Set Up Your Small Business Finances - Profit First Method

[@kelseafrye3783]

Hey Jessica! Thanks so much for this recommendation, I would LOOVE to see a video about step by step how to actually move from sole prop to inc. !!

[@jessicamoorhouse]

A great suggestion!

[@kamilahkent64]

I’m so glad I found this video 😭

[@2002egncn]

Fantastic content. I am very happy to stumble upon your channel! Keep up the good work.

[@jessicamoorhouse]

Thank you!!!

[@jayhoovy]

Can't wait to see more of your videos! Keep up the good work! Loved the concept and insights.

[@jessicamoorhouse]

Thank you! And I've definitely got more videos coming. Any topics you want me to focus on in the future?

[@jenniferv8124]

I am so grateful for your very informative video. As a Canadian based in Ontario, I didn't necessarily find the CRA website as clear as I had hoped. Thank you for sharing your experience :)

[@jessicamoorhouse]

You and everyone else, the CRA website can seem like a different language haha, so happy to help!

[@jodeesetthaboupha1678]

Omg so good!!! You explain it so well!

[@jessicamoorhouse]

Thanks! Glad it was helpful!

[@andrewmwewa6654]

So insightful,am enjoying this.Thank you.

[@jessicamoorhouse]

Thank you!

[@keithdmello]

Very well done video and I just got this book as well and already implemented the strategies

[@jessicamoorhouse]

Amazing!

[@pleasurablemoneypodcast]

I'm so glad I found this video! I have a client who is Canadian (I'm in the US) and I'm teaching her about PF. I have been able to find a couple fee-free banks in the US who allow unlimited checking accounts (or buckets alternatively) but it has been difficult to find a Canadian equivalent. I understand that there is a limit for EQ but this is very helpful so Thank you!

[@jessicamoorhouse]

There are tons of fee-free banks in Canada, here's a thorough list of some jessicamoorhouse.com/high-interest-savings-accounts-in-canada/

[@mathewwerner509]

Thanks for the link. I was wondering what banks you have found to be the most helpful for setting up profit first in canada .

[@donaldcameron9321]

Bought the book reading it. Thanks. Started with chapter 7. 😢

[@jessicamoorhouse]

Amazing! It's been a while since I've read it so can't remember Chapter 7 but hope you find the book useful like I did.

[@UnordinaryPilot]

Thank you so much for your content. I am planning to set up an online mentorship/consulting business in Flight Training in Canada with a buddy of mine whom have a great experience in the field like me. Do you suggest registering a Partnership as him and I are the only employees at the moment?

[@24.Hustle]

How do I setup direct deposit in EQ Bank and how do I know how much to send myself every 2 weeks? Is it possible to send a percentage rather than a dollar amount? That would make life so much more simple.

[@jessicamoorhouse]

If you do a percentage you'd have to do it manually by calculating what the dollar amount is then setting up the transfer. You can't unfortunately set up an auto-transfer that's not a specific dollar amount. In terms of direct deposit, not quite sure what your situation is. Where is the money coming from into EQ Bank? Another bank? If so, then you'd simply set up an auto-transfer into your EQ Bank. Not sure if that answers your question.

[@x.bails.x]

Love this! For your account that you use to deposit cheques/cash into, do you use your personal account or would you advise against that? I also have EQ with majority of my banking but still need my BMO account to make deposits etc..

[@jessicamoorhouse]

So when you're a sole proprietor, you don't need to set up a "business" bank account, unless like you mentioned you need to deposit cheques and your business name is different than your personal name (i.e. personal name is Bailey Elizabeth but business name and name on cheques you get is under Bailey's Designs). But for savings accounts, it doesn't matter, you can just use personal savings accounts. So what my structure looked like was I had a business chequing account at BMO so I could deposit cheques (I needed a biz account because my biz was under "Jessica Moorhouse" but my personal legal name is different). Then once the cheques cleared, I'd simply transfer those funds to my personal EQ Bank accounts. There's no downside in terms of liability or security using a business compared to personal bank account if that's what you're wondering. I can't really think of a downside, only upside since personal savings accounts typically offer higher interest and have lower or no fees.

[@x.bails.x]

@@jessicamoorhouse that’s great info. Thanks so much !

[@leannemccarvill7639]

Very informative. Will you be doing a video on the process of incorporating? I am a freelancer and want to incorporate my business. Just want to know what added tasks need to be done once moving from sole proprietor to corporation; such as filing T2 return, GST/HST remittances, Financial Statement prep, board minutes, etc.

[@jessicamoorhouse]

Absolutely! I might wait until I've filed my first corporate tax return (which I'm in the process of doing) just so I can speak to all aspects of what your first year incorporated looks like. But yes coming soon!

[@TheMl145]

As a photographer the amount of times I've tried to convince myself that new lenses and other camera equipment will be "business investments".

[@jessicamoorhouse]

Oh same! Believe me, it's a constant internal dialogue when I think of spending money on my business asking myself "Do I really need this? Will this actually help my business?"

[@SmallSpoonBrigade]

A good book keeper or accountant should be able to help with that problem. The usual answer to that is no. Just no, there are going to be exceptions, for example, better image stabilization may warrant an upgrade, same goes for a lens design that allows you to stay out longer or can capture more light. But, if you're in a studio, those are probably not worthwhile considerations whereas if you're having to work with available light outside they may be massive improvements. A good rule to go by is that if you can't point to something on your income statement that it would impact and estimate what the impact would be, you should probably say no.

[@rickymagicanada]

Awesome advice. Thank you Jessica

[@jessicamoorhouse]

You're so welcome!

[@reinvestwealth]

You make things so simple Jessica!

[@jessicamoorhouse]

Thank you! It's all I ever want to do is make things easy to understand. :)

[@tylercrooks8659]

Amazing Stuff Jessica. If I am in the situation you were in; wanting to start an online blog and website for a relationship coaching business, where would be a good place today, to start? As a Canadian, I’ve appreciated your content for many years now!

[@jessicamoorhouse]

Definitely start with making a clear business plan and ideally working with an accountant who can help you set up a good bookkeeping system and you can connect with them periodically to make sure you're on track financially and are saving enough for taxes (before you have to pay in instalments) and are also paying your sales tax on time. Profit First is of course a great book you can likely get at the library to get a sense of one system that works. But really, when you're new in business, focus on creating a system that's focused on keeping costs low, attracting clients and diversifying income streams, and has runway to grow.

[@tylercrooks8659]

@@jessicamoorhouse awesome. That makes sense and appreciate your insight Jessica. 🙌

[@tarzanis003]

Such a great video, thank you so much! I had a question about invoicing. Do you have any recommendations for invoicing platforms? Someone recommended Stripe but not sure if that's good for Canada. As someone who is about to contract for an overseas company, I want to make sure I'm doing everything right from the get go. Again, thanks for all your help!

[@jessicamoorhouse]

For invoicing software, there's Quickbooks, Freshbooks, Wave that I am most familiar with.

[@tarzanis003]

@@jessicamoorhouse perfect, thank you!

[@diedre20020]

Hi. I'm watching this on 2023. Do you still recommend EQ Bank?

[@jessicamoorhouse]

In general yes. I still have accounts there and like their interface and customer service. With that said, I'm sad to see they don't offer the highest interest rates anymore. Instead, you may want to look at my list of banks with better interest rates jessicamoorhouse.com/high-interest-savings-accounts-in-canada/

[@indasiasummerfield4308]

How should we keep track of our income/expenses? Is there a software that you use?

[@jessicamoorhouse]

I use Quickbooks, I used to use Freshbooks. There are lots of other accounting softwares out there too like Wave, Xero, and Sage.

[@Jshawts]

Great video Jessica! That visualization is incredibly useful 💯 I have a logistical question - Did you use the "regular" EQ savings account while you were a sole proprietor? Or do they have specific business savings accounts? I'm currently using them for personal savings accounts but have maxed out w/ 5 accounts, so I'm not sure it would work 😔 Do you have any other bank recommendations for sole props?

[@jessicamoorhouse]

I just used their regular personal accounts (not their business accounts) when I was a sole proprietor. But ya I did run into maxing out the number of accounts too since I also housed my personal emergency fund there. Here's a list of other high interest savings accounts you may want to consider: jessicamoorhouse.com/high-interest-savings-accounts-in-canada/

[@Jshawts]

@@jessicamoorhouse Great, thank you for sharing that resource!

[@kaitiinglis1081]

Can I be paid salary by my husband if he’s a sole proprietor or would we need to be partners? Is it beneficial to be partners

[@ghostoferlock]

Hi Jessica, nice to see another video, been a bit. I am not a small business owner, but have thought of it. Few questions for you: Can a business pay into a R.R.S.P. and deduct it as an expense, like a pension ? With most people thinking owning a home is a good idea, does the business side with write offs slant things more in the favour of renting, as it frees up more cash to invest in markets today ? Funny how going and reading a recommended book is something you wonder why you didn't make time before.

[@jessicamoorhouse]

Hi Jim, and thanks for continuing to watch!. No, there's no such thing as a business RRSP. There are only personal RRSPs. But RRSPs can be a great way to lower your taxable income as a sole proprietor. In terms of renting vs. owning, you can write-off some of your mortgage interest, property taxes, and utilities if you run your business out of your house. How much depends on how much square footage of your own you use for your business. You can do the same thing for rent and utilities. Since you can write-off a percentage of your full rent, instead of just mortgage interest (not principle), then you could say there's tax advantage to renting. This could then free up more money to invest in the stock market. But one argument is your rent could be higher than your mortgage payments, or you can get a better/bigger place owning compared to renting, or when you're owning you are also building equity (which you aren't doing renting). Lots of things to consider.

[@ghostoferlock]

@@jessicamoorhouse Hi Jessica, not meaning a business R.R.S.P., but a business writing off an R.R.S.P. contribution, and the money being deposited directly into the owners account, so the business gets the write off as compared to the individual ? Owning against renting is a big debate, but I had watched a video regarding the pros and cons, and it seems many people don't realise that closing costs and others eat away at a down payment, and as compared to putting $30,000 on a house, renting and investing that can make a huge difference. Personally, I think it's a option that needs some good thought. I'm thinking that like most business owners, you split some money with your husband, that way the overall taxes are lower ? maybe get him to hold the camera and pay him a wage ? lol What do you do with the 5% that is left in a business after everything ? Is it considered spending money, or an account for extras ?

[@jessicamoorhouse]

@@ghostoferlock No you can't do that with an RRSP. You can only use the RRSP for personal income tax deductions. However, if you have a corporation and set up a Group RRSP for your employees, if you match their contributions that is considered tax deductible. The costs can be expensive to set up the program (and wouldn't really make sense if it's a small corp like mine). And you're asking what do I do with my business profit? I either invest it inside my corp or pay it out to myself personally as a dividend, and then choose to do whatever I want with it.

[@ghostoferlock]

@@jessicamoorhouse okay, so to set up a dollar match is possible, but not a direct contribution. was curious about that for some time.

[@marikoflores7347]

Hello! Do I need to make a "business" bank account or can I just make a bank account as a proprietorship (I live in AB if that makes any difference)?

[@jessicamoorhouse]

You only need a "business" bank account if you're running your business under a different name than your legal name. So if you're running your business under Mariko Rosa, your legal name, you can just use a personal bank account for your business. But if your business is running under a different business name like Rosa Consulting, then you would need a "business" bank account.

[@marikoflores7347]

@@jessicamoorhouse ty!!!

[@irenefernando2970]

@@jessicamoorhouse Hi there! Lovely video. In Ontario there is a concept of numbered incorporation and named incorporation. In the above reply, did you imply if you have your own legal name as a 'Named Incorporation' , that is when it is okay to have a personal banking account instead of business bank account?

[@jessicamoorhouse]

@@irenefernando2970 No, if you're incorporated you need to have business bank accounts, you can put business funds in any personal accounts otherwise the CRA will think your corporation paid you and you'll be taxed on that money at your marginal tax rate. I was talking about if your a sole proprietor, if you're running your business under your personal legal name, you can just put any income you earn from your business in your personal bank account since it's all taxed to you personally anyway. You can still do this if you registered your sole proprietorship under a different business name (i.e. Bay Street Florist), however let's say you want to cash cheques you are getting from your clients and they are written out to your business name (not your personal name), then you'd need a bank account to match your business name... hence the need for a business bank account.

[@irenefernando2970]

Thank you for the clarity. I loved the concept of routing that you’ve mentioned as well - one for hst , one for personal income , and another for cpp. I have 3 questions on this topic 1. Inherently was what you meant setting up an auto transfer or a manual transfer to these individual accounts or is there anywhere I need to specify to the cra upfront about these ? 2. I am particularly unclear about how do the different line items associated with a T4 (precalculated by an employer in case of a full time job) work if I decide to pay myself an income from the business account to the personal account. 3. The idea that u suggested about using the profit i.e retained amount after paying out all expenses - hst,cpp,personal income - as a bonus for yourself on a normal full time job will be taxed if I withdraw instead of routing to rrsp. In case of sole prop, did you mean that profit amount needs to be sent to your personal income and later get taxed or can I directly access it from business account and treat it as a treat lol .. sorry for the lengthy questions:)

[@TreborNotrub-tz6rz]

How much does the book cost?

[@jessicamoorhouse]

www.amazon.ca/Profit-First-Transform-Cash-Eating-Money-Making-ebook/dp/B01HCGYTH4

[@user-mo7kx7ml7w]

So open up like 13 savings accounts? 🤔

[@jessicamoorhouse]

Not sure if you need 13 haha. There's a breakdown of the accounts discussed in the book here. But I just had 1) Sales Tax Account, 2) Income Tax Account, 3) Profit Account, 4) Funnel Account which was used as my business emergency fund, account that I paid business bills from, and account I withdrew my personal income from.

[@thetapics]

Hi Jessica! Thanks for this helpful content, quick question: how did you set up your corporation? Do you take dividends as an income or your employed by your corp? TIA!

[@jessicamoorhouse]

There are a few ways to do it and it's best to discuss with your accountant. A) You can be an employee of your corporation and pay yourself a salary, B) you can be a contractor hired by your corporation (so you'd be a sole proprietor) and you'd be paid for services rendered by your corporation, or C) you can pay yourself in dividends (or a company of A or B and C.

[@vivivixen09]

You sound like hey Nadine

[@jessicamoorhouse]

Like my voice? Cool! I'll take that as a compliment :)