One of first decisions you have to make when embarking on your small business venture is the type of business structure to select. There are essentially two choices – business registration (sole proprietorship or partnership) or incorporation. Like many small business decisions, the answer can be ambiguous and depends on the business owner’s specific set of circumstancesRead More
One of the great benefits of working from home for freelancers, the self employed and small business owners is that you can deduct the costs relating to the space that you use to work. This can result in a significant reduction in your tax bill for costs that you would incur regardless, giving you one more reason to love being your own boss.
Criteria for Deductibility:
For home office expenses to be deductible, they have to meet the following criteria:
- It has to be your principal place of business i.e. you cannot deduct home office expenses if you have another office that relates to your business, elsewhere, even if you work 22 hours a day or you check your blackberry in bed.
- The space designated as your home office is used to earn business income and/or you meet clients or customers on a regular basis. You can deduct expenses relating to the workspace in your garage which is used for home improvement projects.
One of the most challenging aspects of starting a new business is knowing what to charge for your services. In economics terms, the ideal price is where demand meets supply. The problem, of course, is that at the beginning we tend to have a lot more supply than demand. This can lead to imprudent pricing decisions. Below are 3 considerations to take into account when determining the price for your services:
Perhaps the most daunting aspect of starting a new small service based business is building a client base. On the other hand, there is nothing quite so exciting as getting those first few clients.
When trying to generate new business, it is important to cast a wide net as you never know where potential clients may be lurking. There are many ways to build a client base, even with limited resources. I have outlined some below:
One of the most pervasive problems that face small business owners, particularly in the initial and growth stage of their enterprise, is maintaining sufficient cash flow. Many businesses with great potential have suffered an untimely demise due to their inability to pay their suppliers, employees and revenue agencies (always pay your government obligations otherwise Revenue Canada and Quebec will take matters into their own hands and potentially freeze your bank accounts). Often these issues can be prevented through a greater awareness of your small business’ cash flow requirements along with a proactive mindset. This list focuses on ten different ways you can manage this process to reduce the number of potential crises that arise:Read More
Attending conferences and investing in ongoing training can be a great way for small business owners to keep current on industry developments and improve their skills. It also allows for networking opportunities and occasionally includes trips to exotic locations (and Las Vegas), which can be a nice break. The best part is that the cost of both the events and travel are deductible against your business income, subject to specific guidelines discussed below.Read More
It is the time of year when many accountants and tax preparers live, breathe, eat and sleep taxes (leaving very little time to write about them!). And while much of it is routine, there are numerous issues that arise, the treatment for which is not immediately apparent and can actually be quite interesting (perhaps more so to a tax nerd), some of which are compiled below:Read More
One of the responsibilities of being a small business owner requires having to submit a variety of tax declarations by specific deadlines or face consequences that involve penalties, interest and if left long enough, aggressive letters from Revenue Canada and Revenue Quebec. The bad news is that there is no way around it and ignoring it does not make it go away. The good news is that if you are prepared and organized it doesn’t have to be painful and can actually be quite straightforward with the right infrastructure. The first step is to be aware of the deadlines and understand the obligations that go along with it:Read More
As the end of the year draws nigh, it is time for business owners everywhere to start contemplating some end of year tax planning tips to not only ensure that they can maximize their tax deductions and reduce taxes payable, but to streamline the tax filing process in the New Year. Even if you are incorporated and your year end date is not December 31st, it is a good time to take advantage of calendar year deadlines for personal tax planning purposes.Read More
The Canadian real estate market has been a good place to invest in recent years, although comparisons to the US real estate bubble, which finally culminated in 2008, are continuing to intensify. Potential homeowners often find themselves seduced by their vision of the perfect home in the perfect neighbourhood and end up in a difficult situation, referred to as “house poor”, where the majority of their disposable income goes to paying down their mortgages. This can be avoided by ensuring that you realistically assess what you can afford and being financially responsible.Read More
While the Federal 2013 budget or the (more interestingly named) Economic Action Plan delivered on March 21, 2013 was not earth shattering in any way, it is interesting to note how well Canada is performing relative to other countries in the G7. According to the EAP, The Canadian economy has experienced the best performance among the Group of Seven (G-7) countries over the recovery, with the strongest record of economic growth and job creation. 950,000 jobs have been created since July 2009, the majority of which are full time positions in high wage industries. Additonally, Canada is only G-7 country to also have more than fully recovered business investment loss during the recession. And although the recovery has been broad based, investment in the manufacturing sector has been particularly strong.
The EAP also notes that while GDP growth over the next five years remains unchanged, expected growth for 2013 has been revised to 1.6% down from 2.0%. This will be offset by higher estimated growth between 2015 and 2017. Consequently, economists expect lower inflation in 2013. The CPI inflation in January 2013, compared with the prior year, was 0.5% while inflation for all of 2013 is expected to be lower than average at 1.3%. They also expect that the Canadian dollar will remain at par with the US dollar.
The 2013 budget introduces and extends certain initiatives for small business, while also impacting taxes payable for small business owners:
There are many employees out there to whom the promise of self-employment aka freelancing aka independent consulting (all of whom are ultimately small business owners) seems extremely appealing (particularly with a comfortable pair of pajamas). You might crave the feeling of accomplishment that is no longer possible at your current place of employment; you might want greater flexibility or feel that you are not being compensated enough for your skills or perseverance. Or you simply might want a change of pace.
While being self-employed can accomplish all of these goals, the transition itself is not as simple as it might seem nor is it the right decision for everybody. There are many factors that need to be considered and many mental and financial preparations that should be made prior to taking this potentially life altering decision.
For the third year in a row, the Quebec Sales Tax (QST) will be changing. Fortunately, the change is not to the rate, which effectively remains the same, but rather an effort to harmonize the QST with the GST. Consequently, the most significant change is the method by which the rate is calculated.
In the past, the QST used to be calculated on the total sale plus GST. As a result the published rate was 9.5% while the effective rate was actually 9.975%. The harmonization of the GST and the QST requires that the QST be charged on the sale amount only, without the GST. As such the published rate and the effective rate will both be 9.975%. This is illustrated below: