Business Basics for Alberta Food Processors - Business Considerations

 
 
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 Choosing a name | Intellectual property | Business number (BN) | Business structure | Value chains | Working closely with professionals | Taxation | Manpower and labor

Developing and expanding your business is not a 1-2-3 process. It does not move along one step at a time. You are often thinking of many aspects of the business at once. Some parts of the planning and development may be easy for you. Sometimes you may struggle with a decision. This section covers a variety of business topics that you need to consider as you expand your business.

Choosing a Name

For food companies, the choice of business and product names is extremely important. Select a name that conveys what you and your product are about. Make sure that the name you select will not be confused with an already existing business or product. The name of your business must be descriptive and distinctive. Often the first word in a business name is distinct, followed by a word that describes the nature of your business.

Once you have decided on a name, conduct a name search. Look under Searchers of Records in the Yellow Pages to select a private firm that offers this service. An Alberta search costs less than $50. Once the name is approved, your business can be registered.

Intellectual Property

The Canadian Intellectual property office is where you can register and search intellectual property such as patents and trademarks.

Contact:
Industry Canada
Room 725, 9700 - Jasper Avenue
Edmonton, Alberta T5J 4C3
Telephone: 1-800-461-2646
http://www.ic.gc.ca

Trademarks
Trademarks are words, symbols and phrases that identify a product or service. Because they are the identity of your product it is important to protect your trademarks and shield their use from competitors. Trademarks do not have to be registered. They can become property over time. By registering a trademark you gain exclusive rights for 15 years and avoid the problems related to proving ownership. Trademarks can be renewed every 15 years. For more information on trademarks and to obtain a copy of the publication A Guide to Trade-marks, contact Industry Canada.

Patents
A patent is a document protecting the rights of the inventor on physical objects. It gives the inventor the right to exclude others from making, using or selling his/her invention from the day the patent is granted by the government to a maximum of 20 years after the day which the patent application was filed. Note that recipes cannot be patented.

In the food manufacturing industry, patents are primarily used for protecting inventions for processing. Costs vary greatly depending on the complexity of the invention. For more information on patents, and to obtain a copy of the publication A Guide to Patents, contact Industry Canada.

Business Number (BN)

All businesses operating in Canada must obtain a business number (BN) from Canada Revenue Agency. The BN is a numbering system that simplifies and streamlines the way businesses deal with the government. A BN is assigned to each business and stays the same, no matter how many accounts a business has. It is based on the idea of one business, one number.

A business gets a BN the first time it registers with Canada Revenue Agency. The four major Revenue Canada business accounts are as follows:

  • corporate income tax
  • import/export
  • payroll deductions
  • Goods & Services Tax (GST/HST)
Businesses that register for a BN get one-stop business services from the government. This includes integrated new business registration, a consolidated approach for updating account information and integrated business account inquiries.

Contact:
Canada Revenue Agency
Edmonton District Tax Services
Suite 10, 9700 - Jasper Avenue
Edmonton, Alberta T5J 4C8
Toll-free: 1-800-959-5525

Calgary District Tax Services
Room 172, 220 - 4 Avenue SE
Calgary, Alberta T2G 0L1
Toll-free: 1-800-959-5525
http://www.cra.gc.ca

Business Structure

One of the first things you must do is decide how you want to organize your business. You may choose to operate as a sole proprietorship or you might decide it is better for your business to form a corporation, partnership or new generation co-op. Each type of business has different advantages, disadvantages and tax consequences. These are outlined on the following chart. Check with a lawyer and accountant for more details.

If you choose to organize your business as a corporation, then you will need to register with Service Alberta, Corporate Registry. As you expand and grow your business, you may need to register your company federally or with other provinces. Consult with your lawyer at that time.

For further information and registration sites, check the Service Alberta website http://www.service.alberta.ca

StructureAdvantagesDisadvantages
Sole proprietorships
– Simplest way to set up a business. A sole proprietor is fully responsible for all debts and obligations related to his or her business.– low start-up costs
– greatest freedom from regulation
– owner in direct control of decision making
– minimal working capital required
– tax advantages to owner
– all profits to owner
– unlimited liability
– lack of continuity in business organization in absence of owner
– difficulty raising capital
Joint Venture
– An agreement in which two or more persons combine their resources in a business with a view to making a profit.
– Not a legal entity.
– simple and flexible
– start-up and wind-down relatively easy
– provides some degree of limited liability
– assets remain individually owned
– can work well for businesses in transition
– no tax advantages over sole proprietorship (taxes are distributed to all individuals)
Partnership
– An agreement in which two or more persons combine their resources in a business with a view to making a profit.
– Land, equipment and other assets may be owned by the partnership.
– A legal entity, very similar to a limited company.
– relatively low start-up costs
– additional sources of investment capital
– provides some degree of limited liability (Limited Partnership)
– broader management base
– the general partner has unlimited liability
– lack of continuity
– difficulty raising additional capital
– hard to find suitable partners
– possible development of conflict between partners
– can be difficult to wind-down
Corporation (limited company)
– A legal entity separate from its owners, the shareholders.– limited liability
– specialized management
– ownership is transferable
– continuous existence
– separate legal entity
– possible tax advantage
(i.e. lower business tax)
– easier to raise capital
– closely regulated and most expensive form to organize
– charter restrictions
– extensive record keeping necessary
– taxation concerns
New Generation Co-op
– Specific type of cooperative designed for agricultural value-added processing.
– Legal entity in Alberta as of April, 2002.
– provides for the issue of designated shares, which carry the right (and obligation) to deliver
– can be used as marketing co-ops
– suited to community-based projects and fund-raising
– start-up costs may be high (legal and accounting)
– may be tax disadvantages (compared to limited company)
– co-op philosophy not shared by some investors
– may be difficult to achieve good management

Value Chains

In this intensely competitive world of changing markets and technologies, businesses are faced with new demands, making it difficult for some to remain competitive. A value chain approach is an alternative business strategy used by some businesses to adapt to these changes.

What is a value chain? A value chain is an alliance of enterprises collaborating vertically to achieve a more rewarding position in the market.

The basic characteristics of a value chain is a market-focused collaboration; different business enterprises working together to produce and market products and services in an effective and efficient manner. Value chains allow businesses to respond to the marketplace by linking production, processing and marketing activities to market demands.

While companies in a value chain are legally independent operations, they become interdependent because they have common goals and work collaboratively to achieve them. They work over the long term discussing issues and troubleshooting problems together. It is more than just long term contracting.

For further information contact:
Agriculture and Food Council
http://www.agfoodcouncil.com

Alberta Agriculture and Rural Development
http://www.agriculture.alberta.ca

Working Closely with Professionals

Are you aware of the many decisions to be made, even before you start out, involving legal issues, taxation, insurance, finance, bookkeeping and accounting, hiring employees, etc.? These are often complicated and difficult to address without specialized expertise. Lawyers, accountants, bankers and insurance agents can offer assistance and advice that will help you avoid mistakes. They can save you time and money by addressing pitfalls before they occur. With time, the up-front costs associated with professional help is absorbed if your business goes as planned.

Accounting Advice
You may want to consult with an accountant to help you set up your business records. He or she can help you choose your annual accounting period, your accounting method and your inventory method. An accountant can also help you with strategic planning, cash management, compensation strategies, cost control and management information systems. There are many computerized accounting programs available. Choose the one that works for your situation.

Insurance
Most businesses need several kinds of insurance. Workers compensation and automobile insurance are required by law. Product liability insurance is not required by law; but in the specialty food business it is highly recommended. In practice, many distributors and retail locations require proof of such insurance before doing business with you. Other kinds of insurance, like liability, fire, business interruption, life, disability and key person are not required. These too may be desirable for your particular business.

Find an insurance agent whose advice you trust and discuss all of these types of insurance. Insurance agents will usually meet with you and make recommendations free of charge.

Taxation

All businesses operating in Alberta are subject to three levels of taxation: local, provincial and federal.

Local Taxation
The local taxation system is based almost entirely on property tax. Most property in Alberta is subject to assessment and taxation. This includes land, buildings and structures, machinery and equipment used for manufacturing and processing.

Some municipal governments also levy business taxes. This tax is usually a percentage of the gross rental value or floor space of the premises.

For more information, contact your local Assessment and Tax Department.

Provincial and Federal Corporate Taxation
All corporate residents in Canada are subject to income tax levied upon income earned within the taxation year from all sources, worldwide.

The owners of proprietorships and partnerships are required to record earnings as self-employed income on their personal income tax return. Corporations are required to file a return separate from the owner’s prepared tax return.
Corporations located in Alberta must submit separate income tax returns to the federal government and to the Alberta government.

Contact:
Alberta Finance
Tax and Revenue Administration
9811 - 109 Street
Edmonton, Alberta T5K 2L5
Telephone: 780-427-3044
http://www.finance.gov.ab.ca

Canada Revenue Agency
Edmonton District Tax Services
Suite 10, 9700 - Jasper Avenue
Edmonton, Alberta T5J 4C8
Toll-free: 1-800-959-5525

Calgary District Tax Services
Room 172, 220 - 4 Ave., S.E.
Calgary, Alberta T0G 0L1
Toll-free: 1-800-959-5525

http://www.cra.gc.ca

The Income Tax Division of Canada Revenue Agency provides free booklets to help small businesses with their taxation responsibilities.

Goods and Services Tax (GST)
Most businesses and organizations carrying on commercial activities in Canada have to register for and collect the Goods and Services Tax (GST).

You must register for the GST if you are a person, business or organization operating in Canada with worldwide annual revenues from taxable supplies of goods and services over $30,000. Although small firms may not have to register for the GST, they may find it to their advantage to do so.

For more information, obtain the GST guide called General Information for GST/HST Registrants.

Contact:
Canada Revenue Agency
Suite 10, 9700 - Jasper Avenue
Edmonton, Alberta T5J 4C8
Toll-free: 1-800-959-5525
Room #172, 220 - 4 Avenue SE
Calgary, Alberta T2G 0L1
Toll-free: 1-800-959-5525

http://www.cra.gc.ca

Calgary District Tax Services
Room #172, 220 - 4 Avenue SE
Calgary, Alberta T2G 0L1
Toll-free: 1-800-959-5525

http://www.cra.gc.ca

Manpower and Labor

Federal law requires that all employers collect and remit Canada Pension contributions (CPP), Employment Insurance (EI) premiums and personal income tax to the Government of Canada. The employee and employer share deductions for EI and CPP contributions. Contact your local Revenue Canada Tax Service Office for more information. Their phone number can be found in the blue pages of your phone book.

Employment Standards Code
The Ministry of Human Services is responsible for administering the labor standards provisions under the Employment Standards Code. Issues include wages, hours of work, vacations and general holiday pay, maternity leave, termination of employment, and the employment of adolescents and young persons.

Contact:
The Ministry of Human Services office nearest you.

Alberta Health Care Insurance Plan
All employers with five or more eligible employees are required to form a group plan for payroll deduction of health care premiums.

Contact:
Alberta Health and Wellness
Attention: Alberta Health Care Insurance Plan
P.O. Box 1360, Station Main
Edmonton, AB T5J 2N3
Phone toll-free in Alberta: 310-0000 780-427-1432
Check website for registry agent office location

http://www.health.alberta.ca/AHCIP

Workers’ Compensation Board
Under Alberta legislation, employers must register with the Workers’ Compensation Board.

Workers’ compensation is a disability insurance system set up under the Alberta Workers’ Compensation Act. It protects both employers and workers against the impact of work injuries. It compensates injured workers for lost income, health care and other costs related to a work related injury. It protects employers from being sued by workers if they are injured on the job. This system brings stability and protection to the workplace by providing coverage at a cost shared by all employers. It also protects employers and workers against the risks and expenses of injury and the uncertainties of litigation.

General enquiries:
Workers’ Compensation Board
9912 - 107 Street
Edmonton, Alberta T5J 2S5
Telephone: 780-498-3999
Toll-free: 1-866-922-9221

http://www.wcb.ab.ca
 
 
 
 

Other Documents in the Series

 
  Business Basics for Alberta Food Processors
Business Basics for Alberta Food Processors - Preface
Business Basics for Alberta Food Processors - Introduction
Business Basics for Alberta Food Processors - Starting Out
Business Basics for Alberta Food Processors - Business Planning
Business Basics for Alberta Food Processors - Business Considerations - Current Document
Business Basics for Alberta Food Processors - Food Processing Regulations
Business Basics for Alberta Food Processors - Facilities
Business Basics for Alberta Food Processors - Product Development
Business Basics for Alberta Food Processors - Processing and Packaging Equipment
Business Basics for Alberta Food Processors - Packaging and Labeling
Business Basics for Alberta Food Processors - Distribution and Sales
Business Basics for Alberta Food Processors - Promotion
Business Basics for Alberta Food Processors - Financing
Business Basics for Alberta Food Processors - Sources of Assistance
Business Basics for Alberta Food Processors - Additional Resources
 
 
 
 
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This information published to the web on June 1, 2005.
Last Reviewed/Revised on March 31, 2012.