All businesses require one or more
license, permit and/or inspection in order to start/operate their business.
Below discusses many of the legal requirements for business owners on PEI.
For your convenience, I have provided contact phone numbers and, in many
cases, links that take you directly to web pages of the necessary government
organizations. Please Note: some will apply to your particular business,
while others will not. Please be advised that other licenses, permits and
inspections, not listed here, may apply to your business venture.
Business Name Registration:
For most new enterprises, a business name will need to be registered through the Province of PEI. Your business can be registered as either a sole proprietorship, partnership or corporation, depending upon your particular situation.
The cost to register a sole proprietorship and a partnership on PEI for three years has recently increased from $100 to $105 (which includes $40 for your business name search, $65 for the actual registration and a $10 publication fee for the Royal Gazette).
A sole-proprietor or partnership registration application can be picked up at any of the Access PEI sites across PEI or at The Consumer and Corporate Division in Charlottetown (368-4550).
The cost to register a Corporation on PEI is $305 (which includes $40 for your business name search, $255 for the actual registration fee and a $10 publication fee for the Royal Gazette). Please note: these costs do NOT include the legal fees for setting up a corporation. It is highly suggested that you involve a lawyer when setting up a corporation (99% of business owners involve a lawyer when establishing a corporation since there's additional work required and documentation needed). Legal fees will vary depending upon the sophistication of the Corporation. To give you an idea, legal fees for a simple corporation may cost anywhere between $1,000 and $1,500. If you don't already know a lawyer, you can locate one in the yellow pages of the phone book.
A registration application for a corporation can be picked up at any of the Access PEI sites across PEI or at The Consumer and Corporate Division in Charlottetown (368-4550). Alternatively, the lawyer that you choose will have access to the forms.
For additional information on Sole-proprietorships,
Partnerships and Corporations, visit the section entitled "Legal
Business Structures"
Tax Related Permits & Licenses:
Under this section two main items are discussed; namely, 1) Provincial
Sales Tax (PST) and 2) Business Numbers (BN). Let's begin with Provincial
Sales Tax or what we refer to as PST.
1) Provincial Sales Tax (PST):
PST is a revenue tax that consumers
pay on most items sold on PEI. Businesses collect the PST for the Province
of PEI when a customer buys from the business. The PST on Prince Edward
Island is 10% and the amount is calculated after the GST is added to the
price of the purchase. For example: if you sell a product for $100, then
GST of 6% (effective July 1, 2006) is added to the $100 and then the PST
of 10% is calculated. Here's an example that assumes you are obligated
to charge both GST and PST:
| Price of the product |
$100.00
|
| Add GST of 6% |
6.00
|
| Subtotal |
$106.00
|
| Add PST (10% of Subtotal) |
10.60
|
| Total price of product |
$116.60
|
Therefore, the PST you would collect for the PEI Government on this particular product would be $10.60. The 6% GST is what you would collect for the Government of Canada .
Here's an example assuming you only
have to charge PST on the product (meaning no GST is collected).
| Price of the product |
$100.00
|
| Add PST (10% of Subtotal) |
10.00
|
| Total price of product |
$110.00
|
Therefore, the PST you would collect for the PEI Government on this particular product would be $10.00. Nothing would be collected for the Government of Canada in the form of GST, since in this example, we assumed the product was GST exempt.
Some products are exempt of PST which means you will not have to collect the PST on certain items. For a listing of products/services which are PST exempt, click here. I highly suggest you contact the Provincial Taxation office at 368-4070 for complete clarification on whether you are obligated to charge/register for PST (sales tax). Once you are speaking with a representative, simply tell them what type of business you are planning to start and ask if you are required to charge PST to your customers. If you are required to charge, ask the representative to send you the forms so that you can register for a Vendor Registration Certificate.
Please be advised, the PST you collect
from customers must be remitted (paid) to the PEI Government on or before
the 20th day of the month following the sale. In other words,
the PST you collect in January must be received by the Province of PEI
on or before February 20th of the same year. Payment can be
made at any Access
PEI centre. Alternatively, you can pay the PST through the
internet by setting up an account by clicking here. Your payment can
also be mailed to: Taxation and Property Records, PO Box 1330, Charlottetown,
PEI, C1A 7N1. If you are paying by check, make it out to the Provincial
Treasurer of PEI.
2) Business Number (BN) - Government of Canada:
The Business Number (BN) has been created in Canada to reduce the number of accounts a business needs to get started. If you charge Goods and Services Tax (GST) to customers, or have employees, or incorporate your business, or import goods into Canada, or export goods to other countries, you are required to have a Business Number. If you incorporate a business with the province, territory or Industry Canada, you will automatically be registered for a Business Number as well as a corporate income tax account.
If you are unsure of whether you need a Business Number, refer to the section entitled "Do I Need a Business Number (BN)". The form to register for a Business Number can be received by clicking here (you will need Adobe Reader to view this registration form). IMPORTANT: Canada Revenue Agency holds seminars to help small business owners and aspiring entrepreneurs better understand how to calculate and fill out GST/HST forms and payroll forms, etc... For a listing of upcoming seminars, click here. You can also call Canada Revenue Agency at 1-800-959-5525 to inquire about upcoming seminars.
Below discusses the main categories
contained under the Business Number (BN); namely, A) Good and Services
Tax (GST), B) Importing/Exporting Goods, and C) Payroll.
A) Good and Services Tax: (GST):Summary of Business Numbers (BN):
I suggest you contact the GST office at 1-800-725-4425 for complete clarification on whether you are required to charge/register for GST. Once you are speaking with a representative, simply tell them what type of business you are planning to start and ask if you are required to charge GST to your customers. If you are required to charge GST, ask the representative to send you the forms to register. By the way, GST collected from customers is remitted to the "Receiver General for Canada" which is an extension of the Government of Canada.In some circumstances, a business is not obligated to charge GST. For example, if you don't expect to generate world-wide sales of $30,000 per year, you are not obligated to charge/collect GST from customers.
In many cases, however, it is beneficial to charge GST since the GST you pay on "business" related purchases can be used to reduce the actual amount of GST you remit to the Receiver General for Canada. In other words, if during the period, you collected $5,000 in GST from customers and you paid $2,000 in GST on business related purchases during the same period, the amount of GST you remit to the Receiver General for Canada is $3,000 ($5,000 - $2,000). This example assumes you are registered for GST. If, on the other hand, you are not registered to charge/collect GST, you would remit the full $5,000 that you collected from customers.
So if you are not obligated to charge/collect GST, I highly suggested you speak with an accountant. The accountant can advise you on the best option for you and your business. Other information on whether you are required to charge GST can be obtained by clicking here. For more information on how GST works and how to calculate it, click here.
B) Importing and Exporting Goods:
If you import products into Canada or export products to other countries, you should register for a Business Number prior to any import/export activities. This will avoid any delays that might occur at the border. Moreover, the Business Number is used to process customs' documents. For additional information regarding the Business Number as it relates to Importing and Exporting products click here.
C) Payroll Deductions:
If you hire employees, you will need to register for a Business Number (also called a Payroll Business Number). The Business Number is used to identify and track the Canada Pension Plan (CPP), Employment Insurance (EI), and Income Tax amounts in which you deduct from employee's pay checks. Please Note: as an employer you will incur Mandatory Related Employers Costs (MERCs) which involves two items; namely Canada Pension Plan (CPP), Employment Insurance (EI). These costs are calculated as follows:Canada Pension Plan (CPP): you are required to match the same CPP amount that you deduct from employee's pay checks.Employment Insurance (EI): you must pay 1.4 times the EI amount in which you deduct from employee's pay checks.
The EI, CPP and Tax amounts you withhold from employees, along with the amounts you are required to contribute as an employer, is remitted to "Receiver General for Canada". Payment must be received by the "Receiver General for Canada" on or before the 15th day of the month following the pay periods. January employee deductions and mandatory related employer costs must be received by the "Receiver General for Canada" on or before February 15 of the same year.The CPP, EI and Tax amounts you actually deduct from employees is based on a number of factors such as the wage of each employee as well as the frequency each employee gets paid (weekly, bi-weekly, monthly, etc..). Charts or Tables, called payroll deduction tables, show exactly how much CPP, EI and Tax you must deduct from each employees. You can obtain a copy of the Payroll Deduction Tables in any of the following ways.
1) You can pick up a copy of the payroll deduction tables at any Canada Employment Centre or by contacting the Canada Revenue Agency at 1-800-959-2221.2) Alternatively, you can view and print the payroll deduction tables by clicking here. The document also provides a discussion on how to calculate the amounts to deduct for each employee. Please Note: you will need to have Adobe Reader on your computer in order to view the payroll deduction tables. Most computers have Adobe Reader already installed.
3) Finally, you can download a free software program which will help you calculate the amounts to deduct from each employee's check by clicking here. The download program is 8 MB so depending upon your internet connection, it may take a while to download.
Please be advised that payroll deduction tables are revised twice a year (January 1 and July 1). Remember: payroll deductions tables only show you the CPP, EI, and Federal/Provincial Tax amounts which must be deducted from each employee's check. You will still need to calculate the amounts you have to contribute as an employer. As mentioned above, the employers obligation is to match the amount of CPP deducted from the employee checks and pay 1.4 times the EI amount deducted from the employee's check.To further explain this concept, assume during March you deduct the following amounts from your employee's pay checks. $90 in CPP, $50.00 in EI and $200 in Taxes. You, as the employer, would also have to match/pay the $90 in CPP and pay $70 in EI ($50 * 1.4 = $70.00). Let's organize the above numbers in the following manner.
CPP (match) EI (1.4 times) Federal & Provincial Taxes Total to be Remitted to Receiver General
Therefore, you would remit $500 to the Receiver General for Canada by the 15th day of April. This consists of $340 that you deducted from the employee's pay checks plus $160 that you are required to pay in the form of Mandatory Related Employer Costs (CPP and EI).
IMPORTANT: As mentioned earlier, Canada Revenue Agency holds seminars to help small business owners and aspiring entrepreneurs better understand how to calculate, fill out payroll and remit the forms. For a listing of next scheduled seminars, click here. You can also call Canada Revenue Agency at 1-800-959-5525 to inquire about upcoming seminars.
If you charge the Goods and Services Tax (GST) to customers, or have employees, or incorporate your business, or import goods into Canada, or export Goods to other countries, you are required to have a Business Number.
If you are still unsure of whether
you need a Business Number, refer to the section entitled "Do
you Need a Business Number (BN)". Again, the form to register for a
Business Number can be received by clicking
here (you will need Adobe Reader to view the registration form).
Licenses and Permits for Employees:
Three items are explained under this section. 1) Workers Compensation,
2) Employment Standards Act, and 3) Mandatory Employer Costs relating to
Payroll Deductions.
Workers Compensation:If you intend to hire employees, it is required by law that you register with Worker's Compensation (WC). Basically, Worker's Compensation is a no fault insurance program that protects the employee if an workplace injury occurs. It also protects the employer from possible work place lawsuits.
As their website states, "A major benefit to employers is that the compensation to workers takes the place of the workers' right to sue the employer for damages. Employers are also protected from legal action by any other worker or employer covered by the Worker's Compensation Act.
The cost depends on the industry you operate in as well as the dollar size of your payroll. For additional information regarding Workers Compensation on PEI, contact 368-5680 or visit their web site by clicking here. At their website, refer to the section entitled "Employers".
Employment Standards Act (very important):
If you have employees or intend to hire employees, it is extremely important that you understand your rights as an employer and the rights of the employee. The Employment Standard Act of PEI outlines the rights and obligations of both the Employer and the Employee. The "Act" deals with such items as vacation pay, overtime issues, statuary holidays, records of employment, sick leave, and tonnes of other information you will need to know when hiring and employing staff.
I cannot stress enough the importance of The Employment Standard Act of PEI. In fact, it will help you when establishing guidelines and procedures for your employees. You can obtain the latest version of the Employment Standard Act at any Access PEI centre across PEI. Alternatively, for immediate access to the PDF version of the Employment Standard Act, click here. The PDF version requires Adobe Reader to be installed on your computer. Another employment document you should be aware of is called "The Occupational and Safety Act".
Mandatory Employer Costs relating to Payroll Deductions:
As mentioned in the section entitled "Business Numbers (BN)", an employer is required to deduct EI (Employment Insurance), CPP (Canada Pension Plan) and Federal & Provincial Tax from employee's pay checks. In addition, as an employer you must pay the same amount of CPP that is deducted from the employee and pay 1.4 times the EI amount deducted from the employee's pay checks. See "Payroll Deductions" under the "Business Number (BN)" section (above) for more details.
Building & Property Related
Permits:
This section provides a number of possible permits and licenses you
may require if you are building or developing a structure.
Child Care & Education:
Environment Related Issues:
Food Related Permits:
B&B Information Package Cottage Information Package Hotel/Motel Information Package Inn Information Package Resort Information Package
Entertainment Permits and Licenses: