TAX CONSIDERATIONS
WHEN SETTING UP YOUR BUSINESS
Starting business in Canada is “simple
but not easy”... However taxes are much
much more complex and complicated
Bing Wang CPA, CMA
Bing@AccXpert.com AccXpert Business Solutions, 613.600.6988
Bing Wang CPA, CMA
Bing@AccXpert.com AccXpert Business Solutions, 613.600.6988
Topics to discuss
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Tax Implications for Different Business
Entity
 Tax Filing Requirements
 Discussion:
-- About New Immigrant Start up
Business - the Canadian Entrepreneur
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Bing Wang CPA, CMA, AccXpert Business Solutions, Bing@AccXpert.com 613.600.6988
Tax Implications - Sole Proprietorship
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A business you operate yourself as a sole proprietorship
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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 T2125 for
business income , professional income , and
commission income.
Bing Wang CPA, CMA, AccXpert Business Solutions, Bing@AccXpert.com 613.600.6988
Tax Implications - Partnership (1)
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A business you operate with someone else as a partnership
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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, AccXpert Business Solutions, Bing@AccXpert.com 613.600.6988
Tax Implications - Partnership (2)
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Who must file a partnership return - T5013 (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 principal-business
corporation that incurred Canadian; or
– the Minister of National Revenue requests one in writing.
Bing Wang CPA, CMA, AccXpert Business Solutions, Bing@AccXpert.com 613.600.6988
Tax Implications - Partnership (3)
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Important tax reporting information that partners
should know:
Partnerships –T5013, Partnership Information Return
Individuals – T1, Income Tax and Benefit Return; T2125
Statement of Business or Professional Activities; T776
Statement of Real Estate Rentals
Corporations – T2, Corporation Income Tax Return;
Trusts – T3, Trust Income Tax and Information Return;
Bing Wang CPA, CMA, AccXpert Business Solutions, Bing@AccXpert.com 613.600.6988
Tax Implications - Partnership (4)
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For T5013 filing - Partnerships must send to CRA:
 T5013, Statement of Partnership Income;
 T5013 FIN, Partnership Financial Return;
 T5013SUM, Summary of Partnership Income;
 T5013 SCH 1, Net Income (Loss) for Income Tax Purposes;
 T5013 SCH 50, Partner's Ownership and Account Activity;
 T5013 SCH 100, Balance Sheet Information;
 T5013 SCH 125, Income Statement Information;
 T5013 SCH 141, Financial Statement Notes Checklist;
Bing Wang CPA, CMA, AccXpert Business Solutions, Bing@AccXpert.com 613.600.6988
Tax Implications – Corporation (1)
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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 T4) or Dividend (T5)?
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, AccXpert Business Solutions, Bing@AccXpert.com 613.600.6988
Tax Implications – Corporation (2)
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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, AccXpert Business Solutions, Bing@AccXpert.com 613.600.6988
Tax Implications – Corporation (3)
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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, AccXpert Business Solutions, Bing@AccXpert.com 613.600.6988
Tax Filing Requirements(1): What to do
when start-up and operate business in Canada?
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Sole Proprietorship
 Do you hire employee or contractor?
 CRA BN# (RC) & Payroll account (RP), Payroll stub and
remittance (PD7A); T4, T4-SUM, T4A, T4A-SUM
 Do you charge GST/HST or claim ITC?
 CRA GST/HST Account (RT), GST34 return
 Payroll related: WSIB, CPP/EI/Income tax withholding,
Vacation pay; Public holiday pay, ROE, etc.
 Personal business income tax return: T1 return with
T2125 reporting
 Other: Instalment Remittance Voucher, ….
Bing Wang CPA, CMA, AccXpert Business Solutions, Bing@AccXpert.com 613.600.6988
Tax Filing Requirements(2): What to do
when start-up and operate business in Canada?
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Partnership
 All Same as Sole Proprietorship requirements,
PLUS ...
 For T5013 info filing - Partnerships must send to
CRA:
Form T5013 FIN, Form T5013SUM, T5013,
Form T5013 SCH 1, Form T5013 SCH 50,
Form T5013 SCH 100, Form T5013 SCH 125
Form T5013 SCH 141
Bing Wang CPA, CMA, AccXpert Business Solutions, Bing@AccXpert.com 613.600.6988
Tax Filing Requirements(3): What to do
when start-up and operate business in Canada?
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Corporation (Federal or Ontario):
 Corporation #, BN # (RC), GST/HST # ....
 Annual corporation information return
 T2 Corporate Income Tax Return
 PD7A Payroll Tax Return
 T4 Summary of remuneration paid
 T4A Summary of commission paid
 T5 Summary of dividend paid
 GST34 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, AccXpert Business Solutions, Bing@AccXpert.com 613.600.6988
Discussion & Conclusion
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Bing Wang CPA, CMA, AccXpert Business Solutions, Bing@AccXpert.com 613.600.6988
About Start up business the New Canadian Entrepreneur
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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, AccXpert Business Solutions, Bing@AccXpert.com 613.600.6988
Getting to the Bottom Line
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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
with an accounting professional.
Bing Wang CPA, CMA, AccXpert Business Solutions, Bing@AccXpert.com 613.600.6988
Conclusion: When’s the Right Time to Hire
an Accounting Professional?
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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, AccXpert Business Solutions, Bing@AccXpert.com 613.600.6988
Contact AccXpert TaxServices
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Bing Wang CPA, CMA, Bing@AccXpert.com, 613.600.6988 (Mobile) 613-800-0119 (Fax)
AccXpert Business Solutions Ltd.,1100 – 2720 Queensview Drive, Ottawa ON K2B 1A5 CANADA