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E-Myth – “Why most small businesses don’t work & what to do about it”

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Vancouver CPA | Wondering with What about Employees

Pragmatism is very important in terms of client rationale and attitude, says Vancouver CPA. This is particularly the case when we speak of clients versus employees. For example, do you have one contractor that you are only paying a few hundred dollars a year to question mark if that is often the case then will happen is the Canada revenue agency will probably turn a blind eye, despite the fact that there may be some minor risks. You do is a matter fact have to be pragmatic on evaluating this minor risk. Just think in terms of what are the amounts that you’re going to be paying the contractors? All of the auditors at the Canada revenue agency will turn their heads and about $500 which is potentially the threshold in their audit procedure. Anything over and above that then you might be treading on very risky waters. Bear in mind to that $500 is potentially just a educated guess. It’s like trying to bat on at what speed you’re going to get a speeding ticket. For example if the speed limit is 60, how far and how much faster can you go before you get caught with a ticket? The same thing is involved here.

The two most common factors to think about we were talking about contractors versus employees, says Vancouver CPA, is the risk of profit and loss, and the control. You will not find two more important aspects of that.

Often times the auditors will ask this person if they have any other potential clients. The list of questions is quite huge when it gets to the interrogation. The questions are probably 40 or 50 types of questions long. In the process tends to be about hours long. Does this person have any other customers, is one of the questions that you may have to deal with. The question that is one of the most common and quite frankly the biggest question is can they hire a replacement? That seems to come up often and the Canada revenue agency wants to know the answer to that often.

Consider the fact as well, states Vancouver CPA, of who is training them? How are the hours and who is setting the schedule? Who bid on the project to begin with or as a matter fact did you just tell them how much they’re going to be making question mark did they set the salary, or did you? All of these questions are going back to what the risk of profit and loss to this person will be.

You might know in fact you do have a risk to your business. And you’re going want to reduce that risk level, but at the same time you don’t necessarily want to reach risk and switch people from contractors to employees. These are sometimes going to be tough trying times when in fact you need to do this as you are going to have to incur extra costs. Hopefully you won’t find in a lot of risk.

In will and in all the risk is when you hire an unincorporated contractor, says Vancouver CPA. In terms of incorporated contractors that is not a problem for CPA. In as well, employees are no big deal as well, says Vancouver CPA. However, what is a problem, is unincorporated contractors this is where the risk starts. Big companies are not going to hire an incorporated company’s. It’s just not done as they don’t want to take any of the risk. Yet don’t hire unincorporated companies!

What is in fact going on with this so-called contractor, CRA is going to ask? Are they responsible for their own training, etc. Clients should be very pragmatic as well as can you they hire a replacement to do their job or are you insisting on that particular person doing that particular work?

Be careful with auditors and the Canada revenue agency, as they are very vigilant in wanting to retain the money that is owed to them. They will be able to find out certain things and as a matter fact they do go incognito if they feel as though there is contractor working as an employee and vice versa.

The Canada revenue agency is not going to worry necessarily about the withholding tax at all. What they will go after is the big fish, i.e. the CPP, and the EI. You will in fact have to pay off and payout to the CPP and the EI if this in fact matters and they are employees. The number one important factor with this is the risk of profit and loss to a business. The number two is the control in terms of what’s going on with this contractor.

Vancouver CPA says it is the single most important factor there’s a lot of cons considerations on specific questions that they are going to ask. You have to consider these thoughts and they will be definitely asking you if they feel as though there is a discrepancy between contractor and an employee. They may talk about insurance, other customers, etc. Ideally, you may be able to take on a little bit a risk, but that’s one thing that you’re going to have to assess. What is the risk of profit and loss?

You could consider a psychological aspect with certain adept entrepreneurs. Sometimes a lot of people may just feel as though these entrepreneurs who are very astute and successful are potentially wired the right way because they are fantastic at influencing people to believe in your product, believe in the company, and believing what they are doing. They will influence their employees and they are often able to stay properly on task with whatever they are working on, including their mission which potentially is time and financial freedom. This could also mean their vision which means how to get to their time and financial freedom. And problems that will stand in the way of getting to their outcome.