New to bookkeeping?
Are you a newcomers to Canada or have condition;
|Being in a new place can be scary. There are so many new things to learn, and so many laws that you are unfamiliar with. Anyone who has ever gone to a new place can readily agree that it is best to have a guide with local knowledge. Let Tax Accounting 4U be your local guide in the scary realm of Canadian Taxes. We will assist you to become familiar with tax legislation, while steering you into the right directions from the very beginning. Your best interest is our main priority.|
Or Are you start a business as an Entrepreneur;
When starting a new business, decisions must be made concerning the business framework. Should it take the form of a proprietorship, corporation or partnership? How should it be financed? Who should be involved? What is the best way to structure a business for tax reasons?
A business plan is a sensible tool to ensure that a business idea is sound and the financing is reasonable. It should be prepared, even though it may not be required by a financial institution.
A new business will have to file information returns for government and calculate and pay payroll deductions, HST and income tax. It will require an accounting system that will efficiently calculate these liabilities and is designed for the specific business.
We can help you set up the right organizational structure based on your needs and help you acquire all the required official registration with the federal and provincial government.
Now that you have decided on starting your own business, you will have to determine what business structure or form of organization suits your needs. The structure of your business will depend on whether you want to run your business yourself or with a partner or associates. There are four types of business structures: sole proprietorship, partnerships, corporations and co-operatives.
Planning to start a business? We can help you setup the right organization structure based on your needs and help you acquire all the need official registration with the federal and provincial government.
Now as a first step you will have to determine what business structure or form of organization suits your needs. The structure of your business will depend on whether you want to run your business yourself or with a partner or associates. There are four types of business structures which is:
1-1. Sole proprietorship
With this type of business organization, you would be fully responsible for all debts and obligations related to your business and all profits would be yours alone to keep. As a sole owner of the business, a creditor can make a claim against your personal or business assets to pay off any debt.
- Easy and inexpensive to create or dissolve a sole proprietorship (you will only need to register your business name provincially, except in Newfoundland and Labrador)
- Relatively low cost to start your business and little working capital is required
- Lowest amount of regulatory burden
- Direct control of decision making
- Minimal working capital required to start-up
- Tax advantages if your business is not doing well, for example, deducting your losses from your personal income, lower tax bracket when profits are low, and so on
- All profits will go to you directly
- It not governed by any specific legislation. Each province has some specific regulations.
- A sole proprietor can deduct business expenses from personal income.
- The owner may derive personal satisfaction from being one’s own boss
- Unlimited liability (if you have business debts, personal assets would be used to pay off the debt)
- Income would be taxable at your personal rate and, if your business is profitable, this may put you in a higher tax bracket
- Lack of continuity for your business, if you need to be absent
- Difficulty raising capital on your own
- The assets may be transferred to a new owner who establishes a new sole proprietorship, but the new owner acquires the business free and clear of all debts, obligations, and other liabilities of the original owner.
A partnership would be a good business structure if you want to carry on a business with a partner and you do not wish to incorporate your business. With a partnership, you would combine your financial resources with your partner into the business. You can establish the terms of your business with your partner and protect yourself in case of a disagreement or dissolution by drawing up a specific business agreement. As a partner, you would share in the profits of your business according to the terms of your agreement.
You may also be interested in a limited liability partnership in the business. This means that you would not take part in the control or management of the business, but would be liable for debts to a specified extent only.
When establishing a partnership, you should have a partnership agreement drawn up with the assistance of a lawyer, to ensure that:
- You are protecting your interests
- That you have clearly established the terms of the partnership with regards to issues like profit sharing, dissolving the partnership, and more
- That you meet the legal requirements for a limited partnership (if applicable)
- Easy to start-up a partnership
- Start-up costs would be shared equally with you and your partner
- Equal share in the management, profits and assets
- Tax advantage, if income from the partnership is low or loses money (you and your partner include your share of the partnership in your individual tax return)
- partners’ joint knowledge can benefit management decisions
- Similar to sole proprietorship, as there is no legal difference between you and your business
- Unlimited liability (if you have business debts, personal assets would be used to pay off the debt)
- Hard to find a suitable partner
- Possible development of conflict between you and your partner
- You are held financially responsible for business decisions made by your partner (for example, contracts that are broken)
- Borrowing money for the business is difficult
- Conflict between partners is a serious risk
- Typically, no one person has complete and final authority to act
Another business structure is to incorporate your business. This can be done at the federal or provincial level. When you incorporate your business, it is considered to be a legal entity that is separate from the owners and shareholders. As a shareholder of a corporation, you will not be personally liable for the debts, obligations or acts of the corporation.
Incorporation generally provides two large advantages over other business structures: liability protection and more advantageous tax treatment. Therefore, you should consider incorporation when: (i) you become profitable; or (ii) you are about to incur significant legal/monetary obligations (such as a lease or loan); or (iii) you are entering into risk that you do not want to assume personally.
So at one glance we have three type of corporation:
- formed by one or more people
- cannot sell securities or shares to the public
- a majority of the directors must be Canadian residents
- if none of the directors reside in the province in which the corporation does business, the corporation must appoint a Power of Attorney who resides in the province
- issue securities for public distribution
- must distribute semi-annual financial statements
- must employ outside auditors
- must file a prospectus with the appropriate Securities Commission in the province
- A business operating nationally or in several provinces may find it useful to incorporate federally under the Canada Corporations Act. Both private and public corporations can incorporate federally.
- Be aware that a federally incorporated business must still register in each province in which it does business.
- Limited liability
- Ownership is transferable by selling shares
- Continuous existence
- Separate legal entity, and corporation is responsible for its own debts and obligations
- Easier to raise capital because shares in the corporation can be sold to raise funds.
- Possible tax advantage as taxes may be lower for an incorporated business
- Ownership and management may be different
- A corporate structure provides flexibility in the organization of the business, and in the relationship between the owners.
- This perpetual existence allows for simpler estate planning, without the necessity of re-negotiation of partnership agreements each time a change is made.
- A corporation may be the preferable structure when there is a large number of owners, as it provides for a formal decision-making hierarchy.
- A shareholder can contract with or sue the corporation, whereas a partner can do neither with respect to the partnership and must contract with or sue the partners individually.
- A corporation can provide flexibility of financing.
- The corporation can create different classes of shares, with varying rights and characteristics.
- This flexibility provides more options to investors, as they can obtain a type of investment that most properly fits with their own investment objectives.
- Some government assistance is only available to corporations.
- A corporation is closely regulated
- More expensive to incorporate and closely regulated
- Extensive corporate records required, including shareholder and director meetings, and documentation filed annually with the government
- Possible conflict between shareholders and directors
- Possible problem with residency of directors, if they are in another province or the majority are not Canadian
- dividends are double-taxed
- some charter restrictions
- Laws governing corporations are more complex. If a corporation’s shares are publicly traded, then the corporation must also follow stringent financial reporting and securities commission requirements.
- Shareholders cannot use corporate losses to offset their personal income.Also there is another type of corporation which it is Not for Profit Corporation.
Not-for-profit corporations are organizations that carry on activities without pecuniary gain. They are incorporated under Part III of the Corporations Act as corporations without share capital. They are all subject to section 126, which states:
Not to be carried on for gain — section 126(1)
126. (1) A corporation, except a corporation to which Part V applies, shall be carried on without the purpose of gain for its members and any profits or other accretions to the corporation shall be used in promoting its objects and the letters patent shall so provide, and, where a company is converted into a corporation, the supplementary letters patent shall so provide.
Below are categories of the most common types of not-for-profit corporations:
- General type – this would include such corporations as ratepayers’ associations, professional associations, community organizations, etc.
- Sporting and athletic organizations;
- Social clubs – these are corporations with objects in whole or in part of a social nature;
- Service clubs such as Rotary, Lions, Kiwanis and Optimist;
- Charities – these would include religious organizations and organizations that are engaged in carrying out certain good works that are of benefit to society.
One of the main differences between a charity and another type of not-for-profit corporation is that upon dissolution a charity is required to distribute its remaining assets to other charities, not to its members, whereas another type of not-for-profit corporation may (unless prohibited from so doing in its charter or by-laws) on dissolution distribute its remaining assets among its members. Also, a charitable corporation, because it usually solicits funds from the public and enjoys certain legal and tax advantages (e.g. under the federal Income Tax Act), is subject to more stringent reporting requirements than a not-for-profit corporation of another type.
The last business structure you could create is a cooperative. With a cooperative, you would have a business that would be owned by an association of members. This is the least common form of business, but can be appropriate in situations where a group of persons or businesses decide to pool their resources to provide access to common needs, such as the delivery of products or services, the sale of products or services, employment, and more.
- Cooperatives are organized on a democratic principle of one member, one vote.
- Control of the business is kept in the hands of those who use the business.
- limited liability and perpetual existence of the cooperative
- profits (any surplus earnings) distributed to members in shares or cash in proportion to their use of service
- decision-making process can be long
- Participation of members needed for success
- one member, one vote reduces incentive to invest additional capital
- extensive recording keeping is a requirement
- risk of conflict developing between members
- Cooperatives may not provide incentives for members to contribute additional capital.
- Some entrepreneurs will not be motivated to invest in the cooperative because they are not satisfied with democratic voting arrangements and dividends that are based purely on patronage.
- Cooperatives need to consider an equity redemption plan.
2- What is a NUANS?
Do I need a name search?
A “NUANS (Newly Upgraded Automated Name Search) is a computerized search system that compares a proposed corporate name or trade-mark with databases of existing corporate bodies and trade-marks. It determines the similarity that exists between the proposed name or mark and existing names in the database, and produces a listing of names that are found to be most similar.
A name search is not mandatory. This process allows the business name registrants to know whether a similar/exact name already exists. This is a Canada-wide name search and entrepreneurs will be informed if there are any existing businesses with similar names.
Most business in Ontario are required to be registered with the Ministry of Government and consumer services. Tax Accounting 4U can register, renew, amend or cancel a business for you. We also search your new business name to find out if it is already registered. We can also apply for other government accounts such as: Retail Sales Tax (HST), Employment Health Tax (EHT), Workplace Safety Insurance Board (WSIB), etc. Also Tax Accounting 4U help you to find name for your business.
3- Strategic Business Planning
A Strategic Business Plan is much more than a tool to obtain financing. If you still have all you plans and ideas locked up inside your head… preparing a strategic plan helps you clarify your company’s direction, ensures your key leaders are all “on the same page”, and keeps both management and staff focused on the tasks at hand.
A Strategic Plan is often needed when…
- Starting a new venture, product or service
- Expanding a current organization, product or service
- Buying a new business, product or service
- Turning around a declining business
The Strategic Plan provides a blueprint, describing your company, its products, the competitive environment, management team, financial health, and business risks.
The plan allows you to…
- Identify and describe the target customer profile, features, advantages and benefits of your new venture, product or service.
- Justify that your plans are credible by fully researching the need being filled with your new venture.
- Develop marketing plans including full descriptions of targeted promotional campaigns with implementation timelines. You also get to examine market conditions, the nature of your customers, as well as your competitors, sales potential, and projected results of your promotional campaigns.
- Develop staffing plans including identifying the key players, skills, attitudes and expertise needed to build the venture.
- Develop management plans including full descriptions of management systems and timelines for implementation.
- Develop financial plans including projected startup costs, operating costs, revenue, profits, and break-even analysis for the first 3 to 5 years.
- Identify building and equipment needs including vendors and cost estimates.
- Formulate company milestones including timelines for upcoming products and services in development.
Projected financial plans allow you to effectively predict upcoming problems, or prevent them. In other words, the perspective gained through your Strategic Business Plan can make a significant contribution to your company’s success, and help you get the funding you require. In fact, most lending institutions and private investors will not even talk to you without a solid financial plan.
Let us help you develop a powerful Strategic Business Plan that drives your business to the level of success you deserve.
Tax Accounting4U can help your business identify areas negatively affecting profitability and growth and develop solutions that are practical and technically sound. In addition to acting as a sounding board for management, TaxAccounting4U provides comprehensive, flexible strategies that address the issues affecting your business.
The following are just a few of the areas in which we provide consulting services:
- Accounting software selection, implementation, and training
- Business process improvement
- Computer systems setup and training
- Financial & retirement planning
- Development of a payroll system and payroll tax returns
- Business Restructuring
- HST, EHT, Source deduction, … registration
- Business Planning and Cash Flow
- Not-For-Profit organization, and Charity registration
- Dissolution of corporation and closing
5-Business Set Up
For your new business or organization Tax Accounting 4U can help. We create and customize your computer’s files for you. Starting off right can make a growing business easier to handle.
For new businesses, we will:
- Organize and enter master files including a chart of accounts, vendors and customers/clients.
- Set up payroll, employee records and payroll processing items
- Design invoice and statement forms to suit your type of service.
- Create user defined fields, Financial Statements and reports to track things that are important to you
- Record all bank information, loans and credit card balances
- Enter assets and accumulated depreciation
- Enter outstanding bills and record customer balances to date
- Enter year to date information
Whether you choose to have us perform ongoing bookkeeping services for your business or train your own staff, we provide continuing support.
Existing business may benefit from the help of a professional accountant when undergoing periods of growth or change. Is your existing accounting system satisfactory? Is it providing the information that you need? Do you know how much money you have made this year? Do you know what your tax liabilities are? Are your receivables current and have your customers been re-billed if necessary? Are you recording your payables so that you may benefit from claiming HST tax credits?
Professional accountants can advise you about the taxation of your business. This means legally minimizing your tax bill without incurring the risk of interest and penalties, which may result from careless bookkeeping or bad advice. An accountant can also assist you with estate and succession planning and budgeting.
TaxAccounting4U provides the following services to corporations, partnerships and individuals:
- Assistance with new businesses
- Design and installation of bookkeeping services and reporting systems.
- Support and training of staff
- Periodic bookkeeping on a fee basis
- Reconciliations of accounts
- Preparation of payroll Remittances and HST returns
- Compilation of financial statements
- Financial statement reviews
- Taxation consulting & management consultant
- Preparation of corporate tax returns and schedules
- Preparation of R & D claims