Starting a Business? 4 Disadvantages You Should Know About 

Starting a Business? 4 Disadvantages You Should Know About 

So you want to leave your paycheck behind and start your own business. That’s great. There are a lot of advantages to doing that, but there are also disadvantages you may not know about until after you’ve started.

Before you make that choice, here are four disadvantages worth knowing so you can make an informed decision.

1. Getting Financing Can Be Harder

Banks really like consistent, dependable income. They can plan around your employment income, but once you leave that paycheck behind, your business income may not give them the same level of predictability.

If you’re applying for a mortgage or line of credit, the bank will look at things like the consistency of your income, whether you can make your payments every month, and whether you can service the debt. They may want to see at least two years of financial statements before they’re comfortable lending you money.

The irony is that this is often when you actually need financing. A new business may need equipment, working capital, and enough money to get on its feet. Be prepared for the banks you’ve dealt with your whole life to suddenly be less interested in lending to you.

2. Your Tax Payments Can Create a Cash-Flow Squeeze

The second disadvantage is a conversation I always dread having with clients after their first year in business.

You make some money, file your taxes, and have a tax bill to pay. Then you may also be required to start making installment payments toward your upcoming taxes. If your net tax owing reaches the CRA’s installment threshold and you meet the prior-year requirements, you may have to start paying tax by installments during the year.

It’s similar to having taxes withheld from your paycheck as an employee. The difference is that when you’re running a business, you may be paying a previous tax balance while also beginning to make installment payments toward the current year.

For some new business owners, this is when the cash-flow impact becomes especially noticeable. You’re paying taxes you already owe while beginning to put money toward the next tax year. Eventually, it starts to feel like you’re caught up, but that initial overlap can create a significant cash problem for a new business.

3. You May Be Paying Both Portions of CPP

The third disadvantage is your Canada Pension Plan contributions.

As an employee, you pay your portion of CPP and your employer matches it. If you’re self-employed, you’re responsible for both portions yourself. In 2026, that combined CPP contribution rate is 11.9% on applicable pensionable earnings.

A lot of people don’t realize the impact until they file their taxes for the first time. Even if you aren’t making a lot of money in your first year, that additional CPP obligation can be one reason your tax bill feels higher than you expected.

4. Staying Compliant Comes With a Cost

The last disadvantage is keeping up with business compliance requirements.

Depending on your business, that can mean keeping up with GST, PST, source deductions, WorkSafe requirements, and corporate or personal income tax. There can be a lot of forms and services involved, and I don’t think many new business owners realize how much of an administrative burden comes with starting their own business.

The cost can also be significant when you’re getting started, and it’s something you need to consider before you leave your paycheck behind. It’s also something we can take care of and help you manage.

I know these disadvantages can sound a little doom and gloom, but they’re only one side of the decision. There are also a lot of financial advantages to running your own business that may make leaving that paycheck behind worthwhile.

If you’re thinking about starting a business and want to understand what these costs could look like for you, we can go through the numbers together before you make the jump.

Please note: This content is for general information purposes only and does not constitute personalized accounting, tax, or financial advice. Reach out to us to book a personalized consultation based on your business and financial situation.

So you want to leave your paycheck behind and start your own business. That’s great. There are a lot of advantages to doing that, but there are also disadvantages you may not know about until after you’ve started.

Before you make that choice, here are four disadvantages worth knowing so you can make an informed decision.

1. Getting Financing Can Be Harder

Banks really like consistent, dependable income. They can plan around your employment income, but once you leave that paycheck behind, your business income may not give them the same level of predictability.

If you’re applying for a mortgage or line of credit, the bank will look at things like the consistency of your income, whether you can make your payments every month, and whether you can service the debt. They may want to see at least two years of financial statements before they’re comfortable lending you money.

The irony is that this is often when you actually need financing. A new business may need equipment, working capital, and enough money to get on its feet. Be prepared for the banks you’ve dealt with your whole life to suddenly be less interested in lending to you.

2. Your Tax Payments Can Create a Cash-Flow Squeeze

The second disadvantage is a conversation I always dread having with clients after their first year in business.

You make some money, file your taxes, and have a tax bill to pay. Then you may also be required to start making installment payments toward your upcoming taxes. If your net tax owing reaches the CRA’s installment threshold and you meet the prior-year requirements, you may have to start paying tax by installments during the year.

It’s similar to having taxes withheld from your paycheck as an employee. The difference is that when you’re running a business, you may be paying a previous tax balance while also beginning to make installment payments toward the current year.

For some new business owners, this is when the cash-flow impact becomes especially noticeable. You’re paying taxes you already owe while beginning to put money toward the next tax year. Eventually, it starts to feel like you’re caught up, but that initial overlap can create a significant cash problem for a new business.

3. You May Be Paying Both Portions of CPP

The third disadvantage is your Canada Pension Plan contributions.

As an employee, you pay your portion of CPP and your employer matches it. If you’re self-employed, you’re responsible for both portions yourself. In 2026, that combined CPP contribution rate is 11.9% on applicable pensionable earnings.

A lot of people don’t realize the impact until they file their taxes for the first time. Even if you aren’t making a lot of money in your first year, that additional CPP obligation can be one reason your tax bill feels higher than you expected.

4. Staying Compliant Comes With a Cost

The last disadvantage is keeping up with business compliance requirements.

Depending on your business, that can mean keeping up with GST, PST, source deductions, WorkSafe requirements, and corporate or personal income tax. There can be a lot of forms and services involved, and I don’t think many new business owners realize how much of an administrative burden comes with starting their own business.

The cost can also be significant when you’re getting started, and it’s something you need to consider before you leave your paycheck behind. It’s also something we can take care of and help you manage.

I know these disadvantages can sound a little doom and gloom, but they’re only one side of the decision. There are also a lot of financial advantages to running your own business that may make leaving that paycheck behind worthwhile.

If you’re thinking about starting a business and want to understand what these costs could look like for you, we can go through the numbers together before you make the jump.

Please note: This content is for general information purposes only and does not constitute personalized accounting, tax, or financial advice. Reach out to us to book a personalized consultation based on your business and financial situation.