Based Business Deduction for more information.
Myth 6: There are all kinds of government grants for people who want to start small businesses.
Reality: This is another one that falls into the “Wouldn’t it be nice?” category.
The truth is that government grants for starting small businesses are rare, and the few that do exist are earmarked for special groups of people or particular regions/economic areas of the country. (To get more of an idea about the kinds of grants that are available, read The Truth About Small Business Grants.)
However, there are quite a few sources of business loans that you may wish to investigate if you’re starting a small business. You’ll find Canadian loan sources and information on how to get a loan in the Small Business Loans section of this website.
Myth 7: Starting a small business will let me live the lifestyle of my dreams.
Reality: I guess that depends on what the “lifestyle of your dreams” is. If you picture yourself lazing around next to your own enormous pool while being fanned by a bevy of servants, the answer is “not likely”. Comparatively few small business owners get rich (although many make a comfortable living). Probably fewer still spend much time lazing around. But most people don’t start small businesses because they plan to get rich anyhow; the most common reason for starting a small business is a desire to be your own boss.
Reality: Starting a Small Business Is Rewarding
One other common belief about starting a small business is that starting a small business can be an incredibly rewarding experience. But unlike the common beliefs presented above, this one is true.
The independence and the satisfaction of turning a business idea into a successful enterprise are probably what most small business owners find the most rewarding, but there are all kinds of other satisfactions, too, from creating a new process through hearing from a satisfied customer. Share Your Story: What’s Been Your Biggest Business Success So Far? Don’t let the myths of starting a small business put you off; the reality is so much better.
If you’d like to know more about the traits and beliefs of successful entrepreneurs (and compare them to your own), take the Are You Ready to Start a Business? Quiz.
And when you’re ready, Share Your Thoughts: What Are the Most Important Characteristics of an Entrepreneur?
Top 7 Myths About Starting a Small Business Conclusion
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