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Tips 1-3

Tip #1: Being your own boss takes personality

Being a successful business owner can be one of the most rewarding things you'll ever do. And while you'll likely have to put in some long hours and be prepared to make sacrifices, most find being your own boss is well worth it. To help you test the waters before taking the plunge, have a look at some of the many personality traits common among business owners. They include:

  • Initiative
  • Self-reliance
  • Independent
  • Ambitious
  • Self-motivated
  • Organized
  • Flexible
  • Realistic
  • Determined
  • Committed
  • Personable

Tip #2: If your plan is to be successful, it helps if your business has one

Your business plan is your roadmap for success, detailing your initial requirements and long-term goals, taking into account as many factors as possible. If you plan on securing financing, your business plan represents your credentials - without one, you may not be taken seriously by a financial institution or third party investor. Creating a business plan isn't difficult. In fact, there are plenty of resources out there to help you.

Every sound business plan should:

  • Provide an overview of what your company will offer and how (e.g. product or service, in-store or online, etc.)
  • Outline your business objectives, strategy, goals, SWOT (strengths, weaknesses, opportunities, threats), financials, competitive landscape
  • Identify the resources required for achieving your business objectives (financing, professional expertise, real estate, equipment, etc.)
  • Articulate how these resources will be secured
  • Provide a forecast for how your business will succeed

A good business plan:

  • Outlines the amount of financing or outside investment required and when it is needed.
  • Provides clear and well organized information. First impressions are important and good presentation will help a lender or investor better assess both your financing proposal and your skills as a business manager.
  • Is updated regularly. Spending three or four hours each month revising your plan will save you time and money in the long run.

Committing your plans to paper helps you clearly identify your customers, market, pricing strategy and the competitive landscape. It will also help you identify and head off potential concerns before it's too late, often enabling you to discover opportunities you may not have considered previously.

Planning simply makes good sense at any stage of the game - consider making it an integral part of your management approach.

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Tip #3: Building a business? Think structure

The legal structure you choose for your business determines, to a large extent, how your company is organized, cash flows, taxes and more.

Choosing the best legal structure carries many advantages:

  • Save money at tax time
  • Make it easier (and less costly) to pay yourself
  • Avoid potential personal legal liability
  • Bring revenue earned on foreign sales back to Canada
  • Enable you to sell your business or pass it on to heirs.

There are three basic legal structures:

  • Sole proprietorships
    You alone own it and are 100% responsible for its debts and liabilities. All earnings are taxed as your personal income. This is the most popular small business structure because it's simple and straightforward.
  • Partnerships
    Two or more owners share profits and losses according to their share in the firm. In a general partnership, all partners are liable for debts; in a limited partnership, one or more partners limit their liability by not actively managing the business.
  • Corporations
    The company earns revenue, incurs losses and pays taxes separately from its owners. Companies often pay tax at a lower rate than individuals. Owners' liability is limited to what they invest in the company, and they have options as to when and how they take money out of the company.

Which is the right business structure for you?

While your lawyer and accountant can help you make the final decision, this quick quiz can help determine which way to go. Keep in mind that a business can evolve from a sole proprietorship or partnership to an incorporated company if circumstances change.

Sole proprietorship or partnership

Yes No Questions
Will you be the sole owner, or own the business with just a few partners or family members?
Do you plan to start the business using only personal savings or investments from friends and family?
Do you expect business revenues to support only you and your partners or family members?
Do you plan to do most of the work yourself and not use many subcontractors?
Will you borrow personally on behalf of the business?
Are you in a low personal income tax bracket?
Is your business highly unlikely to face a lawsuit or get into debt?
Do you have limited net worth (personal assets)?

If you answered "yes" to most of these questions, you should operate your business as a sole proprietorship or partnership.

Corporation

Yes No Questions
Will ownership be divided among several shareholders?
Do you expect significant startup costs?
Will you be hiring employees and paying out wages and salaries?
Will you require additional financing beyond savings and investments from family and friends?
Do you expect increasing revenues and a rising asset base?
Will you probably need to raise equity or issue debt, either now or later?
Will you put a full management and organizational structure in place?
Do you expect to look into income-splitting and tax-deferral options?
Do you want to protect your existing substantial net worth?

If you answered "yes" to most of these questions, you may want to consider operating your business as a corporation.

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