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Setting up a home business | REM

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If you or your clients are thinking of operating a business from their home, here are some things to consider.




The legal nature of a sole proprietorship

In this form of entity, you are starting a business on your own. You are not creating a corporation (which we will discuss later on). Instead, you are acting on your own, and are referred to as a “sole proprietor”.

You can give the business a name such as Joe’s Shoe Store or Sally’s Gourmet Sandwich Shop. If you wish, you can register your business name. To do so in Ontario, you must file a form with the provincial Ministry of Consumer and Commercial Affairs for a minimal fee.

Registering a business name under this format does not give you any exclusive rights to that name; however, if the name you register violates a registered trademark of a third party, they may insist that you change your business name.

If you register a business name you can open a bank account, enter into contracts, send out accounts for services provided and/or for goods supplied under that name. If you do not register a business name, then any of these types of activities will be undertaken in your own personal name instead.

Zoning bylaws, apartment rules, condominium rules and bylaws

Whether you are a homeowner or a tenant, check your municipality’s zoning bylaws to see if they permit the use of your dwelling for these purposes. This is particularly if you will have clients coming to your home to consult with you and/or to purchase goods. Zoning bylaws can also be specific in restricting activity. You may be permitted the use of the dwelling as a psychiatrist’s office, but not as a hair stylist’s salon.

If you are a tenant, you must also check your lease, which may prohibit you from carrying on a business from the premises you are renting. These issues are especially relevant if you are a tenant in an apartment building. Check your lease and the building’s rules and regulations.

If you reside in a condominium, whether as the owner or a tenant, you must also clarify whether the condominium’s declaration, bylaws and/or rules and regulations permit you to carry on any type of business from the condominium unit. For the most part, any business or service involving clients and customers coming to your unit in a condominium will be prohibited.

Banking

After registering the business name, one of the next steps is to open a business account with your financial institution. Make an appointment with an appropriate banking official ahead of time, rather than just walking into the branch without having an appointment.

GST/HST and provincial sales tax

If you are running a business, your obligation to pay HST is triggered once your business’ revenues, be they in the form of sales of goods, or billings for the provision of services, exceeds $30,000 annually. At this point you are required to register for an HST number and charge, collect and remit GST/HST to the Canada Revenue Agency on a regular basis.

Depending on the nature of the goods you sell and the services you provide, you may be required to charge, collect and remit provincial sales taxes as well.

Financial reporting

Just as an individual must report income to the CRA, any business must also report its income. As a sole proprietor your business income is simply reported on your personal income tax return under the “business income” category. You must report all sales and services billed income from which you can deduct all related expenses.

In addition to specific business expenses such as equipment and machinery purchases, cost of materials, supplies and goods for resale (if applicable), you can claim phone expenses for a specific business phone, office supplies, automobile expenses solely related to business-related use and a maximum of 50 per cent of entertainment and meal expenses – again, solely incurred for business purposes.

When your business is home-based you can claim a certain percentage of your home’s expenses as a business expense. The formula to determine what percentage of your home’s expenses can be claimed as business expenses is generally based on the percentage that your office space takes up, relative to the total area of your home. Some of the expenses that can be claimed are:

  1. Mortgage interest (but not mortgage principal), if you own a dwelling;
  2. Rent, if your home, apartment or condominium unit is rented;
  3. Insurance on your dwelling;
  4. Property taxes;
  5. Utilities;
  6. Maintenance and repairs;
  7. Phone if you use your own personal home phone number rather than a dedicated business phone line.
Incorporation

The other common form of business entity is a corporation. This is created by preparing and filling a Corporation Application with the Ministry of Consumer and Commercial Affairs.

A corporation is a legal separate entity, existing entirely apart from the individual person; it is the corporation that carries on the business, not the individual who incorporated the business.

This is the most significant difference between a sole proprietorship and a corporation.

Although the corporation is conceptually a separate entity, it requires the participation of humans to make decisions and get things done. This is achieved through the roles of a corporate director, president, secretary and treasurer. In a smaller, home-run business, you may serve all of these roles yourself; however, you are still not personally responsible for the corporation’s debts.

With that said, there are various instances where you may indeed be personally liable. For example, where:

  • the corporation’s bank requires you as the incorporator to personally guarantee loans (also known as lines of credit) given to the corporation;
  • a supplier insists that you personally guarantee payment for goods and/or services provided to the corporation; or
  • the corporation owes taxes and you are called upon to pay them.

While I have only briefly discussed corporations, a number of proprietorship issues which I have commented on are also applicable to home-based corporate businesses.

The bottom line

In summary, if you decide to start up a home-based business, whether it’s a proprietorship or a corporation, there are many factors to consider and matters to be looked into and researched thoroughly.

I always recommend talking to:

  • your accountant (not a bookkeeper) for initial financial and business advice;
  • your lawyer for legal and business advice and assistance in creating the entity; and
  • your banker for financial advice.

I feel it is important to note that some accountants attempt to do what is actually lawyer’s work. Their work and sphere of activity is distinctly different than that of a lawyer and should be dealt with accordingly.

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Montreal real-estate prices climbing much faster than Toronto or Vancouver: study

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MONTREAL — The cost of housing per square foot has skyrocketed in Montreal while other cities saw little change over the last year, according to a new national survey.

The study found that condominium prices in downtown Montreal are up 13.5 per cent from last year to, on average, $805 per square foot.

That’s not as high as other cities, but it’s catching up — and Montreal’s rate of growth is outpacing other major Canadian cities.

Toronto’s condo prices grew to $1083 per square foot, an increase of just under 10 per cent, according to the study. In Vancouver, where you can find some of Canada’s most expensive condo prices, rates are down 4 per cent to $1192 per square foot.

To make the comparisons, Canadian real estate giant Century 21 collected data from real estate boards across the country to calculate the home costs per square foot.

“It’s important to compare apple to apples,” said Todd Shyiak, the company’s vice president of operations.

Montreal’s rise was even more explosive for detached homes and townhouses.

Detached houses in Montreal’s downtown and southwest rose to $958 per square foot, 40 per cent up from last year.

“It’s wild,” said Century 21 broker Angela Langtry. She says the pandemic raised demand.

“People had a lot of time to figure out they don’t like the home they’re in,” she said. “They all want pools.”

There was a big spike in sales, she noted, following a pause in brokerage during the spring, at the peak of the pandemic.

Experts say the pandemic will push people into the suburbs as they search for affordable housing and home office space.

“A huge portion of our society’s housing needs changed overnight,” said Shyiak. People “no longer need to be 10 minutes from the office.”

He says that could mean less demand for condos in the future. “People want their own front door,” he said.

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Carttera buys prime downtown Montreal development site

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Carttera has acquired a prime downtown Montreal site at 1455 De La Montagne St. which will mark its third development on the thoroughfare.

“We think it’s probably one of the best, if not the best, locations in the whole city,” Carttera founding partner Jim Tadeson told RENX. “We’ve had great success on De La Montagne.”

The two earlier projects are: L’Avenue, a building with 393 residential units, 84,000 square feet of office space and 34,000 square feet of retail that was developed with Broccolini and occupied in 2017; and Arbora Residences, a two-phase development with 434 rental and condominium units in three buildings being built in partnership with Oxford Properties.

Thursday’s latest acquisition, for $48.5 million from 630745 Ontario, is a 31,750-square-foot surface parking lot with flexible mixed-use zoning on the corner of De La Montagne and De Maisonneuve Boulevard West.

The site is near the Vogue Hotel Montreal Downtown, the new Four Seasons Hotel Montreal and high-end retail.

“It’s zoned for up to 203,000 square feet of density, which we’re going to take advantage of,” said Tadeson. “Our vision for the site is a condominium project with some retail.”

Since there is no demolition required and no heritage issues to contend with, Toronto-based Carttera plans to move ahead quickly with the luxury project.

It’s in the concept design phase and Tadeson said it could take six months or more before it’s prepared to make a submission to the city.

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Montreal Has the Hottest Real Estate Market in Canada Right Now

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If you thought Toronto’s real estate market was on fire, it’s time for a second take, because the market in Montreal is the hottest in all of Canada right now.

A newly-released annual report from CENTURY 21 Canada reveals that, following an early-spring decline due to the COVID-19 pandemic, sales numbers are bouncing back and house prices across the country are maintaining their strength. The study compared the price per square foot of properties sold between January 1 and June 30 of this year, compared to the same period last year.

In Toronto and Vancouver, unsurprisingly, prices remain high. But while regions across the country are seeing varied stories when it comes to their housing market fluctuations, Montreal stands out — there, prices have increased dramatically since 2019. While the numbers remain lower than Toronto and Vancouver, that housing market is proving to be the country’s strongest right now.

In Quebec’s largest city, prices have increased significantly since last year, particularly in the downtown detached house and townhouse markets. For example, the price of a detached house in Montreal’s downtown and southwest rose 42.14% to $958 per square foot, while townhouses went up 44% to $768, and condos, 13.55% to $805. Comparatively, in Toronto and Vancouver, prices saw more modest increases or, in some cases, even declines.

“Even though real estate in Quebec was not considered an essential service, we have seen strong demand and a jump in prices in 2020,” said Mohamad Al-Hajj, owner of CENTURY 21 Immo-Plus in Montreal.

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