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E-Myth – “Why most small businesses don’t work & what to do about it”

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Outsourced Accounting Services | Accounting Requirements Of Proprietors

There is two different types of business structures that entrepreneurs can operate says outsourced accounting services. The corporation, which is a separate legal entity from the entrepreneur, and is used for tax purposes. The proprietorship, which is tied legally to the business owner and their tax obligations. There is benefits to running both structures, and there is drawbacks to both as well. Business owners should understand the difference between the two before making their commitment to operate their business and one structure or the other. Many people are familiar with the tax requirements of corporations, so before they decide to operate their business as a proprietorship, they should find out what the differences are for filing taxes as a proprietor.

One of the largest differences of tax filing for proprietors versus corporations is in the year-end. Outsourced accounting services says that while entrepreneurs of corporations are able to choose their own filing deadline, that is not the case for proprietorships. Since proprietors and the entrepreneurs that own them are tied together tax wise, they need to file their tax returns at the same time. Entrepreneurs who have proprietorships need to file a personal tax return with their personal tax return paperwork, and then a separate filing with a different form called a T2125 for their business taxes.

For an entrepreneur decides that a proprietorship is the best option for them, should consider some of the benefits of operating a corporation. Many entrepreneurs think it is too expensive to run a corporation, because the incorporation paperwork costs a lot of money, and the monthly financial commitment to keep their books, however having the separate legal entity of a corporation to shoulder a lot of liability of the business is significant.

Because of the additional time it takes to prepare to filings, instead of the typical April 30 tax filing dates that most Canadians have to file their personal taxes, they have an additional forty-five days and have to file by June 15. Business owners need to realize however that even though they have until June 15 to file, if they owe taxes to the government, they start incurring interest at April 30. This is a very small amount of money, 1% on the overall amount owed each month so old add up to a lot and should not be considered a penalty. If business owners are not able to file their taxes by June 15, they will be assessed penalties for being late. Outsourced accounting services says that if they are late in filing from June 15 however, they will end up with penalties.

Once a business owner has decided to operate a proprietorship, being prepared for their tax differences, can help them file a successful year end for their business as well as personally. Doing this says outsourced accounting services, can ensure that business owners are being as prepared financially as they can, so that they can ensure their saving as much taxes as possible in their business.

Outsourced Accounting Services | Accounting Requirements Of Proprietors

When entrepreneurs start out in their business part-time, they often defaults to running a proprietorship says outsourced accounting services. The reason they do this, is because if they do not incorporate, they are left with proprietorship as the other option. While there is no real problems with running a proprietorship, many entrepreneurs are not sure of the differences between proprietorships and corporations. To successfully operate a proprietorship, entrepreneurs should know the differences between the two, especially the differences in tax filing and accounting.

One of the biggest differences that entrepreneurs should keep in mind when it comes to corporations and proprietorships, is that proprietorship has a less stringent accounting requirements. Instead of a double entry accounting system that corporations must adhere to, which requires using a double entry accounting software like QuickBooks, entrepreneurs who own proprietorships only have to do what is called single entry accounting. Outsourced accounting services says that this is simply entrepreneurs keeping track of every purchase, debit and credit in their business, and it does not require owning any accounting software. In fact, the accounting software might be costly and time-consuming to learn, especially what an entrepreneur needs. They can use this simple spreadsheet program to keep track, and they can even do that with a pencil and paper if there keeping a good enough record.

One of the things that entrepreneurs might find extremely helpful when owning a proprietorship, and using single entry accounting, is having a separate bank account. To set up a business bank account as well as a business credit card can help an entrepreneur significantly keep track of all of the debits and credits into their business. Not only will this help ensure the accuracy of their single entry accounting says outsourced accounting services. But it is also going to allow them to have a layer of audit protection in case Canada revenue agency audits their business. Since single entry accounting is much easier to make mistakes, having separate bank accounts can help ensure the accuracy for entrepreneurs.

Even though it might be very easy for an entrepreneur to do the taxes, because single entry accounting is simple, it is also considered best practices for entrepreneurs to get an accountant to file their year-end says outsourced accounting services. The reason for that is because an accountant will be able to help tell an entrepreneur if the expenses are reasonable and if they fit this Canada revenue agency parameters. They can also ensure that information is not missing, and help them claim every single expense that is able to be claimed. They can make sure all expenses are classified properly, for example an entrepreneur might have all automotive expenses put into the travel category which would not be completely accurate. The accountant can ensure that the entrepreneur of the proprietorship has everything done as accurately as possible to minimize their risks.

When entrepreneurs do their proprietorship tax return properly, they can minimize liability and ensure everything is as accurate as possible for sending off to Canada revenue agency.