5 things
to know
about the
taxation
of a new
business

The author of this article is Frédéric Roy-Gobeil, CPA, CGA. Frédéric has a Master’s degree in taxation. He has been helping Canadian SMBs do their financial statements and corporate taxes for over 10 years, primarily through his company T2inc, which has developed a turnkey solution to prepare corporate tax returns.

Are you thinking about implementing a project that you have been cherishing for a long time: founding your own business? Well, here are a few taxation concepts that you should know before embarking on this venture!

01 You have to choose the right legal structure

When you create your new business, it is important to be aware of the various legal structures that exist in order to choose the most appropriate one. Sole proprietorships, partnerships, limited partnerships, joint stock companies, cooperatives and NPOs are all legal structures which can be used to establish your business in Quebec. However, each one is unique when it comes to taxation.

02 It is important to keep your business invoices for your tax reports

Many successful entrepreneurs have one thing in common, they take full advantage of the tax deductions that they are entitled to. From this perspective, a multitude of tax credits on expenses can be granted to businesses, as long as they respect certain rules.

Obviously, expenses that are eligible for tax credits must be linked to professional activities and be a reasonable amount. You also have to keep each invoice to prove that you did indeed incur each expense.

03 Amortizing expenses is a way to lighten your tax burden

Most of the assets that you purchase for your business will depreciate in value over time. Amortizing your expenses takes this notion into account.

As an entrepreneur, you have the possibility of increasing your annual expenses without increasing your cash flow by depreciating your equipment and tangible assets over a number of years defined by the tax laws. This way of reducing your tax burden is called “capital cost allowance” or “CCA”.

04 Consider using the tax registry

Even if you are a small business, you should consider using the Revenu Québec GST and QST registry. Indeed, once your income from the sale of products or a service exceeds $30,000 per quarter, you will no longer be considered a small supplier by the tax authorities and you will be obligated to register. So why not do it now and avoid unfortunate consequences?

05 A tax accountant is an essential ally

Finally, all entrepreneurs should take the time to talk to a tax accountant, whether it is before founding an SMB or once it is up and running. It's the best way to make sure that you respect the rules imposed by the tax authorities while benefiting from all the deductions you are entitled to.

This last point is definitely the most important one to remember. Take the initiative of contacting a business taxation specialist if you haven't done so already. You will receive the helping hand that could make all the difference and lead you to success!