In today’s world, consumers are increasingly prioritizing fresh and locally sourced goods. As a result, it is a great time to start a business to sell home-grown product, such as vegetables, herbs, fruit or honey.
This article sets out some of the legal considerations to tap into this growing demand.
First, you need to understand the local guidelines relating to small businesses and the specific product you are selling, which includes obtaining the necessary permits or licences. This will largely depend on the location of your business operations.
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Once the bureaucratic steps are out of the way, then the fun can start. You can begin by applying to join your local farmers market, participate in a community supported agriculture program near your location or even sell your products from the comfort of your own home.
Registering your business
The first step in selling your products is to register your business and obtain a business licence.
Determining if you need a business licence depends on which municipality you are located.
For example, in the City of Saskatoon, a business licence is mandatory for all businesses, whether you are selling from a storefront, farmers market or even your own home.
If you are selling from your own home, you may be able to apply for a home-based business licence, depending on your location, which allows you to sell your products online or directly from your property.
For businesses selling low risk food, such as fruit, vegetables, herbs or honey, you generally do not need additional licences or food handling certifications, so long as you are selling only within your own province.
It will be important for you to ensure that you do not need additional licences or permits, depending on the product you are selling.
Business structure and taxes
Whether you’re flying solo, teaming up with a partner or operating from a corporation, here’s a breakdown of the possible business structures, plus guidance with respect to GST and PST.
A sole proprietorship is the simplest form of business.
It is owned and operated by an individual person, without any legal distinction between the business and individual. All the income earned through a sole proprietorship is reported on your personal tax return and you would be personally liable for any debts or other legal obligations of the business.
This is a great option for people at the beginning of their business operations when the total revenue earned through the business is expected to be minimal.
A partnership is a business arrangement where two or more people agree to carry on a business together with the intention of making a profit.
Each partner contributes resources to the partnership and they each share in the profits and losses of the business.
Similar to a sole proprietorship, the partners each report their share of the business income on their personal tax returns and are personally liable for the debts and other legal obligations of the business.
A corporation is considered a separate legal entity, which means it owns the assets, earns the income and is responsible for the liabilities of the business.
One of the main benefits with operating your business through a corporation is that the owners are not personally liable for the corporation’s debts or other legal obligations.
In addition, there is possible tax advantages such as accessing the small business deduction, which reduces the corporate tax that is payable on the first $500,000 of active business income.
One of the disadvantages is the higher administrative costs with starting and maintaining the corporation, such as a separate corporate tax return (T2) and annual filing obligations with the applicable corporate registry.
You also may need to be registered for GST and PST in order to charge and remit these sales taxes on your taxable supply of goods.
However, exceptions may be available to you with respect to GST if your business is considered a small supplier.
While PST will be dependent on your location (for example, there is no PST in Alberta), it is important to mention that there may be no similar small supplier exception for PST in your location and you may need to become registered for PST regardless of the size of your business.
Ensure proper insurance coverage
When starting any business, you also need to ensure you have proper insurance. The type and amount will depend on a variety of factors, so it is best to check with your insurance provider to determine the best option for your business.
There are many different factors to consider when starting your small business, so please feel free to reach out for assistance if you find yourself in this situation.
Kade Kehoe is a lawyer and Tone Hagen is a legal summer student with Stevenson Hood Thornton Beaubier LLP in Saskatoon. Contact them at kkehoe@shtb-law.com. This article is provided for general informational purposes only and does not constitute legal or other professional advice and does not replace independent legal advice.
