It’s easy when starting a business to get caught up in the excitement of being your own boss, and not give sufficient consideration to the financial aspects involved. But, by putting sound accounting practices in place from day one, you can save yourself time, money and a whole heap of stress.
Here are some top tips for building strong accounting habits for your new business:
Hire a CPA
With guidance and support from a CPA in Langley, you can give yourself the legal protection and tax advantages you deserve by incorporating your business. A CPA can help make sure that all your documents are drafted properly, that you fully understand shareholder agreements, and that you’re guided appropriately through all necessary requirements from a regulatory perspective.
There are services online for incorporating a business, but nothing compares to the legal advice a professional can give you, and nothing will help you avoid expensive mistakes or issues with compliance, like they can.
Get a bank account and credit card in the name of the corporation
As soon as your business is officially incorporated, you should open a bank account in its name, and put in an application for a corporate credit card; this will help build up a credit history for the business and could be useful when applying for financing or loans further down the road.
Keep your personal and business expenses strictly separate
Using corporate cards for expenses that are personal can easily cause problems for your bookkeeper, and with your taxes. By using your personal cards to cover the cost of your living expenses, you can keep your personal and business expenses strictly separate and give your tax accountant a clearer understanding of the financial health of your business.
Select an accounting system
Crucial for tracking income and expenses as well as financial performance, and for simplifying tax filing, having an accounting system in place from the outset is essential. While working with accounting and bookkeeping services is strongly recommended, you can also use online systems such as Xero or QuickBooks. With access to data in real-time, and the ability to integrate with banking and payroll services, systems that are cloud-based are a popular choice.
Determine whether you should register for GST or PST
In Canada, any business that earns revenue of more than $30,000 over four consecutive quarters, must register for GST (Goods and Services Tax). In some provinces, PST (Provincial Sales Tax) registration may also be necessary. Working with a tax expert early on can help prevent you from incurring penalties, and keep you CRA compliant.
Determine how to pay yourself
An important decision to make, taking a salary, dividends, or both can have a significant impact on your overall tax situation. Salaries give an income that’s more predictable while also contributing to the Canada Pension Plan (CPP), but on the other hand, a certain amount of administration comes with it, like submitting payroll on time, issuing wage statements and payroll tax withholdings. When it comes to dividends, there is less administrative burden, but you can’t contribute to CPP and taxes are applied differently.
To determine a tax strategy that’s the most efficient and practical, and which supports the future goals of the business, working closely with a corporate tax accountant is advisable.
Building strong accounting habits for your new business right from the outset, can help you secure a future for your business that’s both financially sound and tax compliant. Hiring a tax accounting service and following the steps outlined above, should help set you up for sustainable success.