Whether you’re working on a new business full-time, starting a new side hustle or business, or navigating the world of freelancing, making sure you are compliant with your business can be overwhelming for many. Entrepreneurship can come in many forms. From freelancing to passion projects turning into businesses, each entrepreneur may have a different path to realize their dream. All entrepreneurs should understand their tax obligations to comply with tax laws and optimize for any available tax deductions.
Navigating the world of taxes can be overwhelming while juggling all the other things you need to learn as a new entrepreneur. So here are some of our best tips to get you started on the right foot.
Track your Income
Whether you’re a freelancer with clients who pay you in various ways or you are testing multiple income streams in your new business. It is essential to keep track of it all. You’ll get a better sense of where your income is from, and it will be easier to keep track of any invoices and overdue payments. Be sure to file away any invoices or deposit slips in a dedicated workspace if you need.
Tracking your expenses is crucial for tax season. As a new business, you might have many different expenses, ranging from one-time fees to set up your business to ongoing expenses. Tracking these can help you understand how much you spend in your business.
Keep your Personal and Business Expenses Separate
While you might spend much time working on or thinking about your business, keeping your finances separate is a great way to create boundaries. Start by opening a separate bank account and a credit card. You can add on additional financial services as you need them. Keeping them separate will help you better understand how your business is doing. It is still essential to keep your business finances separate from your personal finances.
Digitize your Accounting from the Start
There are many different accounting software that can help make your workflows more manageable, even if you’re new to the business. The software can help you keep track of all your income, expenses and records in one place. Many even allow you to generate invoices and do bank reconciliations so that you can track everything on one platform.
Determine if you Should Charge HST
Not all new businesses will need to charge HST at the beginning of their entrepreneurial journey. Generally, if your business revenue is less than $30,000, you are a small business supplier and do not have to register an HST account. But you can choose to register for an HST account voluntarily. The CRA provides detailed guidance along with examples about when to register and charge HST.
Track any Tax Specific Deductions
As a new entrepreneur, you might wonder what expenses you can write off. If you work on your business from home, you can typically write off some of your internet, rent or phone bills. You could use your personal vehicle to make deliveries to your customers. In that case, it is vital to track and log your use so that you can be sure to optimize this tax deduction for your business. There may be many other tax deductions that can apply in your specific case. Knowing how to deal with them early on will save you hassle during tax season.
Incorporate When It Makes Sense
Not all small businesses need to incorporate. While it can be tempting to incorporate and start your business with a formal structure, it is not a requirement at the start. Many entrepreneurs are self-employed individuals or sole proprietorships. Incorporating a business comes with additional administrative and tax burdens. But incorporating can be beneficial if you are growing fast or have a riskier business model.
Know When you Need to File and Pay your Taxes
Tax deadlines will depend on whether your business is a sole proprietorship (self-employed) or a corporation. If you are self-employed, you typically have until June 15 to file your taxes on time. However, any tax payments are due by April 30. You may even be required to pay your taxes quarterly to the CRA. Corporations must file taxes by six months after their corporate fiscal year-end. However, tax payments are due two or three months after year-end (depending on your corporation type). In addition, you may be filing HST returns and associated payments quarterly, monthly or annually.
Get Professional Advice and Tax Tips If you Need
Starting a new business can be exciting but also overwhelming. Keeping track of your income, expenses, and filing deadlines can quickly become hard to juggle, along with learning the ropes of being a new business owner. Even if you don’t need to hire a bookkeeper or an accountant right away, you can still consult a CPA who can guide you to ensure you’re set up for success from the start.
Contact KSSP Partners LLP in Markham for Tax Tips and Modern Accounting Solutions.
At KSSP Partners LLP, our experienced Chartered Accountants provide modern tax and accounting solutions to meet the needs of your new or growing business. Our knowledgeable and professional tax experts at KSSP Partners LLP can offer clients in Markham, Toronto and across Ontario innovative accounting and advisory solutions. To learn how we can help you and your business with all your tax tips and accounting needs, contact us online or by telephone at 289-554-5997.