New Business Checklist
New Business Information
Incorporation
A corporation is a separate legal entity. As long as the corporate name is used on all transactions (e.g. contracts, invoices, cheques), your personal assets are protected (unless you have signed a personal guarantee).
Most corporations pay a flat 19% tax on their business income, less expenses. The owner is taxed personally on any funds withdrawn from the company (rates range from 22% to 46%). Tax can be deferred (up to a 27%) if excess funds are left in the company. A potential tax saving of 2% to 27% is also possible, depending on the owner's income when the funds are withdrawn.
If the shares of the company are sold, up to $750,000 of the gain can potentially be received tax-free.
Most corporations are incorporated with different types of shares that allow for tax & estate planning opportunities, including income splitting.
Companies are managed by directors. As directors are personally liable for many liabilities (including payroll and GST), discuss with your lawyer who should be the directors of the company.
Year End
Year-end dates are normally between February 28 and September 30. This allows time for personal tax planning after the corporate year-end work has been completed. It is recommended to pick a date when the business activity is slower.
Accounting System
Most of our clients record their accounting transactions using QuickBooks Pro.
Accounting Services
The types of accounting services and pricing can be found on our website under "Services". You will be asked to sign an engagement letter that describes the work we will do for you.
Owners' Compensation
The two most common methods of compensation are salary and dividends (either or both can be used every year).
Salary, a deductible expense to the company, is required for Canada Pension Plan (retirement and disability) entitlements and RRSP limits.
Dividends, paid to shareholders, have a lower personal tax rate as the company has already paid a portion of the tax.
Companies can set up a private group benefits plan that includes life, disability, health and dental insurance. The level of benefits to be covered in each area can be customized.
Government Reporting Requirement
There can be significant interest and penalties charged if the payment or returns are late.
Payroll
Monthly source deductions (CPP, EI, Tax) must be sent to CRA before the 15th of the next month. T4 slips must be submitted to CRA before February 28th.
Goods and Services Tax (GST)
GST must be charged on most products and services sold in Canada. Returns are normally filed quarterly. The return is due 30 days after the quarter end date.
Retail Sales Tax (RST)
RST must be charged on most products and some services sold in Ontario. Returns are normally filed monthly. The return is due 23 days after the month end date.
Corporate Tax
Any corporate tax owing must be paid within 90 days after year end (60 days for investment companies). In the second and following years, advance installments are required.
Dividends
T5 slips must be submitted to CRA before February 28th
Workplace Safety and Insurance Board (WSIB)
Most businesses that pay salaries to non-owners must register with the WSIB. The insurance rates are specific to your industry. Returns are normally filed quarterly.
Employer Health Tax (EHT)
EHT must be paid on Ontario wages exceeding $400,000. Returns are normally filed annually.
Action Plan (once incorporation has been completed)
* To obtain a GST or payroll number, contact CRA at 1.800.959.5525 (press *)
> GST notes
Request that your reporting period be quarterly based on your fiscal year end.
Business with annual sales less than $200,000 can elect to use the Quick method to calculate their GST remittance. This method is recommended if your expenses where GST will be charged will be less than 25% of your sales
* Employer Health Tax - contact Ontario (613.746.9200)
* Contact the Workplace Safety & Insurance Board (613.238.7851).
* Open a corporate bank account (call your bank for an appointment). You will need your Articles of Incorporation. Consider setting up electronic banking so that government payments can be made online.
* If you will have excess cash to invest, ask your broker to open an investment account in the company's name
* Consider using a payroll service. Pay cheques are electronically deposited into the employees’ bank account and the government source deductions are automatically remitted. Contact ADP, Nicolas Theriault, 613.565.8508
* Consider setting up a group benefits plan (medical/dental). Contact Jim Doolan, Benefits Consultant, 613.834.3268.
* Other
> Purchase QuickBooks Pro
> Send any government documents to our office as you receive them (fax or email)
> Review and sign the accounting engagement letter (to be emailed) and related documents