5 Things You Should Know About Taxes Before Opening a Small Business
February 6, 2023 | Written by: Sohail Afzal
Taking the plunge and starting your own small business is an exhilarating experience! But with such a big venture comes many decisions, which can be both daunting and empowering. There’s nothing more daunting (or essential!) than the taxes that come with owning your own business – but never fear! Navigating the world of taxes can be tricky, especially when running a small business.
Before taking your first steps into this complex arena, get familiar with these five key points to ensure that everything runs smoothly and efficiently: essential tips and tricks for filing accurately and understanding all regulations necessary. So you can take advantage of significant savings! With an awareness of what lies ahead in taxation matters, it’s possible to set yourself up for success as soon as day one.
1- What Types of Businesses are Required to File Taxes?
As the complexities of operations and jurisdiction vary, so do the requirements for businesses regarding taxes. Self-employed people and corporations must pay tax on their profits no matter how big, or small they are – but perhaps even more importantly, corporations need to submit an annual return with all its vital financial information: income earned & spent as well as any investments made throughout the year – direct to Canada Revenue Service!
For businesses with employees, making sure to collect, report and withhold taxes from wages is a must – failure to do so could result in hefty fines. And even freelancers or independent contractors need to pay attention; those earning over the taxable income limit are subject to self-employment taxes! To ensure compliance, it’s essential for all business owners – regardless of size or type -to familiarize themselves with local government regulations before filing any forms.
2- What is the Deadline For Filing Taxes as a Small Business Owner?
As a small business owner, making sure you meet your tax filing deadline is essential for staying caught up and keeping organized. Generally speaking, if you are running a sole proprietorship or single-member LLC (or another unincorporated entity), the income taxes must be filed on April 30th each year to avoid late penalties from the CRA. If your business structure is incorporated, you have until March 15th – that’s as long as it uses calendar years when filling out its requirements! So double-check which category of taxpayer applies to ensure timely submissions for all those crucial documents come tax season!
3- How do I Determine What Type of Tax I Need to File For my Business?
To ensure your business meets all legal requirements, you must consider the taxes associated with it. Understanding the various tax filing requirements is crucial for business owners. Depending on multiple factors such as size and scope, federal income tax returns, self-employment tax filings, plus state and local forms may need to be completed. Furthermore, if goods or services are sold, sales taxation will occur alongside possible registration for CRA and the home state’s authorities.
It might be helpful to investigate the regulations in your state, speak with an accounting firm in Toronto or an attorney who is knowledgeable in business tax law, or both to establish which taxes are necessary for your specific business. Making this decision can ensure that all taxes linked to running your business are submitted appropriately and on time. Visit us now.
4- What Expenses can I Deduct From my Taxable Income as a Small Business Owner?
By using deductions and other tax planning techniques, you can reduce your overall tax burden. Using business expenditure deductions is one of your critical options for lowering your taxable income as a small business owner. These include office supplies and tools, employee pay, travel expenses, expenses for advertising, and professional fees.
To be eligible for these benefits, you must keep complete records of all costs associated with operating your business. Taking time and effort in tracking expenses ultimately saves money over time. Therefore, a knowledgeable accountant or tax specialist can be invaluable in saving money by helping determine what costs can be deducted from your taxable income.
5- How Often Should I Review my Business Finances and Tax Situation With an Accountant or Bookkeeper?
As a small business owner, getting an accountant or bookkeeping services is essential to help you with your finances and taxes. Frequent strategic reviews with them should be adopted as part of your routine. A quarterly or semi-annual review is recommended for companies just starting, covering everything from preparing accurate financial statements to ensuring regulatory compliance. Click here if you’re interested in our bookkeeping services.
If the company multiplies, monthly or even weekly reviews can achieve greater financial efficiencies and help you plan more rigorous cash flow strategies. The right accountant can acquire information remotely and provide wealth management advice to simplify your business ambitions.
Now that you know the five things you should keep in mind regarding taxes and your small business, you’re one step ahead. Of course, this is just a general overview – for specific questions or assistance with tax preparation, contact us. We’d be happy to help get your business on solid footing come tax time.
Sohail Afzal, CPA, CMA, MBA
Sohail Afzal, (CPA, CMA, MBA) is the founder & CEO of GTA Accounting Professional Corporation. He is a highly experienced Chartered Professional Accountant and businessman himself and understands the challenges that many businesses face when it comes to cash flow management. As an experienced business consultant & tax advisor, he is helping companies grow by providing the technical, financial, and contractual information necessary for strategic decision-making.