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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 | How Proprietorships File Taxes Differently

Many entrepreneurs do not realize that if they do not incorporate their business, they are officially running a structure called a proprietorship says outsourced accounting services. This is not a big deal, but there are some big differences between proprietorships and corporations that entrepreneurs should be aware of, so that they can ensure that their accounting and year end tax filing is done as accurately as possible. The biggest difference between corporations and proprietorships is that a proprietorship is a business that is tied to the business owner and the business owners tax obligations. A corporation on the other hand, is a business that is its own separate legal entity for tax purposes.

Since proprietorships are tied to the business owner and their tax obligations, business owners need to understand that their personal taxes and their business taxes need to be filed at the same time. While there is two different forms that they should fill out for a proprietorship and their personal taxes, they still have to be filed at the same time. The personal tax filing deadline in Canada is April 30, however this is different for proprietors. They have an additional forty-five days to file their taxes making June 15 their deadline. Outsourced accounting services says that the reason they have an additional time limit, is because Canada revenue agency recognizes the additional work that filing a business and tax return takes. If entrepreneurs file past June 15 deadline, they may get assessed penalties so they should be aware to not make that mistake. However, business owners also need to realize that even though they have an additional forty-five days to file, if they owe taxes, Canada revenue agency starts charging interest April 30. This is a small amount, and business owners should not worry about it as it is only 1% on the entire total per month, but it is something they need to be aware of.

When entrepreneurs are learning how to do the accounting for their proprietorship, they should understand that there are differences in the style of accounting that needs to be done as well. Entrepreneurs only need to do something called a single entry accounting says outsourced accounting services, which means they do not require typical accounting software like QuickBooks. While this is a money in the time savings, this also might mean that entrepreneurs are not sure what expenses to track, or what they need to classify each of the expenses as. Therefore, it is extremely beneficial for an entrepreneur who operates a proprietorship to visit an accountant early on in their business ownership to find out what categories they need to track especially for their specific business. Accountant can ensure that they are on the right track, and are doing the right things in their business as well as even potentially give them some high-level projections and some advice on how to increase their business.

Once an entrepreneur has decided to operate a business, and has decided not to incorporate, they should be as informed as they can to ensure that they are operating their business as efficiently and effectively as possible.

Outsourced Accounting Services | How Proprietorships File Taxes Differently

Entrepreneurs may choose to operate a proprietorship, because not only do they not want to incur the costs of incorporating says outsourced accounting services, but for whole host of reasons specific to them. There is no problems in operating a proprietorship, as long as an entrepreneur understands the difference between the two and makes the right decision for them.

I have big difference between corporations and proprietorships is in the type of accounting that needs to happen. While a corporation requires something called double entry accounting says outsourced accounting services, so that they can ensure that all transactions have been accounted for, and that their bank balance and bank reconciliation match up at the end of the month. It can be a lot more work to do the accounting of a corporation, and proprietors do not need to do that level of work when it comes to their accounting. Proprietors use what is called a single entry accounting, which is just keeping track of all of the things they pay for in their business, the debits and all of the money they break into their business. This can be a lot easier to learn how to do, but it is a lot easier to make mistakes, because there is nothing to balance at the end of the month, like in double entry accounting.

In order for an entrepreneur to do the single entry accounting as accurately as possible, they should ensure that they are keeping track of every single transaction in and out of their business on a spreadsheet. In order to help this, entrepreneurs may find it very helpful to have a separate business bank account and credit card. This way, instead of going through their personal bank account to look for all of the business transactions, if they have a business account, they know that everything that is in that account is a business expense that they can record. The most important thing with this method, is to never use the business bank account for personal reasons and vise versa says outsourced accounting services. This way, an entrepreneur can be very certain of all of the transactions and totals. This is also extremely handy if an entrepreneur gets audited by Canada revenue agency, because it will be very easy to show them all of the transactions in the business.

Even if an entrepreneur has decided to operate as a proprietor, and their accounting is much easier, and may also decide to have an accountant help them file their tax return. The most important reason why says outsourced accounting services is because the accountant will be able to ensure everything has been accounted for accurately, that expenses are not missing, and that everything is classified properly so that they can ensure that Canada revenue agency is satisfied with the tax return, and will be less likely to either get audited or need to provide additional information after the fact.