Corporate Tax Preparation for 2021

It’s no secret that tax preparation can be a pain point and neglected responsibility for most businesses. The nuances and uncertainty can make tax preparation confusing. But it doesn’t have to be that way. We have summarized information every corporation should know essential to file taxes on time and correctly. Subsequently saving your business money!

As a business owner in Canada you have the opportunity to choose from several different types of businesses. The most common are, sole proprietorship, partnerships, and/or corporation. Businesses typically choose a specific type of company because of their overall business goals, the number of employees, revenue projections, and how the company wants to be taxed. It’s important to note that a company can have one or more types of company and can be changed at any time.

A “Sole Proprietorship” is the most common type of all business structures that is the easiest and most cost-effective to set up, and puts you (the business owner) in control. You will need to register your new business name with the Ontario Ministry of Consumer and Business Services. Furthermore, as a sole proprietor, you have the potential to be put into a higher tax bracket as your business revenue is considered personal income. The biggest downside is there are limited protections discerning personal from business assets, putting you at risk if a creditor makes a claim against your business – your personal assets can be targeted to satisfy your debts.

Canada considers partnerships, a business structure that is formed and owned by two or more people. Costs and debts are usually shared equally amongst the members and owner. Options to limit liability can be considered and should be discussed with an expert. Similar to sole proprietorship, partnerships have the same restrictions and allowances. The benefit to this type of business structure is that if the income from your partnership is low or loses money, it can reduce your own personal income tax. Furthermore, there are three different types of partnerships – general, limited, and limited liability. Choosing the specific type of partnership will be determined by the type of liability risk a business would prefer.

A corporation is considered a separate legal entity on its own, removed from its owners and shareholders, and is formally structured with shareholders, directors, and employees. This type of business structure is ideal for bigger companies looking to go public, raise venture capital or invest its profits. As you might have guessed, corporations protect the owner’s personal assets from the business’s liabilities. Corporations can be not-for-profit, for-profit, professional corporation, public, and/or private.

This type of business structure is pretty unique, it is an incorporated business structure where the company is owned and controlled by an association of members. Rather than being structured to maximize profits, a co-op is structured to meet the expectations of its members. There are four different types of co-operatives, worker co-operatives, service co-operatives, producer co-operatives, and multi-stakeholder co-operatives.

The Canadian Revenue Agency (CRA). The CRA is formally known as Revenue Canada and the Canada Customs and Revenue Agency. The CRA is the main federal taxing authority. And is a government that administers tax laws for the Government of Canada and for most provinces and territories and international trade legislation.

Your business has the potential to flourish if you have planned and prepared your taxes properly. Each one of these business structures will require some form of tax preparation and subsequent filing. Here are some helpful tips we suggest to assure your taxes are filed on time and correct.

With all of the above information about business structures, choosing the “correct” business structure can be overwhelming, to figure out what to choose. Know that, nothing is permanent. You can always change the type of business structure as you grow your business.

Think of the bookkeepers as the heart of the organization. In fact, businesses won’t be able to properly function without these helpful employees. Briefly, bookkeepers record all of the financial transactions and are part of the process of accounting in business and other organizations. They prepare source documents for all transactions, operations, and other events of a business, including taxes. They also keep track of all documents and transactions are key to providing the accountant with correct information in a timely fashion.

No business should do their finances on their own. Having an accountant that has experience and specialized tax knowledge for your business type, can prevent you from overpaying on taxes. An accountant can look for savings, file for extensions (if/when needed), file the business taxes, apply for tax credits and make suggestions beneficial to the businesses bottom line immediately, and in the future.

Keeping abreast of new tax laws and potential benefits to your business helps the financial consultants make sure they don’t leave any money on the table. The type of business structure you choose will determine what your business qualifies for and how it will affect the bottom line of the business.

Every business should get to know the tax filing and payment dates. If not submitted on time, the government will penalize the company, costing the company money. For Canadian businesses, the most common deadlines are: