Tax Requirements For Proprietors | Outsourced Accounting Services
Business owners who will start their business as a part-time venture, might not want to incorporate their business until they reached that fifty thousand dollars threshold, or they have grown it to a full-time business says outsourced accounting services. Regardless of why an entrepreneur would choose to incorporate their business or not, there are certain things that they should keep in mind as they operate a proprietorship, because they have very different tax and accounting requirements than corporations.
A corporation is a separate legal entity that is apart from the business owner, that exists for tax purposes. A proprietorship on the other hand says outsourced accounting services, is an unincorporated business that remains legally tied to the business owner and the business owners tax requirements. Because of that distinction, entrepreneurs who are operating a proprietorship, should be very aware of the tax filing differences. While a corporation can choose corporate year end dates, proprietors have to file their business taxes on the same time that they file their personal tax return. Even though most tax returns are due in Canada on April 30, Canada revenue agency gives proprietors an additional forty-five days to help them prepare they tax return. June 15 is the filing deadline for all proprietors for their business and their personal taxes.
It is very important that business owners keep in mind that even though they may not need to file their return until June 15, they do need to understand that if they owe money to Canada revenue agency, the incurring interest as of April 30. This is not to be confused with a penalty, is merely 1% interest charge on the entire amount. If they miss the June 15 filing date however says outsourced accounting services, then they could be hit with a late filing penalty and increased interest charges. Very important that entrepreneurs keep this tax filing date in their mind, and not miss it.
It can be very beneficial for entrepreneurs to have consulted with outsourced accounting services ahead of time, months before their year end is due, in order to find out what the expense categories they should be tracking for their type of business. They can also help identify what their revenue streams are, their main expenses, find out what various categories mean as well as get some high-level projections of the accountant that can help them set a direction for their business. By being proactive this way, entrepreneurs can ensure their doing all the right things to grow their business proactively. But ending up with correct year end taxes, business owners can understand how profitable their business was, and make plans for growth in the upcoming year.
There is many differences between running a proprietorship versus running a corporation, and when entrepreneurs are informed about the differences between both, they can ensure they are keeping their information as accurate as possible. That accurate information can help them review their numbers to help plan what direction they need to take their business in to see business growth.
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When business owners start their business, they may not understand that they have a choice on what business structure they want to operate says outsourced accounting services, and end up running a proprietorship because they just did not know that they could incorporate their business. However, entrepreneurs should be aware of the differences between running a proprietorship running a corporation. Not only are they very different tax wise, but they also have a different accounting requirements as well.
Business owners should be aware that since proprietorships are attached financially to the business owner themselves, all of the income that is earned in a proprietorship is taxed at the personal tax rate. The average Canadian is 43% of their annual revenue in taxes, and the highest personal tax rate in Alberta is 48%. In order to help business owners minimize the taxes that there proprietorship has to pay, they should ensure that they are keeping great records when they are doing their business accounting. This is extremely important, in ensuring that business owners are paying the minimal amount of taxes possible.
Order to ensure this is possible, business owners need to understand that the requirements for proprietorships is different than corporations, instead of needing to take the time to learn how to do double entry accounting, outsourced accounting services says that entrepreneurs only need to worry about knowing how to enter the revenue, cost of goods sold and expenses in a spreadsheet. Even if they do not know how to use spreadsheets, they could not keep track of it using a pen and paper. It is important that entrepreneurs know what their revenue streams are, that is the three most common ways they earn money in their business, the cost of goods sold as it relates to each of those three revenue streams, and the expenses in their business, and what expense categories they need to be assigned to.
Business owners may find it very beneficial to talk to outsourced accounting services as soon as they start their business, to find out what expense categories for their industry is most common for them to track, how to choose their revenue streams, and even here some high-level projections for their business,so they can make some long-term plans and goals that can help them be proactive in their business and have a goal to shoot for in their business. By having goals, business owners will be far more likely to be successful in their business.
When entrepreneurs know the accounting differences between proprietorships and corporations, they can ensure that they are setting their business on the right path as early on as they can, to ensure the accuracy of the information. When they do not, they can not only ensure that they can have the right most accurate information, but that information can help them grow their business significantly which can help them ensure they can make plans on what they can incorporate the business in the future.