Outsourced Accounting Services | Filing Taxes In A Proprietorship
A very common scenario when entrepreneurs start a business says outsourced accounting services, is that they set up their business and start running it part-time, but then are not sure when or how to claim the income in their business. There are extremely different accounting as well as tax filing differences when business owners are operating a proprietorship versus running a corporation. When they understand but they need to do for taxes and accounting as they own a proprietorship, they can ensure that their meeting all of the requirements and filing accurately and on time.
When business owners are running a business, and they have not incorporated, that is called a proprietorship. Proprietorships are unincorporated businesses that are legally tied to the business owner and the business owners tax obligations. A corporation on the other hand says outsourced accounting services is a separate legal entity from the entrepreneur and is used for tax purposes. While a corporation can choose its own corporate year end, and their tax deadlines can vary, proprietorships need to file their business tax returns along with the entrepreneurs personal tax return at the same time. Entrepreneur needs to ensure that there preparing their personal tax return as well as the tax return for proprietorship using a different tax form. While the tax filing deadline for personal taxes is April 30 across Canada, proprietorships and their owners have an additional forty-five days to file, due to the time required to prepare the taxes for proprietorship. Entrepreneurs should write June 15 on the calendar as their business tax filing deadline.
That entrepreneurs are preparing their taxes for filing, they should keep in mind that if they owe money in their business, that Canada revenue agency is actually going to start charging interest at the April 30 deadline. Outsourced accounting services says that this is not a significant sum, 1% per month on the entire amount owed. However, business owners do need to be aware that if they miss the June 15 filing deadline, and they owe Canada revenue agency money, they will be hit with an assessment not only a late filing fee, but higher interest. In order to avoid paying any additional taxes, business owners should ensure that their meeting there filing deadline.
It is also very helpful for business owners to visit an accountant early on in their proprietorship ownership. The reason for this, is that entrepreneurs can ensure they are keeping track of the most important information, to get business advice so that they can set their business up for success, and make plans to grow their business to the point of running full time, and needing to incorporate. Outsourced accounting services says that this can help business owners find out what they need to know, and can help make the transition from proprietorship to corporation much easier when they need to.
By understanding the differences between a proprietorship and a corporation, and what the accounting and tax differences are, business owners can ensure that they are doing all of the right things in their proprietorship to file their taxes correctly and on time.
Outsourced Accounting Services | Filing Taxes In A Proprietorship
Entrepreneurs are not always sure of if incorporating their business is the right choice for them says outsourced accounting services. If an entrepreneur doesnít incorporate, their business structure is called a proprietorship. They need to understand what the differences are between proprietorships and corporations, and how their accounting requirements are different. By understanding these differences early on in their business ownership, business owners can ensure that they are doing all the right things to make filing their year end taxes smooth, and accurate.
One of the first things that a business owner needs to do when they start a proprietorship, is set up a business bank accounts. It is not going to cost an entrepreneur a lot more money, but having a separate bank account can ensure that they are keeping an accurate record of all of the various transactions in their business. The reason why this is important, is because the style of accounting that proprietorships and corporations have are very different. While in a corporation, an entrepreneur needs to do what is called double entry accounting, this style of accounting is much more time-consuming to do, and requires accounting software like QuickBooks, but it is also much easier to ensure the accuracy of says outsourced accounting services.
Proprietorships on the other hand, utilize what is called single entry accounting. This is easier to do, but also a lot easier to make mistakes. Outsourced accounting services says that single entry accounting is simply an entrepreneur keeping track of all of the transactions in their business. This is where having a separate bank account helped significantly. Not only can help business owners ensure the accuracy of their accounting, because if an entrepreneur misses a transaction, it will be on their bank statement. But it can also ensure accuracy of the information if an entrepreneur gets an audit request from Canada revenue agency. If a business owner has all of their business transactions happening out of their personal bank account, it can be extremely hard to tell which transactions or business and what is personal. It can also open up questions that may be difficult for entrepreneurs themselves to answer, such as if a transaction happens in a restaurant, is that a family dinner, or an entrepreneur entertaining a client?
By ensuring they know the difference between accounting styles, can help entrepreneurs keep track of all of their expenses accurately as early on in their business as possible, however outsourced accounting services still reminds entrepreneurs that they need to keep a record of all of their receipts, regardless of what kind of bank account they use. They do not necessarily need to keep the original hard copies, but scanning them in saving them is extremely important, as Canada revenue agency could request information up to seven years.
By understanding early on what their accounting and tax requirements are for their proprietorship can help entrepreneurs are setting their business up successfully as early as possible. This can help them grow their business, hopefully need to incorporate their business sooner rather than later.