Outsourced Accounting Services | How To Operate A Proprietorship

One of the first things that entrepreneurs should understand is what the differences are legally between incorporated businesses and proprietorships. Outsourced accounting services ultimately the differences is that a proprietorship is not a separate entity, it is a business that is directly tied to the business owner and their tax obligations. On the other hand, I a corporation is a separate legal entity that exists separately from the business owner in order to have different tax purposes. This is very evident when entrepreneurs take a look at the different tax rates there are in Alberta currently. The highest personal tax rate in Alberta tops out at 48%, which means the most taxes of person is going to pay is almost half of all of their income to taxes. And the average Canadian pays 43% of their entire income on taxes. When entrepreneurs look at the tax rate for small businesses that are incorporated, that drops down to 11%. That is a 37% in tax savings to go from a proprietorship to corporation. However, entrepreneurs should understand that the only way they can get that 11% tax rate is if they incorporate their business.

If an entrepreneur still decides that in proprietorship is the right decision for them, but they should then do is learn how to do the taxes for a proprietorship, so that they are minimizing their errors, and maximizing all the tax benefits that they can, just like any other business would says outsourced accounting services. The first thing that entrepreneur should keep in mind when operating a proprietorship, is that their tax deadline is actually different from everyone else in Canada. While Canadians owe their personal tax returns on April 30, proprietorships and the owners of proprietorships have until June 15. This means that a business owner whether it is filing their proprietorship tax filing or their personal tax return, they have until June 15. Corporations will be filing their taxes at their own corporate year-end, but while entrepreneurs will be filing their proprietorship taxes with their personal tax return, they are going to be filing with a form called the T2125. By understanding the distinct differences in how their ships and corporations operates, a business owner can ensure that they are doing everything correctly in their proprietorship to ensure that they are paying their taxes efficiently and on time.

Outsourced Accounting Services | How To Operate A Proprietorship

There is many reasons why an entrepreneur would decide to operate a corporation over proprietorship or vice versa says outsourced accounting services. However regardless of why an entrepreneur and make those decisions, if they have decided that a proprietorship is the right choice for them, they should keep several things in mind and how to keep their books organized, and how to file their taxes properly.

One of the first things that entrepreneurs should understand about accounting when it comes to owning a proprietorship, is that they do not need any special accounting software like QuickBooks, Sage or zero. This can actually results in a lot of wasted money in purchasing the software and maintaining the license as well as a lot of wasted time says outsourced accounting services, as an entrepreneur tries to learn the software that is actually unnecessary for them to learn.

Outsourced accounting services says that the reason why it is unnecessary for an entrepreneur to learn accounting software when they have a proprietorship, is because all accounting software such as Sage, zero or QuickBooks is what is called double entry accounting. It is a form of accounting that ensures everything balances, and takes additional time to do. While it is great because it ensures that entrepreneurs balance at the end of the month, and fixes errors because of it, it is not necessary for proprietorships. The type of accounting that a proprietor needs to do is called single entry accounting. This is less work, because rather than trying to balance everything at the end of the month, entrepreneurs are merely totaling up all of their expenses and all of their revenue. The downside is because there is no double entry, it is easier to make errors, and harder to fix them.

When entrepreneurs are keeping track of their revenue and expenses, one of the best practices they can engage in says outsourced accounting services, is ensuring that they have a separate business bank account and business credit card from their personal credit cards and personal bank accounts. This way, it provides an added level of assurance that revenue is not being lost, and expenses are being tracked properly. When this happens, it is much more easy for entrepreneurs to keep track of all of their expenditures and their revenue and to do their single entry accounting.

The last thing that entrepreneurs can do when they own a proprietorship and they are doing their own accounting, is that they may want to hire an accountant to help them file their tax return. Business owners who are taking care of their own accounting may wonder why they should pay for an accountant to help them, but this can be a final layer of protection to ensure that they are being as accurate and thorough as possible. Not only can an accountant help an entrepreneur understand which expense accounts and revenue streams to track, but it can also help entrepreneurs understand if their expenses are reasonable, does this tax return fit Canada revenue agency parameters? Are they keeping track of all necessary expenses, or are they not tracking something that can help them save taxes? Accountants are great tools to help entrepreneurs understand what they need to do to file the best tax return possible.