Title search:

View Archive

My $9000 mistake – and 3 ways you can avoid it

by Sam Perren

700 words (3 minute read)

Originally Published: 2014-08-27


I recently decided to scale back my side business.

Junk removal was good to me. I learned lots about running a business: like about managing employees, payroll, EI/WCB/GST remittances, corporations, marketing, web sites, and found some cool goodies(one man’s junk is another mans treasure).

However with the kids here now and my main business truck now out of service, I am too busy to continue.

Rather than invest more time and money in another vehicle, I have decided that the opportunity cost is too high to keep running a junk removal business.

My time is better spent growing my real estate portfolio or with my growing family.

It’s a tough decision to make, because I grew the business from nothing to respectable gross annual sales, so I am emotionally attached in a way.

I feel like one of those monks that labour away making intricate art patterns in the sand… and now it’s time to rake it all away.

I certainly appreciate the exercise of will required to do that.

Letting go is hard!

But, it is the right thing to do.

On to my $9000 mistake:

I had incorporated the business June 13, 2013. I was advised this was prudent to limit the liability I might face once I hired employes. Along with hiring part time employes I also invested heavily in the business: equipment, advertising, communications, ect…

Now that the corporation is dissolving, I will now be unable to recoup my investment. I just learned from my accountant that over $9000 I had invested is a loss captured inside the company.

As a shareholder of my company, I am only able to claim 1/2 as an investment loss against my personal taxes, where the years I ran the business as a sole proprietor I could claim 100% of any loss against my personal income.

Also the accounting bill to learn this lesson and do my corporate taxes was $2500. Double ouch …

Lessons learned:1. Don’t incorporate unless you are sure you need to. It’s not as cool as it sounds, is only a tax benefit if you are a high income active business(corporations that own RE have no tax advantage), and is only useful for limiting liability.2. Make sure the business you engage on has big enough margins to survive problems like equipment breakdown and inefficient employees (no employee is as efficient as you are, but that’s a topic for another time ). If it doesn’t have big enough profit margins, it will be very difficult to expand. You will find that you don’t own a business, you own a job for yourself(well paying job perhaps, but still trading time for dollars).3. Stick to what is working, even if you are bored. I knew real estate worked well when I was growing my junk removal company. In fact, although I made a $15,000 mistake on my first property(a tenant I selected trashed the place), it has still produced 25%/yr ROI. I got bored and tried to “do it all” thinking a big success in one aspect of my life must mean I can succeed in everything I try, not realizing the opportunity cost was so high… I bet I would have a couple more houses if not for all the junk hauling!


Until next time,


PS – Haul Guys is now operating as a sole proprietor again, and my brother is now running things and making some good money. So although that $9000 would have been a nice holiday somewhere, this story is not all bad ��


About the author: Sam Perren has helped dozens of investment partners aquire real estate, representing over $16Million CAD in purchases with rental income of over $100,000/mo. If you'd like access to Sam's "deal of the week" please click here.