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The first thing that entrepreneurs should understand is that a proprietorship is an unincorporated business that is legally tied to the business owner and the business owners tax requirements. Therefore, entrepreneurs personal taxes and business taxes need to be submitted at the same time. While they have a separate form that they need to fill out for their business taxes, they do need to be filed at the same time. While most Canadians have a personal tax deadline of April 30 every single year, entrepreneurs that have proprietorships get an additional forty-five days to file to make up for the additional time it takes to prepare two tax returns. By ensuring they have their taxes filed by June 15, entrepreneurs can avoid late penalties and increased interest charges.
Business owners should keep in mind however, that even if they adhere to the June 15 deadline, outsourced accounting services says that they will start incurring interest on the taxes they owe Canada revenue agency by April 30. This is not a penalty, and it is not a significant amount, it is 1% on the amount that they owe calculated every month. However, if they miss that June 15 deadline, business owners can expect to have increased interest and additional fees added on to the taxes they owe. In order to avoid paying more than they need to, owners of proprietorships need to ensure their filing by the deadline.
What can help an entrepreneur file their taxes on time and accurately, is utilizing outsourced accounting services. By allowing an accountant to help them review their year end tax return, can help entrepreneurs understand if their tax return is reasonable. The accountant will be able to tell them if the tax return hits the CRA parameters, ensure that they have their expenses classified properly and they are not missing any expenses. By allowing a professional to review their return before they sent it off to the government, can help give business owners peace of mind that they have done everything that they can to ensure the accuracy of the information.
By understanding what their tax requirements are, can help entrepreneurs be proactive in their business, have the right information ready in order to do their tax return. By doing that, entrepreneurs can ensure that they have the most accurate information to send to CRA as possible, so that they can minimize their taxes that they have to pay.
There might be many reasons why an entrepreneur decides to incorporate their business or not says outsourced accounting services. They may not want to incur the expense, or take the time to do it because their business is still part-time, and as they worked their way up to making it full-time, they are happy to operate as unincorporated. However, they should be aware of the different requirements for accounting that proprietors have as opposed to corporations.
Business owners should keep in mind when they are operating a proprietorship, that their accounting requirements are extremely different than the requirements of a corporation. While businesses that are incorporated need to utilize double entry accounting, that is a much higher level than what proprietors need for their business. Outsourced accounting services says that entrepreneurs can track all of their revenue, cost of goods sold and expenses on any spreadsheet program on their computer. Not only is this much easier, but it can also help entrepreneurs save money, because they would have to purchase any accounting software for their business like QuickBooks.
One thing that entrepreneurs need to be aware of however, is that while single entry accounting is much easier to do, it is also easier to end up with mistakes, because there is no double check system built in. With double entry accounting, the books have to balance at the end of the month, ensuring accuracy, because if it does not balance, the business owner knows there is an error, and continue looking until the books balance. Single ended accounting however is just keeping track of all of the credits and debits to the bank, therefore if a mistake is made, there is no specific trigger waiting to an error.
Because of this ease of making mistakes, entrepreneurs should do what they can of their business to minimize those errors. Outsourced accounting services recommends that entrepreneurs have a separate business bank account. There is a lot of reasons why they should utilize a separate bank account and credit card, but in this instance, and can be extremely beneficial to entrepreneurs, because they can use that against their spreadsheet to ensure that the numbers are accurate. Business owners can review all the entries into their spreadsheet against the statement. If they see any errors, they can fix them on the spreadsheet.
Another benefit business owners have two ensuring they have separate bank accounts, is that it gives them an additional layer of audit protection if CRA decides to audit their company. By ensuring that all business transactions are coming out of one accountant all personal transactions are coming out of the other, they get much easier to prove that entrepreneurs are keeping accurate record. Although business owners need to be aware that they still need to keep receipts even if they do this in their business.
By being very aware of all of the accounting requirements a proprietorship, outsourced accounting services says that business owners can ensure accuracy of their numbers, which not only can help them in their business and up the right financial information, but it can also help them grow their business, which will help them beat the odds in business.
