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Becoming a business, where do I start?


MikeCanada
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I took some time with the Maestronet search function looking for things like “business” and “insurance” and a few others, and wasn't finding a whole lot other than having insurance is a good idea, and a lot of discussion about appraisal values etc. While looking on the web at large or non-music specific resources, I had a difficult time figuring out what is applicable to my situation, and what my best course of action is. Here's a little background:

 

I have been studying bow making and repair/restoration for about seven years. Up to this point most of my work has been through a work study and a shop, with some coming in from colleagues as I am a player. The majority has been school/student level bows that would sell under $500 and I do not have clients into my shop/home, so I have not worried with insurance. Bow work has not been my main source of income, so I have not become a business. I would like to change that, and I really don't know where to start. I still plan to work alone from home, but transition to bow work being a larger portion of my income.

 

First, I am located in Canada. From what I have read becoming a sole proprietorship is the simple option, but leaves my personal assets vulnerable in the event that something goes wrong. Is a sole proprietorship the way to go, or is incorporation something I should explore?

 

Heritage and CHUBB have been the two names that come up when insurance is mentioned, and both operate in Canada. Are there other companies that the Canadians here would recommend?

 

Other than becoming a sole proprietorship or corporation and getting insurance, what else needs to happen for legal/tax reasons? Where do I go and who do I talk to to get the ball rolling? A lawyer? Chamber of Commerce? Municipal Office?

 

If you have any guidance for next steps, I would greatly appreciate it.

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Yes - a corporate lawyer might be able to help.  I'd check with your accountant first though - they should have some advice as to how to proceed.  Or you could check in with any of the small business groups that give out advice.  This really isn't the place to ask.

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In the U.S. most business fail within the first year because the owners haven't done their homework (Canada might be different). At least you are already asking these questions, that's a great start!  If you're not sure what you're doing, talk to a lawyer, a good accountant, the state dept. of revenue, city hall, other business owners you know, and/or all of the above. 

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I apologize if this seems out of place. As I look online, a lot of the "how do I start a business?" results are talking about finding funding and partners, hiring employees, looking for patents and trademarks, and other things that do not pertain to my situation. When looking for small business laws and regulations, the majority was pertaining to employees, wages, EI, safe food handling, etc. I have not found "you are a bow maker looking to establish a business, this is what relates to you" and wading through the information that is online that largely does not apply to my situation while finding little that does has been challenging. I assumed since we have a large collection of people who have already been through the process here there is little reason to reinvent the wheel. I was hoping that others who have already been down that road could point me in the right direction.

 

I know that I will need to seek professional assistance, this was more of a question of which professionals I need to seek that assistance from. I have an accountant who has been handling my taxes that I need to get in touch with as the deadline approaches, and will talk to him about further options. The insurance company I deal with for my home and car does not handle small businesses, and I will have to find an alternative. Again, I was hoping that someone who has had positive (or negative) experiences with a particular company would be able to make a recommendation. I will also look into small business organizations to see what information they can provide and what suggestions they have. 

 

Thank you. 

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I used to know someone who taught small business management.  In Australia, and I suspect this is probably typical, most small business fail quite quickly.  This isn't because of lack of the skill in producing the service or product, but because of lack of business skills.   My suggestion, for what it is worth, is to do a small business course first.

 

Good luck (but don't rely on it)

 

Tim

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Perhaps my situation is relevant to what you want to do.  I've had a small-scale violin business, working on my own at home, for about 25 years.  It started out as a hobby and officially became a business when I began passing out the business cards that my wife had printed for me.  For an additional premium, our homeowners' insurance company provides coverage for a home business.  I figure out the taxes myself.  I've never consulted a lawyer or accountant.  It seems to work.

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Mr. Canada,

Of course the elephant in the room is the workbench policy insurance. Having coverage for what happens in the workshop can mean the difference between retaining or losing a home or retirement funds, and normal business umbrella policies do not cover these things.

http://www.thestrad.com/cpt-latests/violinist-leonidas-kavakos-sues-luthier-snapping-80000-bow/

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Thank you Mr. Pasewicz. I had heard about that particular incident, and a few others where broken bows have happened. Insurance companies like to establish "fault" and I can see where if you are the only person in the room when a bow breaks, there is a pretty short list of who is at fault. Our business cannot be the only business that encounters situations where something can go wrong resulting in a very expensive loss. Doctors are the first profession to come to mind, but we do not have the formal institutionalized education with tests and exams to establish our credentials, the legal team on retainer, or the income to offset what I assume is very costly insurance. I currently do not work on pedigree bows as I respect that there are much more qualified people who should be doing so, and have said no to a few repairs while recommending colleagues who are far more experienced.

 

Business, insurance, and money all tend to be elephants in the room, and I managed to put them all in the same thread. It is something that is not really taught in school unless you seek out business courses in post secondary education, and few families discuss it with their kids. While I am not trying to completely blow the lid off that cultural trend or suggest we all talk about how fiscally successful 2015 was, I appreciate those taking the time to shine some light in the shadows.

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I'd have more to say about the process of starting a business here in the US, but here is some advice anyway. Stay a sole proprietor as long as you can. The tax benefits really only start to make sense when your income is above 100K, and the liability protection is minimal if you are the only shareholder in an S Corp. (This is how it is in the US at least)

Buy insurance from Heritage, and you'll be fine.

Talk with an accountant and they will go over what you need to save and record. When in doubt, keep it.

M

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Hey Canada.... Good luck on your venture! I started as the fiddle "mechanic " for my son... his teacher liked what I did and then people just kept coming to me. I started with an accountant who advised to incorporate...thru my lawyer it would have cost $1500 to incorporate. The accountant pointed me to a friendly lawyer who after hearing my story gave me some basic advice and forms and said ... go do it yourself! I called the Dept of corporate affairs (sounds like a fun Department :lol:)  and they guided me some, I filed the paper work and in 2 weeks I was incorporated.... at cost of $350. I have avoided insurance on the basis that if something goes wrong, the corporation gets sued and there I keep rather few assets.... unless I am grossly negligent, and that, I don't plan to be. Good disclaimers on quotes and receipts are helpful also.

Like you I work in the "bottom feeder" category of lutherie.

Another nice thing  (In Ontario anyway) is that you do not need to charge or collect sales taxes (GST/HST) or even file with them until you reach $30,000 gross sales in a 12 month period. 

 Keep asking... the only way to learn! Good luck, Mat

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I support the above comments about insurance, and keeping good records in a spreadsheet,    Here,  one needs only  a vendor's liscense which is for the purpose of paying sales tax.

 

Other than that,  there is the question of whether you want to make and repair bows or to "Start a business."   One suggests doing what you most want to do vs establishing a money-making enterprise.

 

Perhaps start slow while and do that stated in the first paragraph.   Depend on referals for advertisement.  People trust other clients,  not advertising claims.  And growing slowly is the best way to avoid mistakes (methinks.) 

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I echo all of that - if you go down the route of government sponsored start up initiatives, you'll find very quickly that they don't understand the kind of boutique industry that you are pitching to, and will end up with lots of irrelevant advice, a lot of time wasted, and wondering why you ever bothered. A reasonably competent accountant that works with all kinds of micro-businesses such as your own is probably going to have all the advice you need on hand. 

 

Good luck! 

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