Incorporation in Canada for an ebusiness

**kaybee** · 07-11-2006 01:26 AM

Hello, I'm opening up an incorporation for my online business and I currently live in Quebec, Canada.

Now my question is... since my company will not be selling any stock, (it's an online service), could I just register it in Ontario since it's cheaper, and then I would save 7% provincial tax? QST ?

I can't find any information on this, but I dont know if I should just register it in Quebec (higher provincial startup-fee, 7% provincial tax, etc) or if starting it up in Ontario would be more beneficial... even if I dont live there.

And then, what about having an incorporation in one of those countries that dont tax anything ?
Thanks!

**Karen** · 07-11-2006 09:57 AM

If I remember correctly, if you incorporate Federally then you are covered in all provinces. However, if you only incorporate in Ontario then you are only covered in Ontario... someone could come along and incorporate in Quebec using your business name.

Karen

**ginginca** · 07-11-2006 10:03 AM

Originally Posted by kaybee

then I would save 7% provincial tax? QST ?

what would you be saving the QST on?

If you are talking about CHARGING tax, then you charge based on where you are and where your customer is.

For example, if you are GST registered and you sell to someone in the USA, they don't pay GST.

In ontario if you are PST registered (and your product is subject to the tax) then you only charge to customers inside ontario.

If I understand your question ... It has nothing to do with your incorporation.

I have an Ontario corporation AND a USA incorporation for totally seperate businesses.

**kaybee** · 07-11-2006 11:54 AM

That's very true, I previously had an online store (ecommerce) and the parts that we sold were subject to different taxes depending on the location of the purchase. However this time I am not selling any merchandise, I will have absolutely no physical inventory.

When I usually purchase things online, aka a service / something not physical, I dont usually pay any taxes (even if i'm from Quebec). I was hoping I could set something up like that.

Now as I understand it, if I register myself in Quebec, I have to charge 14% tax for Quebecers that use my service, 7% to the rest of Canada and 0% to those in the USA.

I just wish there was a way where I could charge 0% tax to everyone, or at least 7%. Can someone help me out ?

ps. Very recently, I've been looking that maybe setting up a partnership instead of a corporation for this online website. I have a feeling this site is going to be huge, but it's difficult to tell how well it's going to do in the first year. There's going to be a lot of online transactions done on it though, which is why I was thinking a corporation would give me a bit more protection, and maybe setting up merchant accounts with the corporation would be easier than the partnership. If anyone has comments on this, i'm happy to hear them!

p.s.s. Ahh and finally i was thinking of using an online service that starts up the corporation (minute book, shares, tax number registration, etc). Is this a decent way to do it ?

**ginginca** · 07-11-2006 12:02 PM

First of all, GST is now 6% as of July1.

Maritime provinces use something called HST. This was previously 15% and is now 14%.

You only charge GST if you are registered. You only HAVE TO register after $30,000 in sales.

In Ontario, only certain goods and services are subject to PST. It is actually very complicated. Web site design is not, but graphic design is.

It has been a long time since I lived in Quebec so I don't know what you charge tax on, and what you don't. (referring to QST). But if it's like Ontario, you only charge it if you are registered.

Incorporating outside the province will not put you in a position where you don't have to charge tax. But if you move to Alberta it gets a lot simpler

**ginginca** · 07-11-2006 12:06 PM

Originally Posted by kaybee

There's going to be a lot of online transactions done on it though, which is why I was thinking a corporation would give me a bit more protection, and maybe setting up merchant accounts with the corporation would be easier than the partnership. If anyone has comments on this, i'm happy to hear them!

I'm a big believer in paypal to start.

TD Canada Trust also has some very good merchant programs. You will have to have good credit whether you are a partnership or a corporation. It still goes by the credit scores of the owners.

You can set up your OWN corporation. In ontario it is about $360 if you do it yourself, or about $1000 if you have your accountant / lawyer do it.

If you are focusing on US business you will need to charge in $US. And some Canadian emrchant companies are NOT set up to do this.

What is your industry?

**kaybee** · 07-11-2006 05:58 PM

My business model will be very very similar to answers.google.com

In which, people put a question with a price for Google to answer. The money will need to be 'held' and then transmitted to another party (the party that answered the question)

Therefore, really... the service isn't even done by me. But i'm taking a percentage of the transaction (like ebay).
Now, I was hoping to avoid charging tax on this.

I was planning on working with TD canada trust to set this up.
And I'm still unclear if I can open a corporation in any province if I live in Quebec. Is it legal to open an incorporation in Alberta (for instance), if all my partners and I live in Quebec?

**Karen** · 07-12-2006 10:09 AM

Originally Posted by kaybee

Is it legal to open an incorporation in Alberta (for instance), if all my partners and I live in Quebec?

Yes, but then you would would not be legally covered in Quebec - you would also have to incorporate there as well. If you are only trying to save the the GST / QST it isn't worth your time. You might as well federally incorporate (it would be cheaper)

Karen