I have put together a high-level checklist for Canadian Amazon sellers who are looking to incorporate. Incorporation is a big step and has some different requirements compared to sellers who might be use to selling on Amazon as a sole proprietor.
I have tried to cover as much as possible, but there could be more things specific to each individual seller so please use this as a guide in your set up.
Federal or provincial incorporation? There isn’t a big difference in federal or provincial incorporation, especially for an Amazon seller. Federal corporations have historically been targeted to a wider range of name protection across the country. So if you performed a name search and want to protect it across Canada a federal would be better. For most sellers, their company name isn’t that big of a deal as you can operate under a different name, brand and storefront. We would suggest reviewing the costs in each province and some of the details as each is slightly different. Generally, you register provincially in the province you live in. Alternatively, you can register federally and then register still extra-provincially in your home province.
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Where to incorporate? You can always incorporate with a lawyer and they do provide value for sure. However, a lot of people choose to use an online service. Here is one of our favorites for inexpensive yet quick incorporation. http://jo.my/corporation
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Ownership structure. When first starting you need to decide on who is going to own the company. Be very careful. I have seen friends set up together only to quickly fade and run into issues. If you are splitting ownership, I always recommend a shareholders agreement be drafted with a professional. Also if you have a life partner/spouse splitting shares with them can potentially unlock capital gains exemptions for both of you down the road if you sell the company up to $800,000 ish each. Yeah, sell the company tax-free up to $800,000 each! Here is a video on a little more info.
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Registered office: decide if you want to have your house or place of business the registered office. There are also a number of services that will offer these. Remember as an Amazon seller you want all of your addresses to match as much as possible if you run into trouble or verification issues. Overall there usually isn’t any problem having your house as your registered office.
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Decide on a year-end. You can choose any corporation year-end as long as it is within 53 weeks of your incorporation date. I recommend choosing the end of the month to make everyone’s life easier. Lots of people still choose December 31 to match up with their personal income tax dates and make life a little easier. Personal income tax year end in Canada is always December 31.
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Business number CRA. Some provinces when you incorporate, they integrate with CRA and will create a business number automatically. Others you will need to apply. Remember this is a different number than your corporation if assigned. Once you register a business number you can decide if you want GST/HST, payroll and import/export. I almost always recommend registering for GST right away. Import number is good if you are bringing goods in and out of the country. Here is the link to CRA site to get a business number.
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Extra-provincial registration if required. If you have registered federally you still need to register in at least one province you are doing business in.
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PST registration if required depending on your province and individual business and you may want to seek advice on if you should register or not.
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Banking. Time to get bank accounts set up. You need all new bank accounts for the corporation as this is totally different than you an individual or a sole prop. I’d also recommend trying to get a credit card at the same time for the corporation. All the major banks offer business accounts. Perhaps you might want to use this as an opportunity to start a relationship with a new bank.
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Credit cards starting out the limits will be small since your corporation is brand new. I highly recommend getting this Amex for business. It will cost you a bit but the limits are usually good at the start and rewards are great. The nice thing about Amex if you use it they will quickly increase your limits as you develop that relationship with them. I find it much faster than traditional banks. Here is a referral link to the card I have an will get you some additional points on sign up.
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Foreign exchange service. If you are moving various currencies getting a better rate will help and start to add up. I like ofx with their virtual global dollar account. Free and super easy to get set up. If you contact my rep Amelie.Deschenes@ofx.com she can usually get you a preferred rate. I highly suggest getting on a call with her and get an account set up. Usually will only take maybe a week to get all the paperwork and account set up. For more details see my other blog post on OFX.
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Quickbooks. Now with a corporation, all the books and records are separate from your personal. Unlike a sole proprietor, you are also required to produce a balance sheet and financial statements which requires a little more bookkeeping. Quickbooks is a great solution in my view. If you are selling into the US you will need the Essentials Version since it has multi-currency. As a Canadian, you must report all books and records converted into Canadian dollars. I also recommend a copy of my Quickbooks Chart of Accounts which mirrors the Amazon settlement reports and makes life a little easier on the setup. I have included some setup videos.
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If you are running as a sole proprietor, deciding on the date that the sole proprietor has ended and the corporation has taken over. I’d suggest trying to find a good date to cut over that is easy, say as the ending of payment from Amazon.
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Cut over your Amazon accounts. I recommend advising amazon beforehand that you are going to change your banking info. Make sure you have a bank statement already (not a brand new account) so if there is an issue updating ownership and banking info the statements will all match if they freeze your account. I have had this and provided bank statements, incorporation document and passport and was back working in 2 hours.