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.

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• 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.