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Business owners should be aware of what makes the differences between proprietorships and corporations. A corporation is a separate legal entity from the business owner, and is used for tax purposes. It has a tax filing deadline once a year, and the entrepreneur is allowed to choose what the deadline they want to have. A proprietorship is an un-incorporated business that is legally tied to the business owner and their tax obligations. Because of this, the business owners business taxes and personal taxes need to be filed at the same time. Personal taxes are due in Canada on April 30, however for proprietorships, Canada revenue agency has extended the deadline to June 15. Proprietorships have an additional forty-five days in order to prepare their personal tax return as well as their business tax return.
It is very helpful for entrepreneurs to visit with an accountant early on in their business to help understand very different tax requirements and accounting requirements they need as proprietors. This can help them ensure that they are setting their business up correctly, and get great business advice like sitting up a separate bank account and credit card for their business. The be able to hash out some of their plans for growth in their business, as well as receive some high-level projections that can help them set business goals says outsourced accounting services.
In addition to seeing an accountant early on in the business, to ensure that a proprietor has set it up properly, it is also a good idea for an entrepreneur to allow that same accountant to help them with their year end filing. Outsourced accounting services says that this can help business owners ensure that they have filled everything out correctly. A business owner will be able to find out if the expenses they put in are reasonable, ensure that expenses are not missing, and that everything is classified properly. An accountant can help a business owner understand if this is going to fit all of the Canada revenue agency parameters, and be accepted or if they need to do additional work to clean it up so that they will not be requested to send more information later.
By getting the right professional advice early on their business, entrepreneurs can operate a successful proprietorship, and grow their business to the point of needing to incorporate their business. When entrepreneurs do that, they can ensure that making the transition from proprietorship to a corporation is as easy as possible.
If entrepreneurs make the mistake of thinking that the accounting needs for proprietorships and corporations are the same, they can actually be costing themselves more time and money the necessary says outsourced accounting services. There are many differences between the two different business structures, and when running a proprietorship, entrepreneurs do not need to take care of their accounting to the same level as a corporation. Understanding what they need to do as a proprietor, can help ensure that they are doing everything accurately, but without spending additional time and money than necessary.
The biggest difference is that a proprietorship only needs to do what is called single entry accounting, which is simply keeping track of all of the expenses and all of the credits to the business. A business owner can do this in any spreadsheet program, or even on paper with the pen. Outsourced accounting services says that in order to make this task much easier, business owners should set up a separate bank account early in their business ownership as possible. This allows an entrepreneur to keep track of all of their expenses and credits easily, and if they have any questions they can open their bank statement and see what has been going on in their business. If they make mistakes keeping track of all of the transactions, they can look at that statement and see where their mistakes were.
In order for this separate business bank account to work to help entrepreneurs keep their single entry accounting accurate, they must strictly adhere to the rule that they never mix business and personal expenses. If there is personal expenditures made out of their business bank account, it makes it far more difficult to keep track of all of the activity in the bank account. Having a separate business bank account also gives an entrepreneur an additional layer of auto protection says outsourced accounting services. If Canada revenue agency sends the proprietorship an audit request, they will be able to far more easily show all of the transactions in the business. With that having a separate bank account, all business transactions and personal transactions we mix together, we almost impossible for CRA to get the information they require.
When an entrepreneur is learning how to track their transactions in their business with single entry accounting, it can be very helpful to visit an accountant first to find out what the most important categories for an entrepreneur to track with their specific business. Since they will not be using accounting software program to help them on what categories can use, talking to an accountant ahead of time can help ensure that they are keeping track of the most important information, and that they are classifying them as accurately as possible. By doing this, entrepreneurs can ensure that there accounting is as accurate as possible.
