Self-Employment Presentation for TQM Website July 18 2012

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An Introduction to Self-Employment:

An Introduction to Self-Employment “If you want work enjoyment, try self-employment!!” Prepared and presented by: #202 – 1211 Summit Drive Ph. (250) 828-0420 www.tqmconsulting.ca Kamloops, BC V2C 5R9 Fax (778) 471-5636 info@tqmconsulting.ca

What is Self-Employment?:

What is Self-Employment? Earning money, with effort , through means other than traditional employment (or gambling, theft or other criminal activity!) Home-based, commercial space, or ‘mobile’ Full-time or part-time Separate, or combined with regular employment One person, or two or more people (partnership) Multiple Options & Variations: Year-round, seasonal, or ‘incidental’ Contract work or actual business operation

Why Choose Self-Employment?:

Why Choose Self-Employment? Control over work and income Pursue an opportunity not available through employment (ie. business ownership) Supplemental income (ex. “normal” job + part-time S.E.) Desire for the experience Influenced by others (parents, friends) Industry or occupational related reasons Don’t like being an employee anymore “Last resort”

Potential Advantages:

Potential Advantages Enjoyable work (more variety and flexibility) Not limited to a fixed or otherwise ‘dictated’ income Acquisition of new skills and knowledge Increased tax-planning opportunities Many employers consider self-employment experience an asset when evaluating potential new employees Eye-opening experience – gain first-hand insights into why business owners do some of the mind-boggling things they do when running their own business!

Potential Disadvantages:

Potential Disadvantages Risks: Financial, family, personal health Inconsistent income Long hours, including non-standard hours May conflict with personal values, lifestyle, etc. May be difficult to acquire funding No control over external conditions No public ‘safety net’ for failure (ex. EI)

Types of Self-Employment:

Types of Self-Employment Two Major Types of Self-Employment: 1. Independent Contracting (“Contract Work”) Self-employed individual does all (or most of) the work – usually of a service-oriented nature (rather than selling products) 2. Operating a Business “Bricks and mortar” operation: commercial facilities, employees, formalized procedures, separate bank account(s), etc. Many self-employed individuals start out as small independent contractors and grow into full-fledged businesses.

How to Enter Self-Employment:

How to Enter Self-Employment 1. Start new business (or enter into independent contract work) from scratch 2. Buy an Existing Business 3. Buy a Franchise 4. Inherit an Existing Business (ex. Family-owned) Question: What are the advantages and disadvantages for each type of entry into self-employment?

Factors Impacting Success:

Factors Impacting Success Self-Employed Individual Personal Health Access to Funding Personal Supports Personal Character Timing Family Situation Financial Health Demand for Product or Service Economic Conditions

The Window of Opportunity:

The Window of Opportunity Time Business Concept Resources Available Personal Situation There is a window in time when an individual’s business concept, personal situation, and access to resources all align. This is when an individual should make his/her move into self-employment! Window of Opportunity

Business Legal Structures:

Business Legal Structures 1. Unincorporated Sole Proprietorship (one person) Partnership (two or more people) There is no legal separation between the business and the individual owner(s) with respect to income tax and liability 2. Incorporated One person or several people Business name includes corporate designation (Ltd, Inc, Corp) Business is taxed as a separate entity and has separate business liability from its owners (with exceptions!)

Income Taxation:

Income Taxation Basic Formula for All Self-Employment: Sales revenue e arned during operating year - Allowable business e xpenses i ncurred during operating year = Taxable income for the operating year Sales Revenue Only money earned from sales of product or service Does not include sales taxes (ex. HST), owner’s contributions, loan proceeds Allowable Expenses Defined in Income Tax Act and monitored/administered by CRA Alternative expression: “Write-offs”

Income Taxation:

Income Taxation Unincorporated Businesses Operating year is calendar year (Jan 1 to Dec 31) Business income is taxed at personal income tax rates Business income is claimed on personal income tax return Incorporated Businesses Operating year is any 12 month period decided by owner(s) Business income is taxed at corporate income tax rates Separate income tax return for the corporation

Business Registrations:

Business Registrations Three to check into for all self-employment: HST (Harmonized Sales Tax) www.cra.gc.ca Charged on sales of most goods and services sold by Canadian businesses & self- employed individuals. Some options, exemptions, and special circumstances exist. WorkSafeBC (WCB) www.worksafebc.com Self-employed individuals can choose to cover themselves with WCB insurance If hiring employees, the self-employed individual MUST register to cover them Business Licencing You should check with your local municipality as well as the Province to find out what business licences, if any, you may need to legally operate your business. Other licences and registrations may apply to your specific type of business or self-employment. These three are the most common but are not necessarily the only registrations you may need to consider!

Tax, EI, CPP, WCB, etc.:

Tax, EI, CPP, WCB, etc. Regular Employment Earn wages or salary from employer(s) Tax, EI, and CPP deducted by employer(s) and remitted to Canada Revenue Agency Employer pays WCB for employee Employee covered by Employment Standards & related regulations Self-Employment Earnings from sales to customers Tax and CPP calculated by self-employed individual; no EI (and no ROE!) WCB coverage available on optional basis Employment Standards & related regulations do not apply to self-employed individuals

PowerPoint Presentation:

Paying Yourself Sole Proprietorship and Partnership Draw money from your business whenever you want or need to Draw flat-amounts only (no payroll deductions like income tax or CPP) Owner / partner draws are NOT a tax-deductible expense to the business Corporations Draw wages (with income tax and CPP deducted) from the business, just like any other ‘employee’ Wages drawn from the business becomes a tax-deductible expense to the corporation, BUT the owner must claim the wages on his/her personal income tax return Other options available: dividends, shareholder loans, other methods (consult a certified accountant for further advice!!!)

Marketing Yourself:

Marketing Yourself Employment Self-Employment Resumes and cover letters Employment interviews Networking Employment assistance programs through EI or IA Business literature (cards, flyers, brochures, etc.) Networking Quotes / proposals Referrals / testimonials Provision of free product or services to demonstrate quality/capability Advertising, websites, etc. Informational interviews Cold calls Internet (on-line applications, Workopolis, Monster.ca, etc.)

PowerPoint Presentation:

Planning for Self-Employment Key Considerations: Personal suitability Legalities Marketing Human resources Everyday operations Money management Funding sources Support / information / resources

Getting Help:

Getting Help Community Futures Venture Kamloops Business Development Bank Kamloops Chamber of Commerce City of Kamloops Government Agent Office (Courthouse) Banks / Credit Unions Accountants, Lawyers, Business Professionals Books, magazines, periodicals Internet TQM Consulting!!!

PowerPoint Presentation:

Thank you for taking the time to view this presentation! If you would like us to deliver a self-employment workshop for your group, please contact us. We can provide a ‘generic’ workshop such as this one, or we can customize a workshop which focuses on specific topics of interest to your audience. If you are an individual who is either exploring self-employment as a potential career option, or you have made the commitment already but require some assistance with your start-up activities, we would be happy to assist! #202 – 1211 Summit Drive Ph. (250) 828-0420 www.tqmconsulting.ca Kamloops, BC V2C 5R9 Fax (778) 471-5636 info@tqmconsulting.ca

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