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Is the GST Quick Method Right for You?

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Completing your company’s GST claim can be a hassle! You have to track the GST you’ve been charged and the GST you’ve paid and back up these claims with invoices and receipts. If you miss any input tax credits, you pay too much. Luckily, the GST quick method can save business owners both tax and time. You can use the quick method if taxable sales for your business do not exceed $400,000 for the fiscal year. Instead of claiming the GST paid on purchases as an input tax credit, you need only remit a portion of the tax you collect to the Canada Revenue Agency (CRA).

The GST Quick Method:

  • Is a simplified accounting option (eliminates the need to record and report the actual GST paid or payable on most purchases)
  • Reduces paperwork
  • Simplifies calculations
  • Requires submission of  2.6% of the first $30,000 of gross revenue and 3.6% of the gross revenue after that
  • Can save you $1,000 or more each year
  • Allows you to claim ITCs on purchases of real property, capital property (computers, equipment, vehicles), eligible capital property, and improvements to those properties

You can use the GST quick method if: 

  • You’ve been in business continuously throughout the 365-day period ending immediately before your current reporting period
  • You’re a new registrant and you expect your taxable supplies to be $400,000 or less in your first full year of business
  • You didn’t revoke an election of the quick method or the simplified method for claiming ITCs during that 365-day period
  • You’re not a person listed under Exceptions
  • Your revenues are not more than $400,000 for either the period consisting of the first four consecutive fiscal quarters out of your last five fiscal quarters or the period consisting of the last four fiscal quarters out of your last five fiscal quarters.

Who can use the GST quick method?

Most goods and service-based small businesses are eligible to use the quick method.

  • IT consultants
  • delivery services
  • dry cleaners
  • auto repair shops
  • quick-service food outlets
  • house-cleaning services
  • campgrounds
  • caterers
  • delicatessens
  • painting contractors
  • photographers
  • taxi drivers
  • etc.

 

Who is ineligible for the GST quick method?

  • accountants or bookkeepers
  • financial consultants
  • listed financial institutions
  • lawyers (or law offices)
  • actuaries
  • notaries public
  • listed financial institutions
  • audit services
  • tax return preparers or tax consultants
  • municipalities, or local authorities designated as municipalities
  • public colleges, school authorities, or universities, established and operated not for profit
  • hospital authorities
  • charities and non-profit organizations with at least 40% government funding in the year

How do you elect to use the quick method?

You can elect to use the quick method by using online services:

  • You can also elect to use the quick method by completing Form GST74

 

Do you find calculating GST difficult and time-consuming? The GST Quick Method is faster and easier to use than the general procedure and, in most cases, saves you money. Check out your company’s eligibility for the Quick Method. Save time, money and hassle! Sign up for the GST Quick Method today.

 

Need help calculating your GST? Wondering if you qualify for the GST Quick Method? Contact Cook and Company Chartered Professional Accountants. Whether you operate a sole proprietorship or a sizable corporation with multiple subsidiaries, Cook and Company uses their experience and expertise to help you. Contact us for a complimentary consultation.

 

Resources:

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How to Fix a Mistake on a Filed Tax Return

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You’ve added a stamp and mailed the envelope or you hit the send button and e-filed your tax return. Feels good to have this task done! Then you receive another receipt, realize you used the wrong date for your medical deductions, get another information slip in the mail, notice you incorrectly calculated your deductions, realize you input the wrong social insurance number and/or gave an incorrect bank account or routing number. Don’t panic! There are procedures to follow so you can change your tax return after filing and fix the mistake you’ve made.

 

If you’re requesting a change to a T1 income tax return, the adjustment can be accomplished online or by mail. You can request a change to the current year or any of the previous nine years. A separate request is required for each year you wish to amend.

  • By mail: Send a completed  T1 Adjustment Request form (T1-ADJ) to your tax center or send a signed letter asking for an adjustment to your return. You’ll need your social insurance number, the year of the return you are amending, your address and a phone number at which you can be reached.
  • Online: Use the change my return option found in My Account, a secure online service. You can access My Account in one of two ways, through a Sign-In Partner (selected financial institutions such as BMO and ING Direct) or by creating and using a CRA log-in. You’ll need your social insurance number, date of birth, current postal code and your copy of the tax return you are amending.

 

If you’re requesting a change to your T2 income tax return, you can do so by mail or online.

  • Online: Use commercial Canadian tax software or send your amended T2 tax return in barcode format to the CRA.
  • By mail: Send a letter to your tax center. Make sure you include the name of your corporation, your business number, the tax year and details including revised financial statements and revised schedules. Use Schedule 4 to carry back a loss, Schedule 21 to carry back foreign tax credits, Schedule 31 to carry back an investment tax credit and Schedule 42 to carry back a part I tax credit.

 

After making online changes to your tax return, keep all your receipts and supporting documents in case the CRA asks to see them. Provide supporting documents only if asked to do so and using the method of submission indicated in the CRA’s contact letter.

 

How long will it take for the change to be made?

The CRA will review your request for a change and advise you if the change is allowed by sending you a notice of reassessment or a letter explaining why the changes you requested are not possible. It will take approximately two weeks for a change requested online and eight weeks for a change requested by mail. Additional time may be needed if the CRA contacts you for more information or documentation. Requests which are submitted during the CRA’s peak return processing period, between March and July, will take longer.

 

If you realize, after submission, there’s an error on your tax return, don’t worry! There are procedures in place to help you make changes and adjustments. Tired of completing complex forms for tax? Contact a chartered professional accountant. They have the knowledge and expertise to make tax claims a breeze.

 

Need help preparing your tax return? Require assistance correcting a tax return? Contact Cook and Company Chartered Professional Accountants. Whether you operate a sole proprietorship or a sizable corporation with multiple subsidiaries, Cook and Company uses their experience and expertise to help you. Contact us for a complimentary consultation.

 

 

 

Resources: 

https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t2sch42.html

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Managing Small Business Debt during COVID-19

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Three-quarters of Canadian small businesses have taken on debt as a result of COVID-19. As of November 3rd, 69% of Alberta businesses are open, 39% are back to pre-COVID staffing levels but only 21% are experiencing normal revenues. The Canadian Federation of Independent Businesses estimates that, if and when revenues return to normal, it will take most Alberta small businesses 1 ½ years to recover.  Business owners have two choices: try to save the business while attempting to settle outstanding accounts, or allow the business to fail with an exit strategy that minimizes the financial consequences.

Financial help available for those attempting to save their business:

    • CEBA (Canada Emergency Business Account) supports businesses by providing financing for expenses that cannot be avoided or deferred thereby helping to position businesses for successful relaunch when the economy reopens. CEBA is available from more than 220 financial institutions across the country. Repaying the balance of the loan on or before December 31, 2022, will result in loan forgiveness of 25%.  CEBA support is being expanded from $40K to $60K and is available to all eligible previous and new CEBA applicants.
    • CEWS (Canada Emergency Wage Subsidy) covers part of employee wages, retroactive to March 15. This enables businesses to re-hire workers, help prevent further job losses, and ease back into normal operations.
    • RRRF (Regional Relief and Recovery Fund) helps businesses and organizations in sectors that are key to regions and local economies. The fund is specifically targeted to those that may require additional help to recover from the COVID-19 pandemic, but have been unable to access other support measures.
    • CERS (Canada Emergency Rent Subsidy) provides direct and easy-to-access rent and mortgage support to qualifying organizations. Charities, nonprofits and qualifying businesses receive a subsidy of up to 65% of eligible expenses until December 19, 2020. Combined with the other support received under the CERS, businesses can receive a rent subsidy of up to 90%.
    • Loan Guarantee (for small and medium-size businesses): Export Development Canada (EDC) is working with financial institutions to guarantee 80% of new operating credit and cash flow term loans of up to $6.25 million to small and medium-sized enterprises. This financing support is to be used for operational expenses and is available to both exporting and non-exporting companies.
    • Co-Lending program (for small and medium-sized enterprises): Business Development Canada (BDC) is working with financial institutions to co-lend term loans of up to $6.25 million to small and medium-sized businesses for their operational cash flow requirements.

Tips for businesses regarding recovery:

  • Take care of your people: Implement best practices for safety. Allow those who can to work remotely. Establish a contingency plan for quarantined workers. Schedule regular updates and optimize technology to keep the lines of communication open and clear.
  • Evaluate capacity and resources: Review your expense items to see where you can shave costs. Find recurring operating expenses that can be suspended for a short term. Align personnel to production/sales. Defer discretionary expenses. Document cash inflow and outflow. Create a rolling cash flow forecast and update it weekly.
  • Communicate with suppliers to confirm whether existing purchase orders will be filled on time. This will help you manage your customers’ expectations and update your cash flow plan. Try to negotiate deferred payment terms for payables.
  • Reach out to customers and confirm that existing and planned orders are still on track. If they owe you money, discuss the ability to pay and the timing of payments. Offer markdowns if they can pay you quickly. You may have to defer production or loosen repayment terms.  Ask customers if they need anything else. With businesses closed and supply chains compromised, there may be a new opportunity for your company.
  • Talk to your banker: Present your banker with a solid restructuring plan. If possible, renegotiate your bank loan so it’s spread over a longer-term, reducing the interest payments and also the monthly repayment cost. Investigate the opportunity to lower interest rates. Consolidate business loans into one payment, which may reduce monthly costs.
  • Consider alternative lenders: Even in tight times, there are those who are looking to invest and alternative methods of financing. Consider peer-to-peer loans, a line of credit, invoice financing, an advance funding loan, non-bank lenders (ThinkingCapital, OnDeck), invoice factoring and a merchant cash advance.
  • Be open to change and move quickly: Look beyond the status quo. Adapt quickly to the changing situation. Look for new market demands. Explore adjacent markets. Consider new ways to use your expertise. Solve unique problems resulting from the situation thereby creating a new niche. Establish a regional supply chain for continuity.
  • Embrace digital possibilities: Digital technologies can provide new marketing, financing and networking opportunities. Create digital products and services. Use online platforms to gain efficiencies and create customer value. Enable remote working. Access regional, national, and global markets in a cost-effective way using e-commerce platforms.
  • Think outside the box: What can you do to increase revenues? Can you lease out a portion of your office to another business? Could you save on rent by working remotely? Get creative. Find ways to generate additional revenue from your existing assets.
  • Get outside help: Outside assistance can help you navigate the changes. Talk to your chartered accountant, your financial planner and/or your banker. They have experience and knowledge that may be helpful.

 

Do everything you can to keep your business running. With luck and perseverance, you can survive and possibly thrive through this pandemic. Learn from this experience so that you can bounce back stronger.

 

Need help navigating the current situation? Draw on the knowledge and experience of Cook and Company Chartered Professional Accountants. Whether you operate a sole proprietorship or a sizable corporation with multiple subsidiaries, Cook and Company uses their experience and expertise to help your business. Contact us for a complimentary consultation.

 

 

References:

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Cybersecurity and Your Business

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Cybersecurity is the technologies, processes, and practices designed to protect networks, devices, programs, and data from attack, damage, or unauthorized access. You may think that your business will not be a likely victim but the risk is not limited to businesses that sell products and handle credit card information and it’s not just large companies that are targeted. If your business collects, processes, and stores data on computers and other devices, you are at risk. Protecting your company and its information needs to be a top priority. There are a number of safety measures you can take to ensure that your systems, data and site are as secure as possible.

    • Train your employees: Establish basic cybersecurity practices and policies for your company and train all employees regarding these. Inform employees regarding all security issues. Have a clear email and Internet use policy. Provide regular updates on new protocols and conduct regular training sessions to review IT security best practices. Create a culture of cybersecurity awareness.
    • Secure your network, database and website: Install the latest anti-malware, antivirus, spam blockers, spyware detection and anti-ransomware software. Consider using a service like PayPal to process payments and protect customer information.
    • Establish safe passwords and authentication practices: Data breaches often happen due to lost, stolen, weak or easy to guess passwords. Consider a  Password Manager App, a software application designed to store and manage online credentials in an encrypted database. Multi-factor authentication that requires additional information to gain entry is another possibility. Change passwords every 3 months. Give employees access to only the specific data systems that they need for their jobs and require permission before installing any software. No one employee should have access to all data systems.
    • Implement penetration testing: Penetration testing involves hacking into your own system to expose vulnerabilities in your host network and network devices. It identifies problematic access points in your system and provides suggestions for hardware and software improvements to upgrade your security.
    • Provide firewall security: Install a firewall on all devices; a set of programs that prevent outsiders from accessing data on a private network. If employees work from home, ensure that their home systems are firewall protected. Firewalls give you the best chance of protecting your site before an attack is successful and they result in a faster and safer website. Many companies install internal firewalls to provide additional protection.
    • Do private browsing with a VPN (virtual private network): Business owners/employees often use temporary workplaces and remote locations (coffee shop, airport, home office) increasing the risk of outsiders gaining access to business data. A VPN creates an encrypted connection between your computer and the remote private network making it necessary to have the key to decode information. Your data can’t be monitored, tracked, collected and stored.
    • Create a mobile device action plan: Mobile devices (laptops, tablets, USB drives, smartphones) create a security risk for your company. Require employers to have password protection, encryption software, and a remote lock and wipe app.
    • Encrypt your emails: Email messages and attachments are not a safe way to send confidential/sensitive information. Email encryption software ensures that only the sender and recipient can read the email/attachment thus preventing data breaches. The email contains a hyperlink to a website controlled by the sender.
    • Subscribe to a Cloud service; an easy and affordable way to get data security from a company that specializes in handling security threats.
    • Backup business data and information: Automatically backup critical data (word processing documents, electronic spreadsheets, databases, financial files, human resources files, accounts receivable/payable files) and store the copies offsite or in the cloud. Check your backup regularly to ensure that it is functioning correctly.
    • Outsource your IT: A third-party IT provider hires and trains the best security people, gives you a set monthly fee, remotely manages your servers (24/7) and responds to emergencies.
    • Dispose of data safely: When disposing of outdated computers, completely destroy the data on the hard drive by using a wiping/degaussing system and then physically destroying it with a hard-drive shredder or crusher.
    • Secure your Wi-Fi network: Set up a wireless access point/router that is secure, encrypted and hidden. Password protect access to the router.
    • Talk to your professional accountant to ensure that your information is protected on their end.

 

Increase your vigilance regarding online security in order to protect your intellectual property, financial data, personal information, or other types of data from unauthorized access or exposure. Undertake proactive measures to protect your business computer, network, data, and website. Be aware of recent attacks and adjust your protection as needed. Stay ahead of cyber attacks, cybercriminals and emerging trends in cybercrime. The Canadian Center for Cyber Security provides online training, checklists, and information specific to protect online businesses.

 

Concerned about the safety of your company’s information? Want an accountant versed in cybersecurity? Contact Cook and Company Chartered Professional Accountants. Whether you operate a sole proprietorship or a sizable corporation with multiple subsidiaries, Cook and Company uses their experience and expertise to help your business. Contact us for a complimentary consultation.

 

 

 

References:

https://www.wordstream.com/blog/ws/2019/03/12/video-advertising-trends

https://www.wordstream.com/blog/ws/2019/10/31/pre-roll-ads

https://smartyads.com/blog/what-is-ott-advertising/

https://instapage.com/blog/pre-roll-ads

https://instapage.com/blog/digital-advertising-trends

https://financesonline.com/advertising-trends/

https://financesonline.com/advertising-trends/

https://marutitech.com/benefits-chatbot/

https://blog.templatetoaster.com/google-alp/

https://www.business2community.com/digital-marketing/top-10-trends-in-digital-advertising-in-2020-02263555

https://www.singlegrain.com/digital-marketing/digital-marketing-trends-2020/

https://instapage.com/blog/what-is-outstream-video

https://www.curalate.com/blog/google-shoppable-ads/

https://www.3playmedia.com/2018/09/20/3-reasons-why-you-need-video-transcription/

https://www.tintup.com/blog/user-generated-content-definition/

https://www.google.com/search?client=firefox-b-d&q=what+is+a+remarketing+ad

https://www.investopedia.com/terms/o/over-top.asp

https://digitalguardian.com/blog/biggest-incidents-cybersecurity-past-10-years-infographic

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Preparing a Business Plan

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In order to secure the money your business needs from a bank, you’ll have to prepare a business plan. It’s a factual description of your business and its projections. This document describes your plan for your company showing its structure, products, services, marketing strategy, budget and financial projections. It’s an informational document intended to showcase your company’s operations, goals and potential. Make sure it includes the following:

 

  • Executive summary: This section briefly summarizes the entire business plan. It describes the company, your product/service, the industry, your competitive advantage and the prevailing economic climate.
  • Description of the company: This segment of the document fully describes the history, current operations, strategy, mission statement, principals, strategic partners and corporate structure of your company.
  • Management team experience: This is your chance to showcase the skills, experience and qualifications of yourself (owner), any co-owners and each member of your management team. Include an organizational chart and salary forecasts. If you have a board of directors, list them along with relevant experience.
  • Key financial data: Report the fiscal strength of your company. Provide financial statements and forecasts for the next 2 to 3 years and include historical results for the past three to five years. This portion of the plan should include income statements, cash flow statements, capital expenditure budgets, balance sheets, profit and loss statements, sales forecasts and relevant financial metrics for your industry. Provide monthly, quarterly and yearly projections.
  • Market analysis: Provide a competitive analysis of your market identifying existing gaps that your business intends to fill. Include an industry overview, information on your target market, planned marketing strategies, your knowledge of relevant regulations and your past compliance with them.
  • Production plan: Describe your company’s product/service in detail. Itemize the product line with the current and planned pricing structure. Include the estimated life-cycle of the product/service and a description of any trademarks/patents/intellectual property rights you own.
  • Supporting documents: Append principal’s resumes, tax returns, real estate documents, processing flowchart, letters of intent from buyers of your product/service, marketing materials, training certificates, research supporting your forecasts, clients testimonials and media reports.

Tips:

  • Use simple language, avoiding technical terms and acronyms.
  • Your proposal should be clear, well-structured and easy to read.
  • Don’t hesitate to sell yourself!
  • Demonstrate that you have contingency plans.
  • Consider working with a professional to help you to lay out the document.

 

Preparing a clear, well-documented business plan is crucial for getting the money your business needs. Create a detailed, precise, informational document that presents your business in the best possible light. Demonstrate your willingness to make a success of your business. If you need help creating your plan, talk to your chartered accountant. They will have the knowledge, experience and skills to help you create a professional business plan.

 

Need help preparing a business plan? Contact Cook and Company Chartered Professional Accountants. Whether you operate a sole proprietorship or a sizable corporation with multiple subsidiaries, Cook and Company uses their experience and expertise to help your business. Contact us for a complimentary consultation.

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What Financial Statements Does my Business Need?

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Financial statements are a set of documents showing a company’s current financial status. They communicate what your business owns and what it owes at a fixed point in time and provide details about your assets, liabilities and equity. There are three statements that all businesses require for tax, financing and investing purposes.

 

Balance sheet:

The balance sheet is a snapshot of a company’s performance at a given time. It identifies the company’s assets (inventory, equipment, vehicles, furniture, property, cash), liabilities (short term debts, long term loans, accounts payable) and equity (what would be left if assets were sold and debts paid). The balance sheet is an indication of the health of a business and helps business owners make decisions regarding how much inventory to order, if assets should be sold and whether a cash infusion is called for. Lenders use a company’s balance sheet to evaluate collateral and risk.  

 

Income statement:

The income statement, also known as a profit and loss statement, summarizes a company’s revenue and expenses for a given period of time. This report shows the company’s bottom line. The income statement consists of four sections; revenues (net sales), cost of goods sold (inventory, freight, labour, indirect expenses), expenses (wages, advertising, depreciation, payroll taxes, office expenses, utilities) and other income (assets sold, interests on loans/investments). The income statement is the document you show to potential lenders/investors and is necessary during tax season. It indicates the profitability of a business’ current operations and guides management in how to expand or cut operations for greater profits.

 

Cash flow statement:

The cash flow statement reports the cash and cash equivalents that flow into and out of a company in a given time period. It measures how much cash a company has on hand. Your income statement shows your company’s bottom line while the cash flow statement shows how your business earns cash and where it goes. The information in this report is used to project how much revenue can be expected in the future, estimate upcoming expenses and make judgments re revenue gaps that may result in non-payment of business liabilities and debts. There are three activities documented in a cash flow statement; operations (accounts receivable, accounts payable, wages, merchandise expenses), investments (equipment and merchandise purchased, purchase of an asset, loans made to vendors, payments related to a merger or acquisition)  and financing (bank loans, shareholder monies, personal investments, dividend payments, loan repayments, sale of company stocks). This report informs management of how much cash is available to pay expenses and invest in the business. Large discrepancies between the cash flow statement and the income statement help identify problems in a business’s operations.

Financial statements are written records that convey a company’s activities and financial performance. The balance sheet provides an overview of assets, liabilities, and stockholders’ equity. The income statement focuses on a company’s revenues and expenses. The cash flow statement measures how a company generates cash to pay its debt obligations, fund its operating expenses, and fund investments. These three main financial statements are interrelated and help you make smart financial, investment and management decisions. All businesses should prepare these reports on a regular basis. Talk to your chartered accountant. They will have the knowledge, expertise and experience to provide you with the financial statements you require. 

Need help with your company’s financial statements? Contact Cook and Company Chartered Professional Accountants. Whether you operate a sole proprietorship or a sizable corporation with multiple subsidiaries, Cook and Company uses their experience and expertise to help your business. Contact us for a complimentary consultation.

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Why do I Need a Financial Statement for my Business?

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Financial statements are records that communicate the activities and the financial performance of a business. They generally include a balance sheet, an income statement and a cash flow statement. They indicate:

  • How much money is made
  • How much money is spent
  • What the company owns
  • What the company owes
  • The net value of the business
  • Where the money came from and where it went
  • The amount of money kept in the company

Companies generally hire an accountant to prepare their financial statements then use the reports as a management tool to affect positive change within their organization. There are several reasons why a business needs financial statements:

  • For performance measurement: Financial statements provide a gauge of performance that helps you review the success of your business and communicate your past, present, and future prospects to stakeholders. It allows you to assess management’s stewardship of the company, the viability of the business and is a starting point in forecasting future performance.
  • For loan applications/investors: Many lenders will not consider a loan application without up to date financial reports. The information in a financial statement forms the foundation of a bank’s decision whether to fund a venture or a company. A business can use financial statements to persuade an investor to buy into the company, or to attract a venture partner who can put money into a new project.
  • For the CRA: In order to file corporate tax returns, Canadian corporations are required to produce financial statements. To avoid penalties, a company needs to have financial statements prepared on a yearly basis.
  • For regulating cash flow: Financial statements help a business anticipate borrowing needs. Reviewing your statements can reveal trends your business can use in its cash flow strategies.
  • For decision making: Financial statements provide decision-makers within a company with the up-to-date information necessary to make effective choices. Financial reports are used to provide shareholders, partners and/or potential investors with key business metrics.

 

Start your business off with the correct financial statements and a maintenance plan for keeping them in order. These reports will assist you when measuring the value of your company,  applying for a loan, attracting investors and/or selling your business. They are a powerful diagnostic tool you can use to evaluate your firm’s strengths and weaknesses, helping you chart the way forward. Talk to your accountant about the statements that your business needs. They will have the knowledge, experience and expertise to help you with your financial statements.

Need help with your company’s financial statements? Contact Cook and Company Chartered Professional Accountants. Whether you operate a sole proprietorship or a sizable corporation with multiple subsidiaries, Cook and Company uses their experience and expertise to help your business. Contact us for a complimentary consultation.

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Should I Incorporate my Business?

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When you incorporate a business, you create a distinct legal entity separate from its owners and/or shareholders. This entity has the same rights as a person. It can own property, obtain loans, enter into contracts, sue, be sued and be found guilty of a crime. You can incorporate either federally or provincially. Which you choose depends on whether you intend to do business in more than one province. Though there are a multitude of advantages to small business incorporation, it is not the right path for every company. Carefully examine the pros and cons of incorporation before deciding.

 

PROS:

  • Limited liability: Incorporating provides a layer of security against personal liability. You’re not responsible for the corporation’s financial obligations, personal assets cannot be taken to pay business debts and you do not answer to company lawsuits.
  • Lower tax rate: Corporations are taxed separately from their owners/shareholders. This is an advantage as corporate tax rates are typically lower than the tax rates for individuals.
  • Tax deferral: Instead of taking a salary, you can choose to leave income in the business, taking it out when your personal tax rate is lower.
  • Continuous existence: Corporations continue to exist unless they wind-up, amalgamate, or give up their charter. An incorporated business continues to exist even if the ownership changes making the selling of the business easier.
  • Better Access to Financing: Corporations are often able to raise money and grow more easily because they can issue bonds/shares to investors and borrow money at lower rates.
  • Income Splitting: The owner of an incorporated company can hire their spouse and children, a significant tax advantage. The company deducts the amount it pays them as an expense, while family members pay tax at their personal income tax rate.
  • Business name protection: When you incorporate your business provincially, the business name you choose is reserved for you. If you incorporate federally, you have the right to use your business name throughout the country. Without incorporation, anyone can start a business with the same or a similar name.

CONS:

  • Costs of incorporation: The process of incorporation requires completion of legal paperwork and the associated costs. Ongoing costs include annual legal filing fees and professional accountant fees (filing an annual corporate tax return, notices of any changes and articles of amendment).
  • Multiple tax returns: Owners of corporations must file personal income tax returns and an additional tax return for the company.
  • Increased administrative requirements: The owner of an incorporated business needs to maintain a minute book containing corporate bylaws and minutes of corporate meetings. They must also maintain up to date records of business activities.
  • More complexity: An incorporated business has individuals who act on its behalf (shareholders, owners, directors, CEO, CFO, president, etc.). The company requires a paper trail of activities of these individuals to ensure all by-laws are followed.
  • Reduced tax flexibility: When revenues are high, there are many tax advantages to being incorporated. When a company experiences losses, incorporation can be a disadvantage. Losses can only be carried forward or back to reduce the company’s income from other years, not in the year the losses are incurred.

When it comes to small business incorporation in Canada, it’s wise to consider every angle before making your decision. Talk to your accountants. They will provide you with advice and information to help you decide whether incorporation will be a benefit for your company.

Considering incorporation? Contact Cook and Company. Whether you operate a sole proprietorship or a sizable corporation with multiple subsidiaries, Cook and Company uses their experience and expertise to help your business. Contact us for a complimentary consultation.

 

 

References:

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Tax Deductions for Small Businesses in Canada

Tax season is upon us! It’s time to gather your receipts and organize your documents in preparation for filing your business tax return. Canada Revenue Agency offers a number of tax deductions to small business owners. Are you aware of all of them? Following are some deductions you will want to keep in mind as you file your taxes this year.

Operating Expenses are expenses incurred during your company’s day-to-day activities or normal business operations. Some are deductible at 100% while you may only claim a portion of others.

 

  • Capital cost allowance: When your business purchases items such as buildings, computers, computer equipment, vehicles and/or a franchise, you can depreciate these articles over time providing a tax benefit for several years.

 

  • Bad debts are debts that remain unpaid after you have exhausted all means to collect. The CRA allows you to claim bad debts except those which are for a mortgage or resulting from a conditional sales agreement.

 

  • Start-up costs are costs incurred preceding the start of business operation and can be claimed as an expense.
  • Fees, licenses and dues: You can claim fees for professional licenses, professional service fees and professional association fees (membership in a trade or commercial association).

 

 

 

 

  • Use of home expenses: If you operate your business from home, you can claim a portion of the following: interest on your mortgage, electricity costs, home insurance and heating costs.

 

  • Delivery, freight and express: You can claim fees for services such as mail and delivery.

 

  • Fuel costs: You can deduct the cost of fuel (gasoline, diesel, propane) motor oil and lubricants used in your business. This does not include fuel used in your motor vehicle.
  • Insurance: You can deduct all business insurance policies such as general business liability, business property insurance, business interruption insurance and fire insurance. You cannot deduct the insurance for your motor vehicle or your life insurance premiums.
  • Interest and bank charges: You can write off any interest you have incurred on money borrowed for business purposes or to acquire property for business purposes and bank charges which are given when processing your payments.
  • Maintenance and repairs: You can deduct the cost of labour and materials for any minor repairs or maintenance done to property you use to earn business income.
  • Management and administration fees:  You can deduct any fees you paid to have your assets and investments managed.
  • Meals and entertainment:  When you attend a convention, conference, or similar event you can claim up to 50% of the cost for food, beverages, plane tickets, hotel rooms and gratuities. When you take a client to an entertainment or sporting event, you can claim 50% of the cost of tickets, entrance fees, cover charges, food, beverages, gratuities and room rental for a hospitality suite.
  • Motor vehicle expenses: If you incur expenses through the use of your personal vehicle for business purposes, you can claim those expenses by keeping an accurate log of use. If your business owns a vehicle or a fleet of vehicles, you can claim fuel, insurance, parking, repairs and maintenance.
  • Legal, accounting and other professional fees: You can deduct the fees you incurred for external professional advice and/or services such as accounting and legal fees.
  • Prepaid expenses are expenses you pay ahead of time such as yearly rent and can be claimed.
  • Office expenses can be deducted such as the cost of pens, pencils, paper clips, stationery and stamps.
  • Other business expenses are expenses you incur to earn income that are not included on a previous line of your claim such as disability-related modifications, computer and other equipment leasing costs, property leasing costs, convention expenses, allowable reserves private health services plan (PHSP) premiums and undeducted premiums.

 

 

 

 

  • Property taxes: You can deduct property taxes you incurred for property used in your business such as taxes for the land and bulding where your business is located.

 

  • Rent: You can deduct rent incurred for property used in your business such as rent for the land and building where your business is located.

 

  • Salaries, wages and benefits: You can deduct gross salaries and other benefits you pay to employees but not a salary paid to yourself or your business partner.
  • Supplies: You can deduct the cost of items your business used indirectly to provide goods or services such as drugs and medication used in a veterinary operation, cleaning supplies used by a plumber, supplies used to manufacture a product or software used to supply a service.
  • Telephone and utilities: You can deduct costs for telephone and utilities (gas, oil, electricity, water, and cable) if you incurred the expenses to earn income.

 

 

 

  • Travel: You can deduct up to 50% of travel expenses incurred to earn business and professional income such as public transportation fares, hotel accommodations and meals.

Donations: Don’t forget that you can claim donations made to registered charities, registered Canadian amateur athletic associations, registered national arts service organizations, registered Canadian low-cost housing corporations, government bodies, registered municipal or public bodies, registered universities, certain registered foreign charitable organizations and the United Nations.

Advertising: You can deduct expenses for advertising and promotion, including amounts you paid for business cards and promotional gifts. You can also deduct expenses for advertising in Canadian newspapers, on Canadian television, Canadian radio stations and online or digital advertising.

These are just some of the many deductions available to small businesses in Canada! Allowable tax deductions are constantly changing. If you aren’t aware of or don’t understand all of the deductions possible, don’t despair! Get in touch with your CPA. No matter what type of business you operate, what size your business is or where you operate from, your CPA will ensure that you receive all the deductions you’re entitled to. Let your CPA help you determine how much you can save this year.

For all your tax needs contact Cook and Company Accountants. Whether you operate a sole proprietorship or a sizable corporation with multiple subsidiaries, we can use our experience and expertise to make tax time a breeze. Contact us to request a meeting.

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