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The biggest difference between a corporation and a proprietorship is their legal status. A corporation is actually its own separate legal entity that is separate from the business owner who is also called a shareholder. This means that it has its own tax requirements different than the business owner. Outsourced accounting services says that proprietorships on the other hand are unincorporated businesses that remain tied to the business owner as well as the business owners tax obligations.
Because of the tax requirement differences, corporations are allowed to choose when there corporate year-end is going to be, whereas proprietorships have no option. They must have their taxes done alongside the personal tax return of the entrepreneur. Since the personal tax return deadline in Canada is April 30, this is around the time that proprietorships need to get ready for their year end as well. Canada revenue agency however has recognized that it might take additional time for entrepreneurs to create their tax returns for a company and personal, so they have granted all proprietorships an extension of forty-five days to complete their business and personal tax returns.
Even though entrepreneurs have until June 15 to file their business and personal tax returns says outsourced accounting services, if they owe Canada revenue agency any taxes, they will start accruing interest on the April 30 deadline. This is not a penalty, it is a 1% interest rate on the entire amount over the course of a year. On the other hand, entrepreneurs who file past June 15 deadline, will be hit with additional interest and payments. If a business owner wants to avoid paying more taxes than necessary, they just have to ensure that there filing their proprietorship tax and personal tax return by June 15.
Prior to filing their proprietorship year end, business owners should be encouraged to set up an appointment put their outsourced accounting services, in order to get their accountant to review their tax return. This can help business owners ensure the accuracy of their information, so that they can minimize the risk of submitting an incorrect tax return. The captain should be able to tell if their expenses are reasonable, properly classified and some expenses are not missing. It can help give entrepreneurs peace of mind that they have satisfied CRAís parameters, and send off their taxes with that peace of mind.
When entrepreneurs are learning how to run their business, outsourced accounting services says that they should understand that if they do not take the time to incorporate their business, their business structure is called the proprietorship and it has some very different accounting requirements. By understanding that there is differences in that business, can help entrepreneurs be prepared and proactive in their business for these accounting differences.
One of the largest differences for the accounting requirements for proprietorship, is that it is a much easier process. It is called single entry accounting, and it does not require specialized software to do. Outsourced accounting services says that entrepreneurs can save money by not having to buy accounting software like QuickBooks in their business yet, and it can save them time because they will not have to learn such a complex accounting software until they incorporate. Business owners can take that time savings, and put it in their business improving their product and growing their business.
One of the drawbacks of single entry accounting however, is it is a lot easier for mistakes to happen and not get corrected. Because of this, entrepreneurs are encouraged to have a separate business bank account and separate business credit card. There are many benefits to having a separate bank account, but it can ensure business owners have a double check system for their single entry accounting. By comparing their bank statements and credit card statements to their accounting spreadsheet, business owners can ensure the accuracy of the numbers, and catch mistakes easier.
Business owners can also set up an appointment with their outsourced accounting services, to figure out how to set up their accounting spreadsheet correctly early on in their business. By finding out what expense categories to track, and what different revenue streams they need to claim for their business, can mean that entrepreneurs end up with the spreadsheet the right revenue category, cost of goods sold categories that relate back to those revenue streams, and the right expenses attributed to the right categories such as meal and entertainment, supplies, or advertising. By getting some professional help to ensure that their accounting spreadsheet is set up properly, can significantly help business owners ensure the accuracy of the information and the integrity of their spreadsheet.
By keeping accurate track of the revenue, cost of goods and expenses on the spreadsheet, and analysing that information, entrepreneurs can gain insight into their business, and use that information. Not only can business owners see how much money they are making and how much it is costing them to make that money, they can be proactive in their business and avoid making the same errors that cause so many other Canadian entrepreneurs to go out of business. Not only can they avoid mistakes, but they can be proactive in their business to help grow it to the point where they need to incorporate to get to the next level of business for them.
