Accounting for Start-ups Presented by: Julia A Lee CPA, CA Gordon B Lee & Company CPAs

Agenda Sole proprietorship vs Corporation Eligible business expenses Log book Online sales GST/HST requirements Sub contractor vs employee Hiring employees

Sole Proprietor vs Corporation Report income and expenses on personal return Register the name of business Personally liability Less compliance cost Easy to set up and close Separate legal entity Corporate veil? Use a lawyer or do it yourself Select an accountant Annual tax returns Financial statements

Income and Revenue Sales – when is it a sale Service is complete Manufacturing – shipped to customer Money you receive for service or goods

Business Expenses

Eligible Business Expenses Advertising and promotions – include networking fees Meals and entertainment – clients/customers (50% deductible) Insurance Bank charges Interest expense on bank loans or line of credits Office expenses - supplies Professional fees – legal and accounting Motor vehicle expenses( fuel, interest, insurance, maintenance and repairs, license) refer to Log Book Repairs and maintenance to your office Travel expenses Home office expenses (heat, electricity, insurance, maintenance, mortgage interest, property taxes)* area for business use/ percentage Sub contractors and employees wages

Log Book Require to determine the percentage of your vehicle that is used for business use. Odometer reading at beginning of year Make down every business related trip in the log book – total km’s of the trip, date and reason for the trip. Odometer reading at end of year Log Book can be a physical book or an app

Log Book Log book app should only be used if it is Printable

Car expense - example Total Gas = $2,000 Car Insurance = $1,200 R&M =$1,000 Total car expenses for year =$4,200 Odometer reading beginning of year 5,000km Odometer reading end of year 20,000km Total Kms for business trips = 6,000km % of expenses for business = 40% Total business car exp = $1,680

Online sales Registrants who has physical presence in one province and sells goods to consumer in other province Charge GST/HST based on the where the goods are delivered Example: Ontario service provider providing services to consumer in Newfoundland required to collect HST at rate of 15% Shipping to USA – Contact Cross Border Professional ASAP Wayfair/Shopify Over 10,000 tax districts

Introduction What is GST/HST (13%): Goods and services tax Harmonized sales tax Taxable supplies: Most goods and service supplied in or imported into Canada are subject to GST/HST Zero rated supplies (0%) GST/HST is not charged Groceries, agricultural products, livestock, most fishery products, prescription drugs, hygiene products

Sales tax rates by province Type PST GST HST Total tax rate Alberta 5% British Columbia GST+PST 7% 12% Manitoba New Brunswick 15% Newfoundland and Labrador Northwest Territories Nova Scotia Nunavut Ontario 13% Prince Edward Island Quebec GST+QST 9.975% 14.975% Saskatchewan 6% 11% Yukon

Registration for GST/HST You have to register if: Sales over $30,000 – have to start charging GST/HST Taxable goods and services in Canada Effective date of registration is the day of supplies go over the threshold amount (within 29 days from that day) As a registrant you can claim Input tax credit (ITCs) GST/HST paid or payable on the purchases and operating expenses related to your business activity Small supplier – refers to a person whose revenue (along with the revenue of all persons associated with that person) from worldwide taxable supplies was equal to or less than $30,000 ($50,000 for public service bodies) in a calendar quarter and over the last four consecutive calendar quarters.

Reporting periods Threshold amounts Assigned reporting period Optional reporting period $1,500,000 or less Annual Monthly, Quarterly More than $1,500,000 up to $6,000,000 Quarterly Monthly More than $6,000,000 Nil GST/HST return is due Canada Revenue Agency – best to file online

Sub contractor vs Employee

Factors to determine Control Tools and equipment Financial Risk Hours worked Enter in contracts/sales Pay suppliers Independent Tools and equipment Ownership Requirement for up keep of tools and equipment Financial Risk Investment responsibility Opportunity for profits

Employees

Hiring Employees Employee’s Social Insurance Number (SIN) Name, address , date of birth Complete TD1 forms for Federal and ON taxes Job description Have Employee filled out required forms – ex confidently, understanding your business policies and procedures – ex phone use Payroll deductions requirements Remit/submit money to CRA by the 14th of preceding month CRA – payment online Personal files/information locked up or password protected

Thank You!