Small Business Accounting Start Up Kit

Small Business StartUp Kit
P a g e 1|12
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INTRODUCTION:
Gettingyournewbusinessstartedoffontherightfootcanbeadauntingtask.Whetheryouareanentrepreneur
startingfromscratch,orleavingtheworkforcetoenjoytheautonomyandchallengeofrunningyourownbusiness;
this guide is for you! The world around us is ever evolving, and now, perhaps more than ever, the traditional
workforceisgivingwaytopeoplewhoarereadytopursuetheirdreamofstartingandowningabusinessoftheir
own.
Unfortunately,behindtheglitzandglamourofrunningyourownbusiness,thereareamyriadofI'stodotandT's
tocross.Thisguidewillhelpwalkyouthroughgettingyourbusinessstartedright.
TABLE OFCONTENTS
Introduction:..................................................................................................................................................................1
WhatisaBusinessPlan?................................................................................................................................................2
ChoosingaCorporateStructure....................................................................................................................................3
SoleProprietorship:...................................................................................................................................................3
Partnerships...............................................................................................................................................................4
GeneralPartnerships.............................................................................................................................................4
LimitedPartnerships..............................................................................................................................................4
Corporations..............................................................................................................................................................5
RegisteringwiththeTaxAuthorities.........................................................................................................................5
BusinessNumber.......................................................................................................................................................6
IncomeTaxForms..........................................................................................................................................................6
Corporations..............................................................................................................................................................7
Partnerships...............................................................................................................................................................7
SoleProprietorships..................................................................................................................................................7
FirstCorporateReturn...............................................................................................................................................7
SignificantIncomeTaxDates:....................................................................................................................................8
CorporateIncomeTax...............................................................................................................................................8
PayrollTaxes..................................................................................................................................................................9
EmployedorSelfEmployed?.....................................................................................................................................9
AvailablePublications..................................................................................................................................................10
AppendixAWhatisaBusinessPlan.........................................................................................................................11
AppendixBChoosingaCorporateStructure............................................................................................................11
AppendixCIncomeTaxForms..................................................................................................................................12

P a g e 2|12
WHATIS ABUSINESSPLAN?
Atitsmostbasiclevel,theBusinessPlanisroadmapforyourbusiness.Itwilloutlineyourbusinessesgoals,aswell
as how your business plans to achieve those goals. Good business plans take it one step further and create buzz
aboutthefutureprospectofyourbusiness.Inthatsense,thebusinessplanisasmuchaboutsellingyourbusiness,
asitisaboutcarefullysettinggoalsandplanninghowtoachievethem.Poorplanningandfinancialmanagement
aretheleadingcausesofbusinessfailuredon'tfallvictimtothiseasilyavoidedpitfall.
Composing a compelling business plan can be a nervewracking, and time consuming task. To help you get
organizedhereisalogicaloutlineofinformationthatallbusinessplansshouldinclude.
Each of the above sections requires careful thought and consideration. Appendix A has useful links to help guide
youalong.Aswellas,worksheetstohelpsupportyourbusinessplan.
Onceyourbusinessplaniscompletedreviewitwithsomeoneyoutrust.Seektheadviceofqualifiedpeople,and
attempttogetfeedbackfromsomeonewhohas,oris,operatingasimilarbusiness.Mostimportantlytalktoyour
accountant,astheyhaveawealthofknowledgeandexperience,andareheretohelpyourealizeyourdreams.
ExecutiveSummary
BusinessOverview
SalesandMarketingPlan
OperatingPlan
HumanResourcesPlan
FinancialPlan
ActionPlan
P a g e 3|12
CHOOSING A CORPORATE STRUCTURE
Oneofthefirsttechnicaldecisionyouwillmakeforyourbusiness,willbetochoosealegalstructure.Thisdecision
willhaveanimpactonhowmuchyoupayintaxes,itwillaffecttheamountofpaperworkyourbusinessisrequired
to do, the personal liability you face and your ability to raise capital for your business. To a large degree this
decisionmaybedictatedbythewayyouhaveorganizedyouroperationsandwhetheryouintendtoworkonyour
ownorwithothers.
Thethreebasicformsofbusinessorganizationare:
Aseludedtoabove,eachformhasadvantagesanddisadvantages.It'simportanttonotethattheselectionoflegal
entity needs to be determined on a casebycase basis, and you should not assume one form is better than
another.
SOLE PROPRIETORSHI P:
A business owned and operated by one individual is typically structured as a sole proprietorship. It is not
considered to be a legal entity under the law, it is considered to be an extension of the individual who owns it.
Ownership ofthe business assets AND LIABILITIES aredirectly attributed to the owneroperator. This means that
theownerisresponsibleforthedebtsandotherliabilitiesincurredbythebusiness.Forincometaxpurposes,the
incomeorlossrealizedfromasoleproprietorshipisrecognized,togetherwithotherearnings,andreportedonthe
individualowneroperators'incometaxreturn.
A sole proprietorship does not require any specific legal documentation for its creation, excepting any normal
requirementssuchasbusinesslicenses,orotherlicensesand/orpermits.
Sole proprietors are considered selfemployed for income tax purposes. Income or loss from selfemployment is
include, on a calendar basis, in the income tax return of the owneroperator. Selfemployed individuals are
requiredtofiletheirtaxreturnsbythe15thofJuneofthefollowingyear;however,anytaxesowingaredueApril
30th. Failure to timely remit amounts owning for income taxes from the previous year can result in interest and
penaltiesfromCRAarenondeductiblefortaxpurposes.Taxablesoleproprietorshipsmayberequiredtomaketax
installment payments; if required, installments are due quarterly on the 15th of March, June, September and
December.
Several other tax filings may be required as well, you should discuss this with your Chartered Professional
Accountant(CPA).
Sole
Proprietorship
Partnership Corporation
P a g e 4|12
PARTNERSHIPS
Partnerships,forthemostpart,takeononeoftwolegalforms:GeneralandLimited.
GENERAL PARTNERSHIPS
A general partnership is similar a sole proprietorship in that income (and its source i.e. business income, passive
income, capital gains) is passed directly to the partners and reported on their personal tax returns. Partners of a
general partnership are also personally liable for the debts and other liabilities of the partnership, as well, each
individual partner enjoys ownership in the partnership assets. A partners right to assets and income/loss, and
responsibility for liabilities is determined based on their prorata share of ownership in the partnership. This is
typicallydeterminedbytheamountofcapitaleachindividualpartnerhascontributed.
A partnership, unlike a sole proprietorship, does require a specific legal formation, and registration with the BC
Registry (See Appendix B) because it is a legal entity recognized under the law. A partnership has rights and
responsibilitiesinandofitself.Apartnershipcansigncontracts,obtaintradecreditandborrowmoney.Ingeneral,
many creditors will require personal guarantees from the partners of small/new partnerships in order to obtain
credit.
It'softenadvisabletoformalizeapartnershipwithalegalagreementgoverningamongotherthings:
Managementofoperations
Partnershipinterests
Obligationstofundbusinessoperations
Exitofexistingpartners
Entryofnewpartners
Allocationsofincomeandloss
Borrowingpowers
Dutiesandrightsofthegeneral
partner(s)limitedpartnerships
LIMITED PARTNERSHIPS
Alimitedpartnershipissimilartoageneralpartnershipwithafewveryimportantdifference.Alimitedpartnership
may have oneor more general partners, and several limited partners. In this arrangement thegeneral partner(s)
are responsible for thedaytoday operations of the partnership. General partners(s)of a limited partnership are
alsopersonallyliableforthedebtsandobligationsofthelimitedpartnership.
Limited Partners, on the other hand, do not take part in running the business, but are entitled to share in the
profitsandlossofthebusiness.Theirliabilityforpartnershipobligationsislimitedtotheircapitalinvestments.
Forincometaxpurposesapartnershipisrequiredtopreparefinancialstatements(bothfederallyandprovincially)
however, a partnership itself does not pay income taxes. Each partner reports their share of the partnerships
profit or loss on their individual tax return as mentioned above. Partnerships with six or more partners are
required to file an annual information return (T5013) by the March 31st following the fiscal year end of the
partnership.
P a g e 5|12
CORPORATIONS
Corporationarelegalentitythatexistsundertheauthoritygrantedbylaw.Corporationsareviewedasindividuals
by the law, and have substantially all of the legal rights of an individual (i.e. is responsible for its own debts). It
mustalsofileincometaxreturnsandpaytaxesonincomeitderivesfromitsoperations.Unlikeaproprietorshipor
partnership,theownersorshareholdersofacorporationareprotectedfromtheliabilitiesofthebusiness.Whena
corporation is small or in the startup phase, creditors often require personal guarantees of the principal
shareholders before extending credit. Aside from this however, the legal protection afforded the owners of a
corporationcanfaroutweightheadditionalexpenseofstartingandadministeringacorporation.
AcorporationmustobtainpermissionfromtheMinisterofFinancetouseordobusinessunderacorporatename.
Corporations must file annual income tax returns with the Canada Revenue Agency. The elections made in a
corporation'sinitialtaxreturnscanhaveasignificantimpactonhowthebusinessistaxedinthefuture.
Incorporating a business allows a number of other advantages such as the ease of bringing in additional capital
throughthesaleofequity,orallowinganindividualtosellortransfertheirinterestinthebusiness.Italsoprovides
forbusinesscontinuitywhentheoriginalownerschoosetoretireorselltheirinterest.
Should you decide to incorporate your business venture, you should seek the advice of competent legal counsel
andaCharteredAccountant.
REGISTERING WITH THE TAX AUTHORITIES
A crucial yet often over looked part of starting a new business is ensuring you have appropriately complied with
theplethorataxandinformationfilingrequirementsfromvariousgovernmentauthorities.Failuretocomplywith
theserequirementsonatimelybasis,oftenresultsinpunitivepenaltiesbeingassessed.
Several form are required to be filed when a business is started. This guide is an allinclusive list of the filing
requirements,itdoeshowever,highlightthemorepertinentrequirementscommontomostbusinesses.Industries
specific filing requirements may also exist and should not be overlooked. Qualified professional(s) within your
industryshouldbeconsultedtoensureallfilingsareappropriatelymade.

P a g e 6|12
BUSINESS NUMBER
MosttaxformsfiledforyourentitywiththeCanadaRevenueAgencyrequiretheuseofaBusinessNumber(BN).
EachbusinessisassignedauniqueninedigitregistrationnumberthatisusedforallfourofthefollowingCanada
RevenueAgencyaccounts:
Itisimportanttoregisterpromptlyinordertoavoidsubstantialconfusionaswellaspenaltiesandinterestforlate
filings.ToregisterforabusinessnumberformRC1ERequestforaBusinessNumbermustbecompletedandfiled
with Canada Revenue Agency. The Business Registration Form is available online at the CRAs website at
http://www.craarc.gc.ca/E/pbg/tf/rc1/README.html. CRA is also able to process registrations through the
internet via the Business Registration Online webpage at http://www.craarc.gc.ca/tx/bsnss/tpcs/bnne/bro
ide/rstrctns/menueng.html
INCOME TAX FORMS
Thereareonlytwocertaintiesinlife,deathandtaxes.Onceyoustartyournewbusiness,youwillhavetodealwith
incometaxes.TheCanadianIncomeTaxActisextensiveanditcantakeyearsofstudyandtrainingtomastermany
of its rules and regulations. The following discussion is not an all encompassing discussion of the tax issues and
complianceissuesyouandyourbusinessmightface.Itdoes,however,aimtoprovideguidanceoncomplyingwith
thelawsandregulationswithintheIncomeTaxAct.
A qualified Chartered Public Accountant should be consulted when you are dealing with income taxes. It's no
secret that Income taxes have a direct and potentially significant impact on the cash flow of your business. This
pointhighlightsthepivotalimportanceofthoughtfultaxplanningsoastomaximizeincometaxlaws,andminimize
theeffectoftaxesonyourbusinessescashflow.Itishighlyrecommendedthatyoudeveloparelationshipwitha
qualifiedtaxprofessionalwhohasexperiencewithyourindustry.
YourCharteredProfessionalAccountant(CPA)canhelpyouproperlyplanandexecute,intheearlystagesofyour
newbusiness.However,taxplanningisn'tjustduringyourstartupphase,orworse,rightbeforeyoureturnisdue.
Tax planningisayearround,andyearoveryearendeavorwhichrequiresconstantcommunicationbetweenyou
andyourCPA.Thiscommunicationhelpstoensurestherearenosurprisescometaxseason.
Ifyouaredoingbusinessinmorethanoneprovince,itisessentialthatyoufamiliarizeyourselfwiththetaxlaws
andfilingrequirementsofthoseprovincesasprovincialtaxreturnsmayberequired.
As mentioned previously; income tax laws are quite complex and take years of study to attain proficiency.
Attempting tocreate savingsbyattemptingto tackle yourown taxes, can be pennywise but pound foolish. The
expenseyoumayincurifyoumakeamistakecanfaroutweighanysavingyourealizebyattemptingtotacklethis
enormoustaskonyourown.
Corporate
Taxation
PayrollTaxes
Goods&
ServicesTax
Import/Export
P a g e 7|12
CORPORATIONS
Corporations must file a T2 Corporate Income Tax Return on an annual basis, as well as, produce financial
statements for this same purpose. Your Chartered Professional Accountant will use these financial statements to
completeyourreturn.TheinformationmustbeenteredintotheGeneralIndexofFinancialInformation(GIFI)as
requiredbytheCRA.
PARTNERSHIPS
Astouchedonearlier,partnershipsaretreatedasaflowthroughentitieswheretaxableincome(orloss)ispassed
through to the partners for inclusion in their respective individual tax returns. The partnership is required to
prepare financial statements for this purpose. Form T2125 Statement of Business and Professional Activities,
should be used if the partner is an individual (http://www.craarc.gc.ca/tx/bsnss/tpcs/slprtnr/rprtng/menu
eng.html). Where a partner is a corporation, the partners share of the net income of the partnership should be
entered on the Corporate T2. Partnerships which have 6 or more partners are required to file Form T5013
Statement of Partnership Income (http://www.craarc.gc.ca/E/pbg/tf/t5013/README.html) on or before the
March31stfollowingthepartnership'sfiscalyearend.
SOLE PROPRIETORSHI PS
A sole proprietorship should report income/loss from its business activities on a calendar year basis using Form
T2125 Statement of Business and Professional Activities. This form needs to be filed with the tax payers T1
GeneralIncomeTaxReturn(http://www.craarc.gc.ca/menu/LBAe.html)forthecalendaryear.
FIRST CORPORATE RETURN
A Corporations first tax return is very important. Several elections are made which will dictate the way the
corporationistaxedformanyyearstocome.
Someofthemoresignificantelectionsthatmayneedconsiderationareoutlinedbelow:
1. Theselectionofamethodtocostinventoriesusingthemostappropriatemethodforyourbusiness.
2. Thetreatmentofreportinggainsoninvestments.
3. Theselectionofayearenddate.
The elections discussed above are only a few of those that may need to be considered in an initial return. A
qualified tax practitioner can help plan how best to utilize elections to take advantage of some of the following
provisionsofthefederalandprovincialtaxlawsincluding:
1. Operatinglosscarryovers
2. Researchanddevelopmenttaxcredits
3. Businesstaxcredits

P a g e 8|12
SIGNIFI CANT INCOME TAX DATES:
Date
Task
2monthsafterYearEnd Corporatetaxesowingonthepreviousyeararedue
6monthsafterYearEnd T2CorporateReturnfilingdeadline
January15 Fourthquartersourcedeductionremittancedate(forqualifyingsmallbusiness)
February28 T4sandT5s(ifany)needtobefiled
March1 RRSPcontributiondeadlineforcredittoprioryears
March15 Firsttaxinstallmentdateforselfemployedindividuals
March31 Partnershipinformationreturndeadline,andT3trustallocationsdeadline
June15 Secondtaxinstallmentdateforselfemployedindividuals
September15 Thirdtaxinstallmentdateforselfemployedindividuals
December15 Fourthtaxinstallmentdateforselfemployedindividuals
CORPORATE INCOME TAX

Monthlyinstallmentsduebytheendofeachmonth
RemittancedeadlineforbalancedueisthreemonthsaftercorporateyearendforCanadian controlled
PrivateCorporationseligiblefortheSmallBusinessDeduction;twomonthsforallothercorporations
Taxreturnduesixmonthsafterthecorporateyearend
FormoreinformationontaxremittancesanddeadlinesseetheCRAwebsite:
(http://www.cra.arc.gc.ca/tx/bsnss/tpcs/crprtns/pymnts/menueng.html)

P a g e 9|12
PAYROLLTAXES
Irrespectiveoftheformofbusinessinwhichyouoperate,ifyouaregoingtohaveemployeesthenyouwillhaveto
contendwithpayrolldeductionsandremittances.Thebriefsummarythatfollowswillgiveyousomeguidancein
therulesandregulationsofthevarioustaxingauthorities.
Employers must withhold income tax, Canada Pension Plan (CPP) & Employment Insurance (EI)
premiumsfromwageseachpayperiodandremitthesewithholdingsalongwiththeemployersshareof
CPPandEI
Newbusinessesarerequiretoremitpayrolldeductionsonamonthlybasis.Remittancesaredueonthe
15thofthefollowingmonth
EverycompanyisrequiredtoprepareaT4informationreturnconsistingofasummaryandslips.Slipsfor
each employee must be prepared summarizing his or her wages, benefits, CPP, EI, and union dues
amongstotherspaidduringaparticularcalendaryear.YouremployeesmustreceiveacopyoftheirT4slip
bytheendofFebruaryofthefollowingyear.Inaddition,acopyofeachT4InformationReturnmustbe
receivedbyCRAbythesamedate.
EMPLOYED OR SELFEMPLOYED?
Incomeearnedfromemploymentandincomeearnedfromselfemploymentaretreateddifferentlyfortax
purposes.RevenueCanadahasstrictregulationstodeterminewhetheranindividualisanemployeeorisself
employed.Theregulationsarebrokendownintofourtests:
Control Anemployeeemployerrelationshipexistsifthepayercontrolsthetime,placeandmanner
inwhichtheworkisperformed.
OwnershipofTools An employeeemployer relationship exists if the payer supplies the equipment and tools
requiredbyaworker.
ChanceofProfit/
RiskofLoss
An employeeemployer relationship exists if the payer bears the risk of financial risk and
theworkerreceivesfullcompensationregardlessofthehealthofthebusiness.
Integration Anemployeeemployerrelationshipexistsiftheworkerhasintegratedhisorherbusiness
intothepayersbusinessandisdependentonit.
An individual is not considered to be selfemployed if he or she meets any of the above tests. Each employment
situationisuniqueandshouldbeanalyzedbasedonthefactsofthespecificsituation.
Ifyouremploymentfitstheparametersofaselfemployedbusiness,then:
1. Yourpayerisnotrequiredtowithholdsourcedeductionsonyourbehalf,
2. Youarenolongerentitledtoemploymentinsurancebenefitsshouldyoubelaidoffand
3. YouwillhavetoremittheemployeeandemployerportionofCanadaPensionPlan
YourCharteredProfessionalAccountantcanhelpyouestablishwhetheryouareanemployeeoraselfemployed
individual.

P a g e 10|12
AVAILABLEPUBLICATIONS
The publications "Employers' Guide Payroll Deductions and Remittances T4001", which cover the payroll
reporting and remittance requirements, can be obtained through the CRAs website at http://www.cra
arc.gc.ca/E/pub/tg/t4001/t4001e.htmlorfromtheCRAslocalofficelocatedat:
1166WestPenderStreetVancouver,B.C.V6E3H2Phone#(604)6664664orFax#(604)6914446.
Commissions, directors fees, overtime pay, benefits (such as auto allowances) and other remuneration amounts
are also subject to payroll deductions. Canada Revenue Agency will access penalties and interest charges on
insufficientand delinquentpayroll deductions and remittances. Thesepenalty and interest charges are normally
not deductible for income tax purposes. Your Chartered Accountant can discuss your business payroll
requirementswithyouindetail.

P a g e 11|12
APPENDIXA WHAT IS ABUSINESS PLAN
BusinessPlan:ArticleonHowto
http://articles.bplans.com/writingabusinessplan/whatisabusinessplan/33
BDCBusinessPlan:Template
http://www.bdc.ca/EN/advice_centre/tools/business_plan/Pages/default.aspx
SBABusinessPlan:Resources
http://www.sbabc.ca/businessplanning/keyresources/businessplans
CYBFBusinessPlan:Writer
http://www.cybf.ca/cybf_resources/startingmybusinessplan/businessplanwriter/
CBDevelopaMarketingPlan
http://www.canadabusiness.ca/eng/page/2690/
BDC5stepmarketingPlan
http://www.bdc.ca/EN/advice_centre/articles/Pages/marketing_plan.aspx
BDCMarketingBasics:
APPENDIXB CHOOSING A CORPORATE STRUCTURE

EmployeevSelfEmployed
http://www.craarc.gc.ca/E/pub/tg/rc4110/rc4110e.html
EmployeevContractor
http://www.labour.gov.bc.ca/esb/facshts/employee.htm

P a g e 12|12
APPENDIX C INCOME TAX FORMS
Startupcostcalculator
http://www.bplans.com/business_calculators/starting_costs_calculator/
RBCNetWorthCalculator
http://www.rbcroyalbank.com/cgibin/retirement/networth/start.cgi/start
CIBCNetWorthCalculator
https://www.cibc.com/ca/tools/networth/netstart.html
OperationsPlanning
CooperativeAssociationsBC
http://www.coopscanada.coop/assets/firefly/files/files/pdfs/ProvAndSectoralProfiles/BC_coops_jun07.pdf
Cooperatives
http://www4.agr.gc.ca/resources/prod/coop/doc/creatcoopguide.pdf
http://bcca.coop/content/whatcoop
Societies
http://www.bcregistryservices.gov.bc.ca/bcreg/corppg/societies/index.page?

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CORPORATE INCOME TAX

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APPENDIXB CHOOSING A CORPORATE STRUCTURE

Small Business StartUp Kit

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