Outsourced Accounting Services | What Proprietors Need To Know To File Their Taxes

The first thing that entrepreneurs should do if they decide they want to operates there business as a proprietorship, is understand the difference between proprietorship and corporations. Outsourced accounting services says that proprietorships are businesses that are legally tied to business owners and business owners tax requirements. A corporation on the other hand is its own legal entity with its own tax requirements. When entrepreneurs understand this, they can start to understand why there are different tax rates, requirements and rules for proprietorships and corporations.

One of the first things that an entrepreneur should understand when they own a proprietorship, is that their tax filings are going to be different. In a corporation, an entrepreneur gets to choose when there financial year end is. They choose their fiscal year ends, and it stays the same for the life of the business. Personal tax returns on the other hand are filed on April 30 for everyone in Canada. Unless an entrepreneur owns a proprietorship. The proprietorship and the business owners of the proprietorship have until June 15 in order to file their tax returns both personal and business. Understanding this, can help business owners be prepared to create their personal and business tax return. Their tax return is going to stay the same, meanwhile an entrepreneur is going to fill out a different form called the T2125. They will be able to file both their personal and business tax returns on June 15 but business owners also need to be very aware that if they owe Canada revenue agency any money, they are going to start incurring interest charges as of April 30. To be very clear, this is different than a penalty, the interest charges are 1% per month until they pay so it is not significant, it is just something for businesses to keep in mind. However, outsourced accounting services says that if they file late, they will incur penalties which are much higher than 1%.

When entrepreneurs understand the tax differences between owning a proprietorship in owning unincorporated business, they can ensure that they are meeting those requirements, so that they do not get hit with penalties, and that there filing properly and on time. This is extremely important, and regardless of why a business owner decides to operate a proprietorship, it is important for them to know this information.

Outsourced Accounting Services | What Proprietors Need To Know To File Their Taxes

There is many things that entrepreneurs need to understand whether they own corporation, or proprietorship says outsourced accounting services. 50% of all entrepreneurs end up failing within the first five years, and 29% of those failed entrepreneurs say that running out of cash was the reason why their business failed. Making running out of money the most common reason for business failure. Learning how to file taxes properly and efficiently regardless of if an entrepreneur owns a proprietorship or corporation is vitally important to a businesses success.

Once an entrepreneur understands that there is a different tax deadline for owning a proprietorship, they also need to understand what their accounting requirements are as well. Outsourced accounting services says that entrepreneurs only need to worry about what is called single entry accounting when they own a proprietorship. In corporations, entrepreneurs need to do it is called double entry accounting, which means for every debit in the business, there is a credit somewhere else and for every credit in the business that there is a debit somewhere else. How this works, is for every action there is an equal and opposite reaction moneywise says outsourced accounting services. It is called double entry, because a business is tracking the movement of the money through the business. They start off by looking at the bank balance, where it ended in the previous month and match it to the starting balance of the bank reconciliation. They ensure that they are doing double checks to ensure that there is no errors, and that the amounts balance at the end of the month as well. This type of accounting is much more time-consuming and requires accounting software like QuickBooks, Sage and zero. Even though it is more time-consuming, outsourced accounting services says that it is also very accurate, because if the amount does not balance at the end of the month, they keep working on it until it does work.

With the accounting that an entrepreneur who owns a proprietorship need to do, it is not double entry it is single entry accounting and essentially all that is is an entrepreneur keeping track of all of their revenue and all of their expenses. They can do that without needing to by any accounting software, which is going to save an entrepreneur time and not having to learn that software and is going to save the money from not having to purchase the software and update their information. A business owner can literally keep track of their accounting on spreadsheet or even by hand in the ledger book. While this is a lot less work, it is also more risky because it is much easier to make mistakes.

When entrepreneurs can understand the difference that the accounting needs to have when they own a proprietorship, they can learn how to do it properly and effectively says outsourced accounting services, so that they are keeping their financial records as accurate as possible, so that they can file of the taxes as efficiently as possible.