Starting Your Business – Federal Tax Accounts - PowerPoint PPT Presentation

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Starting Your Business – Federal Tax Accounts

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If you are considering starting your own business, now is certainly an exciting time to be joining the hundreds of thousands of Canadians who are currently business owners. One of the first steps is deciding how you want to run your business and understanding the accounts you’ll need to set up. Today’s blog will cover a few important choices you’re going to have to make! – PowerPoint PPT presentation

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Title: Starting Your Business – Federal Tax Accounts


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Starting Your Business Federal Tax Accounts
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  • If you are considering starting your own
    business, now is certainly an exciting time to be
    joining the hundreds of thousands of Canadians
    who are currently business owners. One of the
    first steps is deciding how you want to run your
    business and understanding the accounts youll
    need to set up. Todays blog will cover a few
    important choices youre going to have to make!
  • Deciding on a Legal Structure
  • Before we begin discussing tax accounts, youll
    need to choose a legal structure for your
    business make sure to get properly informed on
    the various options.

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  • There are many ways to structure your business
    the two most common are as a sole proprietor or
    as an incorporated business.
  • Sole Proprietor As a sole proprietor, you are
    your business, from a tax point of view. Business
    income/expenses are reported on your personal
    income tax return there is no ability to defer
    income tax. If your company loses money, those
    losses can typically be used as deductions
    against your other sources of income (i.e. you
    get a tax refund). Note that there are rules to
    follow here, so make sure you know what they are.
    (The rules are too lengthy to describe here.)

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  • Incorporated business As an incorporated
    business, you and your business are two separate
    legal entities. This results in a variety of
    distinctions, two of the most important ones
    being that you have to file a separate tax return
    for the company, and that you add a legal buffer
    between you and the work your company does. As
    your business earns money, you may leave money in
    the business or take the additional funds as
    salary or a dividend. (See our blog on dividends
    vs. salary.) Any business losses remain in the
    company to offset future earnings, but if you
    never earn a profit, these losses are trapped
    in the company.

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  • Business Number
  • Your next crucial step is an easy one. Regardless
    of whether you choose to operate as a sole
    proprietor or as an incorporated entity, you will
    need a Business Number (which operates like a
    social insurance number for your business). You
    can get one easily by phoning the CRA
    (1.800.959.5525). Make sure you have your
    business name, address, nature of your business,
    account types (which we will discuss below),
    phone number and Articles of Incorporation (if
    applicable) in front of you before you call. Want
    to double check you have everything you need
    before you call the CRA? Set up a time with Kent
    Accounting so we can ensure youre completely
    prepared.

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  • GST Account
  • Almost every business requires a GST number,
    although there are a few exceptions.
    Unfortunately, the rules are quite complicated so
    its hard to give simple pointers here youll
    need to either read the rules or contact a
    professional. To find out whether your business
    needs a GST number, call Kent Accounting and book
    a consultation. As a rule of thumb, you are
    required to collect GST once your business makes
    30,000 worth of sales in a single year, and
    since many new business operators dont know how
    much they will make or when, it is best practice
    to register for a GST number as soon as you begin
    operations.

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  • At the time of this blog post, Alberta has GST
    and not PST/HST. However, other provinces have
    PST and HST if you plan to sell in other
    provinces, ensure you understand the rules on
    collecting and remitting. Like any federal tax,
    GST returns must be filed annually. Filing
    deadlines depend on when you register for your
    GST number and what revenue volume you
    anticipate. If you fail to file your return and
    make the GST payment on time, it will cost you
    interest and penalties.
  • Corporate Income Tax Account
  • This applies to those small business owners who
    have decided to incorporate their business. As
    youll be filing a separate annual tax return for
    your business,

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  • it will need its own income tax number, and these
    taxes must be filed both provincially and
    federally. Your corporate income taxes are due
    within six months of your fiscal year end, and a
    failure to file and pay can flag you for an
    audit.
  • Payroll Tax Account
  • Issuing payroll cheques has taxation
    requirements, starting with registering for a
    payroll account. Registering for your payroll
    account (or closing your payroll account) is as
    simple as contacting the CRA, and we suggest
    registering before you hire any employees, so it
    is ready to go when you start bringing on staff.

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  • A word of caution be organized with payroll. If
    you dont know what youre doing, STOP and either
    read the rules or contact a professional. The CRA
    is very punitive with payroll errors and/or late
    remittances it is common to incur financial
    penalties as a result. One point we cannot stress
    enough is to not to be late with your remittance
    payroll withholdings are the CRAs money, and
    they want it in a timely fashion. Remittances are
    generally due on the 15th of the month, following
    the payroll payment. If your payroll exceeds
    certain thresholds, the remitting frequency will
    be accelerated.

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  • The first time you are late with a payment, its
    a 10 penalty. The second offense is a 20
    penalty. Finally, payroll accounts require that
    you issue T4s to all your staff. If payroll seems
    overwhelming, contact Kent Accounting to find out
    more about our payroll services.
  • Import/Export Account
  • If your business includes importing and exporting
    goods across the border, then youll need to set
    up an Import/Export Account. If you are planning
    on using a customs broker, you might not need an
    Import/Export Account.

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  • Not all goods are allowed into Canada, so make
    sure you determine their eligibility before
    putting significant efforts into your business.
    If your payment is due on the 15th and you make
    it on the 16th, its considered late, and the CRA
    will not give you a break.And finally, there
    are duties and tariffs associated with importing
    and exporting goods know the tariffs and duties
    before you get started. Failure to adequately
    consider these costs in your pricing could cause
    real challenges.

12
  • Kent Accounting is a full-service accounting firm
    located in Calgary, Alberta. The firm is led by
    Kent Greaves, a Chartered Professional Accountant
    in Calgary with over 18 years of experience
    working with privately owned companies. Our small
    business accountants in Calgary believe in
    prompt, accurate service at affordable rates.
    Hiring a tax accountant in Calgary from Kent
    Accounting for your tax preparation or to do your
    bookkeeping will allow you to rest assured that
    your books are accurately kept and will free up
    your time to engage in your business in the
    activities that you are best at.
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