Congratulations ! Just added another brick in the foundation of your own business, take it to a new level , the decision to give a corporate structure. Although daily activities have not changed much because of it , you have to realize how much things have changed for you from the perspective of the taxes!
This is what you should consider getting the full benefit of business structure :
A. Keep track of all your transactions and make sure you have the documents. The good accountant is to keep an updated record of all transactions
linux accounting software , so anytime you are aware of your income, expenses and net income . If you are too busy with other tasks and you want to leave for further calculations , at least make sure to save all
- Bills
- Income
- Bank statements
- Match Deposit
- Agreements
- Letters of the CRA , WSIB and other
Keep a separate file with the bylaws, minutes book and other documents relating to the founding of the company.
Good idea would be to store all documents related to your business , so when evidence is needed to support their position before the CRA will have some equipment available. You can always know that it will be useful , so keep everything might be a good idea to leave . You can keep the accounting simple file in Excel , notwithstanding those who use accounting software such as Quick Books and Simply Accounting. In fact, CPAs do not use Excel with your tax preparation software . Thus, we would be happy if at the end of the year if they decide to ask them to prepare Declaration of T2 Corporation , which amènerez data organized in a format like this spreadsheet :
Date | Name on Invoice | Invoice No | No Paid Ck | Net | Taxes | Total | Paid
Two . Have you registered a No HST . If you sell or provide is taxable or zero-rated HST , HST register quickly! If you hear a response from your accountant before sales have not reached only 30,000 by the rules of the CRA , you do not have to register , ask how you can then return all HST you paid a business? Note that usually have more expenses than income in the first months of operation.
For example :
1 month .
- The company buys :
HST Team 13000 100000
Rent and other charges 50,000 plus HST 6500
Total purchase price 25,000 Car financing , more than 3250 HST
- And a month ago :
Sales of 25,000 HST 3250
Subtraction of HST HST collected cancellation generate a net 19,500 to 1 month.
2 months .
- The company buys :
Rent and other charges 25,000 plus HST 3250
- And two months ago:
Sales of 35,000 HST 4550
Subtraction of HST HST collected due 1300 generated tax 2 months.
In the above example, this is usually the case of a new company by the initial registration, the company will recover the HST paid 19,500 in the first month . We assume that is probably why the CRA does not require companies to seek registration with HST sales to reach a limit of 30,000. Even if you collect HST on their sales will more than pay your expenses, you are always better than the total amount of the HST paid , as your customer pays you 13 % extra. They claim to return the same way , if the actual tax by the end user of the goods or services is paid . See tax official Web site for more information CRA HST Guide .
Three . Think twice before renting / buying / spending to reduce taxes , there are other ways you can save on taxes and keep your money ! If you decide to proceed with the financing of the vehicle, do not forget that the maximum cost to be considered by the CRA to radiation is 30,000. Therefore, if the car is worth more , still considered a $ 30,000 car for tax purposes. You do not need to be reminded that additional funds are needed to keep your business afloat , and if spending is to cut taxes on the way, you may first want to make sure that you research is important and should be net income taxes.
April . Choose your new year with caution. According to the CRA , the first tax year may be of any length not exceeding 53 weeks. Therefore, if for example, the date of incorporation is May 16 , and you want the fiscal year from 1 November to 31 October can make your first tax return for the period May 16 - October 31 . And then all subsequent fiscal years ending October 31 . What end of the year should I choose? Here , you will realize that you have two tax returns : Personal - T1, and the company - T2 . The income tax is presented for the calendar year January 1 through December 31 and is due on April 30 . Corporate tax declaration is presented for the fiscal year together as we have described , and is due six months after the end of the year. Due to the tax must be paid three months after the end of the year for small private Canadian company. Fiscal year the same for you and your business , is easy and transparent to determine real income of society.
May . Use your corporate account carefully. From the point of view of the CRA , bank account deposits should be treated as income , unless otherwise (ie , the loan transaction , investment , redemption or investment ) is demonstrated. If you have a deposit that is returned, be sure to keep sufficient records to prove it . Otherwise, you may be liable for income tax and / or HST on deposit.
6. Keep track of the specific shareholder. This is an area that particularly attracts the attention of the taxes that most cases involve tax evasion withdraw funds without deductions , as in the case of regular payroll receptors . From the point of view of the CRA , net withdrawals from your company , your income is taxable. This income needs will be declared T1 personal tax returns . An accurate estimate of what took unless you have invested is the key here . If you paid part of the cost of business, you put money in your business. If the company pays for its owner, is a retreat .
By way of example :
During the calendar year for which you have to file your personal tax that :
A. 20,000 invested in the company by transferring the amount on behalf of the company .
Two . Invested $ 15,000 in assets, such as computers, furniture, tools .
Three . 5000 paid out of pocket expenses for gas, telephone and insurance company .
April . Eliminated 30,000 of the company account to cover living expenses .
May . In charge of the corporate bank account for renewal of 15,000.
The balance of your shareholder account is calculated as follows:
20.000 + 15.000 + 5.000 30 000 = 15 000 - 5,000
This means that you have taken over 5,000 invested , and at the end of the year, if not paid , the amount should be included in your income subject to personal income tax . That's why it is important to monitor and maintain proof of these transactions. If you will not be able to provide documentation to support the fact that you initially invested 20,000 in the business , your income can be reevaluated , so now it will be 25,000 instead of only 5,000 .
7. Spread your wealth your tax and legal responsibilities. A company can be an advantage for those who intend to sue and get some of their assets. If you do a lot of business and accumulate funds and other assets over time , you might consider registering a business , however , is a holding company , which will be less exposed to various claims . Limited liability offered by the structure of the company also has its own limits for tax purposes . Pay HST and tax payroll withholding is the direct responsibility of the Director , as these funds have already been received and are currently held by the company before they are sent to the CRA in the appropriate date because ( a month monthly HST and 15 days for quarterly payroll deductions , see the calendar of due dates at the end for more information ) .
8. Meet the criteria of the CRA for freelancers , if you are the sole director and shareholder of the company. To be considered a business standpoint Tax Act on income , you must meet certain conditions. CRA has developed a set of criteria that distinguish business income from labor income . These criteria allow the CRA tax based on economic reality rather than legal structure applies . To be considered a business, which generally have more than one customer , take responsibility for the completion of all project work , use their own tools, hire workers in the process of performing the contract. These criteria do not necessarily have to be fulfilled together, but you must be prepared to defend its position in this way. See " Employee vs. Independent " guide , available on the CRA web site for more information section.
9. Payment Plan / dividends in advance. If your business generates net income, as the owner probably withdraw all or part of it. You can decide to do as wages or dividends. The salary is a deductible expense for the company , while dividends are not. However, the beneficiary will pay less tax on dividends. This is especially true for the annual income of 50 - 60k .
10. Weather archive , remain in the registry. Comply with the obligations of an hour before the agency tax revenues is a good business practice , keeping more organized and ready to audits or investigations. Knowing that your books are in order and has no reason to be concerned about tax issues raise a great weight off , so you can do your business and leave her . Concentrate India and enjoy the creative work . As accountants , we can not add , that all authorities receive new hours , is a drama in the bay, as almost all audit come and go, and if something has not been explained or not the explanations were accepted , you still have 90 days to appeal , which is usually a fair trial , often checks completely rejected.
Attachments:
A. The tax rate of the Company. The small Canadian company will pay tax as follows :
Basic federal tax: 38 %
less :
Deduction for Small Business: 17%
Reduction of federal income tax . 10%
Provincial Sales Tax in Ontario. 14 %
less :
Ontario Small Business Deduction : 8.5%
Net cash tax : 16.5%
Two . The deadlines for submission and payment of the CRA
Deposit on time could save money and help maintain the rule of agency you:
Corporation tax:
The tax is paid two months after the end of the year .
One-month extension is available to Canadian-controlled private corporations .
T2 tax return is due six months after the company year-end .
5% + 1% penalty for late filing of tax .
10% + 2% for repeated failure in the.
Arrears interest on unpaid balances , calculated at the prescribed rate .
payroll :
Retention must be filed no later than the 15th of the following month.
T4 T4 summary should be submitted by 28 February of the following calendar year for the year ending 31 December
dividends :
T5 Dividend and abstract must be submitted by February 28 of the year following the calendar year ending December 31, up to $ 1,000 for late / deposit punishment for failure.
Small business:
Tax sole proprietorship, partnership or a limited partnership is payable on April 30 , four months after the end of the year.
T1 tax return for a sole proprietorship , partnership or a limited partnership is 15 June of the following year to the calendar year to 31 December
5% + 1% penalty for late filing of tax .
10% + 2% for repeated failure in the.
Arrears interest on unpaid balances , calculated at the prescribed rate .
Personal tax returns :
Taxes for each taxpayer is payable on April 30 , four months after the end of the calendar year.
T1 tax return for each taxpayer is due on April 30 of the following year , for the calendar year to 31 December
5% + 1% penalty for late filing of tax .
10% + 2% for repeated failure in the.
Arrears interest on unpaid balances , calculated at the prescribed rate .
Important Notice ( 1) The information above may reflect a subjective interpretation of the author ( s ), which in any case can accept any responsibility for the results of the use or misuse of the information above, all or in part , so explicitly states that all information provided by the authors, may not be appropriate for the specific unit specific purpose, and that alone can not be invoked to produce a decision. In each case , you should get professional advice .
Important Notice ( 2): This text is subject to copyright © law and may not be reproduced in whole or in part, without the author ( s ) written authorization.
