TAX CONSIDERATIONS WHEN SETTING UP YOUR BUSINESS Starting

TAX CONSIDERATIONS WHEN SETTING UP YOUR BUSINESS Starting business in Canada is “simple but not easy”. . . However taxes are much more complex and complicated Bing Wang CPA, CMA Bing@Acc. Xpert. com Acc. Xpert Business Solutions, 613. 600. 6988

Bing Wang CPA, CMA Bing@Acc. Xpert. com Acc. Xpert Business Solutions, 613. 600. 6988

Topics to discuss 3 Tax Implications for Different Business Entity Tax Filing Requirements Discussion: -- About New Immigrant Start up Business - the Canadian Entrepreneur Bing Wang CPA, CMA, Acc. Xpert Business Solutions, Bing@Acc. Xpert. com 613. 600. 6988

4 Tax Implications - Sole Proprietorship A business you operate yourself as a sole proprietorship Taxed at their own personal tax rate, which might be lower or higher than the corporate tax rate. To protect personal assets and income from a tax audit by deducting only legitimate company expenses. Reporting self-employment income on T 2125 for business income , professional income , and commission income. Bing Wang CPA, CMA, Acc. Xpert Business Solutions, Bing@Acc. Xpert. com 613. 600. 6988

5 Tax Implications - Partnership (1) A business you operate with someone else as a partnership Each partner contributes financial capital and resources to the partnership, and shares responsibility for any profits or losses. Partnerships are not taxable entities, profits and losses are “passed through” to the company’s owners and reported on each partner’s individual tax return. Some partnerships must file an annual partnership return reporting the company’s income, gains, losses and deductions. Bing Wang CPA, CMA, Acc. Xpert Business Solutions, Bing@Acc. Xpert. com 613. 600. 6988

6 Tax Implications - Partnership (2) Who must file a partnership return - T 5013 (Statement of Partnership Income): – the partnership has an absolute value of revenues plus an absolute value of expenses of more than $2 million*, or has more than $5 million in assets**; or – is a tiered partnership or has a corporation or a trust as a partner; or – invested in flow-through shares of a principalbusiness corporation that incurred Canadian; or – the Minister of National Revenue requests one in writing. Bing Wang CPA, CMA, Acc. Xpert Business Solutions, Bing@Acc. Xpert. com 613. 600. 6988

7 Tax Implications - Partnership (3) Important tax reporting information that partners should know: Partnerships –T 5013, Partnership Information Return Individuals – T 1, Income Tax and Benefit Return; T 2125 Statement of Business or Professional Activities; T 776 Statement of Real Estate Rentals Corporations – T 2, Corporation Income Tax Return; Bing Wang CPA, CMA, Acc. Xpert Business Solutions, Bing@Acc. Xpert. com 613. 600. 6988 Trusts – T 3, Trust Income Tax and Information

8 Tax Implications - Partnership (4) For T 5013 filing - Partnerships must send to CRA: T 5013, Statement of Partnership Income; T 5013 FIN, Partnership Financial Return; T 5013 SUM, Summary of Partnership Income; T 5013 SCH 1, Net Income (Loss) for Income Tax Purposes; T 5013 SCH 50, Partner's Ownership and Account Activity; T 5013 SCH 100, Balance Sheet Information; T 5013 SCH 125, Income Statement Information; T 5013 SCH 141, Financial Statement Notes Checklist; Bing Wang CPA, CMA, Acc. Xpert Business Solutions, Bing@Acc. Xpert. com 613. 600. 6988

9 Tax Implications – Corporation (1) CCPC or non-resident corporation or foreign corporation? Active business income or Passive income (e. g. Rental income) or PSB (Personal Service Business)? Pay Salary (Payroll T 4) or Dividend (T 5)? Corporations can be subject to a double tax Non-Arm's Length Transactions Investment in Foreign Affiliates or Payments to Non. Residents Corporations are eligible for special tax deductions (e. g small business deduction, SR&ED - Scientific Research and Experimental Development tax credit). . . Bing Wang CPA, CMA, Acc. Xpert Business Solutions, Bing@Acc. Xpert. com 613. 600. 6988

10 Tax Implications – Corporation (2) Tax Related Regulations: - Corporate Minute Book (Mandatory in QC), includes incorporation registration docs, director and share holders info, share register, resolutions, etc. - CRA business account record up to date - Accounting book and all receipts for 6 years - Internet Business Activities - Audit, Review or Compilation Engagements for FS - On time filing all required returns - . . . Bing Wang CPA, CMA, Acc. Xpert Business Solutions, Bing@Acc. Xpert. com 613. 600. 6988

11 Tax Implications – Corporation (3) Tax Accounting Consideration: - Balance sheet: Assets, AR, Owners investment, Liability, AP, loans, Retained earnings, Dividend, Capital shares, Net loss, Net assets, . . - Net Loss carry back or forward - CCA and Capital gain/loss - Cumulative Eligible Capital Deduction - Related and Associated Corporations Bing Wang CPA, CMA, Acc. Xpert Business Solutions, Bing@Acc. Xpert. com 613. 600. 6988

Tax Filing Requirements(1): What 12 to do when start-up and operate business in Canada? Sole Proprietorship Do you hire employee or contractor? CRA BN# (RC) & Payroll account (RP), Payroll stub and remittance (PD 7 A); T 4, T 4 -SUM, T 4 A -SUM Do you charge GST/HST or claim ITC? CRA GST/HST Account (RT), GST 34 return Payroll related: WSIB, CPP/EI/Income tax withholding, Vacation pay; Public holiday pay, ROE, etc. Personal business income tax return: T 1 return with T 2125 reporting Other: Instalment Remittance Voucher, …. Bing Wang CPA, CMA, Acc. Xpert Business Solutions, Bing@Acc. Xpert. com 613. 600. 6988

Tax Filing Requirements(2): What 13 to do when start-up and operate business in Canada? Partnership All Same as Sole Proprietorship requirements, PLUS. . . For T 5013 info filing - Partnerships must send to CRA: Form T 5013 FIN, Form T 5013 SUM, T 5013, Form T 5013 SCH 1, Form T 5013 SCH 50, Form T 5013 SCH 100, Form T 5013 SCH 125 Form T 5013 SCH 141 Bing Wang CPA, CMA, Acc. Xpert Business Solutions, Bing@Acc. Xpert. com 613. 600. 6988

Tax Filing Requirements(3): What 14 to do when start-up and operate business in Canada? Corporation (Federal or Ontario): Corporation #, BN # (RC), GST/HST #. . Annual corporation information return T 2 Corporate Income Tax Return PD 7 A Payroll Tax Return T 4 Summary of remuneration paid T 4 A Summary of commission paid T 5 Summary of dividend paid GST 34 Goods and Services Tax/Harmonized Sales Tax Other related: WSIB, ROE, Instalment Remittance Voucher. . If QC Corporation: NEQ#, ID#, CO-17, TPZ-1015, RL 1, QST. . Bing Wang CPA, CMA, Acc. Xpert Business Solutions, Bing@Acc. Xpert. com 613. 600. 6988

Discussion & Conclusion 15 Bing Wang CPA, CMA, Acc. Xpert Business Solutions, Bing@Acc. Xpert. com 613. 600. 6988

16 About Start up business - the New Canadian Entrepreneur 2. 4 million businesses in Canada: 1. 3 million are solo ventures with no employees; 611, 000 have 1 -4 employees ; 470, 000 have 5 -99 employees ; Only 25, 000 have more than 100 employees. More than half (53%) of all new startups are run by part-time entrepreneurs a third (35%) of startups trying to go full-time would quit their jobs if they could pull in a mere $30, 000 a year. For Mature Businesses (more than 4 yrs old), 72% are run by full-time entrepreneurs Bing Wang CPA, CMA, Acc. Xpert Business Solutions, Bing@Acc. Xpert. com 613. 600. 6988

Getting to the Bottom Line 17 Startups overwhelmingly understand the importance of engaging a professional accountant: Four-fifths (80%) of startups have engaged an accountant at some stage in the development of their business. Three quarters (73%) of startups believe that an accountant would add value to their business. Unfortunately, only 13% are actively working Bing Wang CPA, CMA, Acc. Xpert Business Solutions, Bing@Acc. Xpert. com 613. 600. 6988 with an accounting professional.

Conclusion: When’s the Right Time to Hire an Accounting Professional? 18 If you’ve started a new business, it might save you time and a headache to hire Accounting Professional at early stage. What Exactly Does an Accounting Professional Do? Analyzes the financial big picture and offers strategic advice Produces key financial documents and can help file company taxes Act as outsourced CFO, to advise on financial strategies Performs day-to-day hands-on tasks: handling tax related paperwork, bookkeeping, payroll and paying taxes Tracks company expenses to ensure every cost is recorded correctly for taxes Keep up-to-date on new tax laws and regulations change in order to avoid legal troubles Bing Wang CPA, CMA, Acc. Xpert Business Solutions, Bing@Acc. Xpert. com 613. 600. 6988

19 Contact Acc. Xpert Tax. Services Bing Wang CPA, CMA, Bing@Acc. Xpert. com, 613. 600. 6988 (Mobile) 613 -800 -0119 (Fax) Acc. Xpert Business Solutions Ltd. , 1100 – 2720 Queensview Drive, Ottawa ON K 2 B 1 A 5 CANADA