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How to pay yourself as a corporation

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“Siri, how do I pay myself if I’m incorporated?” | Photo by Viktor Hanacek via Pic Jumbo

 

And now the fun part: reaping the well-deserved rewards from your incorporated business via yummy cash.

When it comes to paying yourself as a corporation, it comes down to this: Salary and dividends.

 

Salary* more expensive option

  1. Add yourself to the company payroll and receive a T4
  2. Company will have to pay payroll taxes on your behalf
  3. Accumulate more room in your RRSPs to save on personal taxes

Dividends

  1. Get a bookkeeper to figure out how much money you took from the business
  2. Your accountant will declare the money you have taken from the company as a dividend
  3. Get your accountant to issue a T5 from the corporation

WARNING:

  1. You cannot be a contractor to your own corporation because the Canada Revenue Agency (CRA) is missing out on taxes.

Register for our “Should I Incorporate” webinar on August 24 at 1pm today here to learn everything you need to know before you decide to Inc. up!

Hack: I’ve incorporated. What’s next?

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Handshake to that! | Photo by Viktor Hanacek via Pic Jumbo

 

You did it! Took the plunge and incorporated your small business.

Now what?

This week, we provide you with the bookkeeping floaties to make sure you do not sink in the sometime cold and unnerving incorporation waters.

FIRSTLY, make sure you do not forget to do the following:

  • Pat yourself on the back. You just got yourself a brand new business for gosh sake!
  • Pick the official operating date
  • Get a new set of books and accounting records

THEN…

  • Apply for new tax registration numbers
  • Open new bank account and credit card, merchant service provider *if applicable
  • Change bills to be in the name of the corporation

HACK:

  • We recommend you see a lawyer before incorporating
  • Remember to put your GST/ PST numbers on your invoice template
  • Track any personal cash you put into the corporate bank account

Next week, we look at how to pay yourself when you are incorporated.

Register for our “Should I Incorporate” webinar on August 24 at 1pm today here to learn everything you need to know before you decide to Inc. up!

Beginner’s Guide: Why incorporate?

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It’s incorporation o’clock!

Incorporation can be the best thing that ever happened to you and your small business, or a wrecking ball moment that sinks you into poverty.

Here are the pros and cons of incorporating:

PROS

You are NOT your business

Separate Entity

  • Reduces Personal Liability
    • When you are a operating as a sole proprietor, your personal assets can be seized to pay your business debts. If you incorporate your business, it becomes it’s own separate entity in terms of liability and financial responsibility.

Though your business is still liable for any debts it incurs, as a shareholder your personal assets are protected.

Unlimited Lifespan

  • Unlike a sole proprietorship which begins and ends with the owner, corporations can exist regardless of ownership changes.

Tax savings

  • Corporate tax rate is 13 per cent on the first $500,000 of net income
  • Personal tax rates increase as your income increases

CONS

They say, “Nothing in life worth having comes easy…” and such is often true with business incorporation…

 

Cost to incorporate

  • $700-$1,000 with a lawyer (one-time charge)
    • Benefit: They will look at the long-term picture to ensure you have the correct corporate structure to maximize tax savings.

More government reporting

  • Annual report for the BC Corporate Registry

More tax returns

  • Once you incorporate you will have to file a corporate tax return AND a personal tax return

    • $1,500/ year if you choose a Homeroom-recommended accountant

Increased accounting costs

  • If you thought that your quarterly bookkeeping package was on the high end, you will be rattled by the cost increase once you incorporate
  • At Homeroom, minimum $2,400/ year for a straightforward home-based business

 

On the agenda for next week?

  • Hack: I’ve incorporated. What’s next?

Stay tuned!

Webinar: Register for our “Should I Incorporate” webinar on August 24 at 1pm today here.

Questions you should ask before you incorporate your small business

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Sometimes no matter how hard and long you meditate on a question, it takes a guiding hand of a professional to light the darkened path | Photo by Annie Spratt via Unsplash

Say, “Holla” to Homeroom’s new small business incorporation series!

Deciding to incorporate your small business can save you money and legal hassle down the road. Do it at the wrong time, though, and you’re looking at a barrage of fees coming at you faster than you can say, “Open for business!”

So how do you know whether or not you should incorporate and what do you do once you take the plunge?

Over the next few weeks, we will look at the top questions you should ask before you incorporate your small business:

Register for our “Should I Incorporate” webinar on August 24 at 1pm today here to learn everything you need to know before you decide to Inc. up!

Xtreme-EffeX: Extremely creative and innovative design with impact

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As part of our Client of the Month series, we look at Xtreme-EffeX, top custom ironworks and fabrication biz with swag!

Imagine this: A beautiful four-story staircase with glass landings. You’re at the top floor, awestruck, as you glance down at the transparent tier and see the basement at the bottom of the house.

Xtreme-EffeX,  Custom Design and Fabrication, has been making projects like this a reality for residential and commercial properties in Vancouver and throughout North America since 2007.  In fact, they designed and built the swanky residential glass staircase mentioned in the first paragraph.

The brainchild of Ryan Ramsdale, Owner/ General Manager, who built Xtreme-EffeX out of his garage, has evolved into a flourishing retail and fabrication hub that connects businesses, homeowners and developers to the most cutting-edge design trends and products.

 

 

 

Photo: Ryan Ramsdale admits he does not have too many photos of himself. It is evident that his focus has always been on his family and business.

 

With Xtreme-EffeX inventive design-build process, the in-house design team creates unique, functional and durable products that FIT.

Their motto? “Customize rather than compromise. Because custom fits!”

It’s design with impact. With passion, precision and hands-on approach, it’s high-end work that exceeds expectations, going above and beyond with their out-of-the-box approach to realize your vision no matter how seemingly far-fetched or impossible.

Surely, it is no surprise the 10-year-old business has a five-star presence in the industry with access to the best products and materials on the market and the most skilled fabricators.

Whether it’s your outdoor living space that needs sprucing up or you are looking for a special installation project, or security solutions, Xtreme-EffeX is there to save the day, and make it a lot more awesome!

With no signs of slowing down, you’ve probably seen their eye-grabbing work at upscale restaurants, lottery show homes, and designer retail stores.

As part of our “Client of the Month” series, we caught up with Ramsdale on everything from life as a business owner to advice for new startups:

 

What motivated you to start your own business?

“The experience I gained through the industry and the drive to want to continually create custom products that my team and I can be proud of.”

What do you enjoy most about being a business owner?

“Through hard work, the freedom and ability to create a schedule that benefits me, and especially my family.”

 

What’s your favourite part about the fabrication industry?

“The ability to take raw materials and create functional items, using different processes and practices, to achieve what most people don’t see as possible.”

 

What’s your #1 motivator?

“My #1 motivator would definitely be my family. Working hard and developing a business that allows me the time to be there for and with my family.”

 

Describe your ‘a-ha’ moment

“Being able to confidently rely on my team to carry out the tasks that I would typically feel to be my responsibility. Releasing the control and being pleased with the results.”

 

What’s your vision for the business?

“To have self-sufficient business with a dedicated team of motivated fabricators and designers that consistently exceed the expectations of our customers and clients in every aspect.”

 

What advice do you have for other people who would like to start their own business?

“‘With dedication to your dream, you can spend a few years of your life like most people won’t, so that you can spend the rest of your life like most people can’t.'”

Anonymous quote

 

How do you achieve a work/ life balance?

“With the technology of today, it makes it very difficult to be able to turn work ‘off’. But it’s planning for tomorrow, today, then actually turning work OFF and enjoying what it is that we work so hard for.”

 

Who could benefit from your services?

“Home builders, home owners, architects, developers, or anyone with a design idea or concept that needs to be brought to life through our design/build process.”

 

Find Xtreme-EffeX online here and check out all the neat things they do on the daily to make living and work spaces way cooler!

 

Five ways your business will benefit from having a professional bookkeeper

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Girl working on her MacBook in caffe by Viktor Hanacek

Sometimes it’s easy to get caught up in the day-to-day business operations that you miss the little things that can add up to big and pricey mistakes. Whether it is a late GST filing or a missed payroll remittance payment, we are here to help with the financial side of your small business.

Here are five ways your business will benefit from having a professional bookkeeper in your corner:

  • We take on your deadlines. We take this so seriously that we will pay for late filing penalties that you incur if we miss one of your deadlines.
  • If you have cash-flow problems and owe money to the CRA for your various accounts, we can help prioritize your payments so that you are incurring the least amount of penalties.
  • Do you have employees OR you pay yourself a salary and remit source deductions?
    • It is very easy to mess up payroll. We have found this is the number one area that clients always do incorrectly if they are doing their own bookkeeping. Even though the CRA has the online payroll calculator available to everyone, we have yet to see someone that has used it correctly.
    • Consequences of payroll mistakes:
      • Penalties and interest for late remittances are assessed on a monthly basis.
      • Payroll non-compliance is considered by the CRA to be the worst offence. Eg We had a client who “did” her own T4. She calculated her own deductions, remitting wrong amounts and din’t even file the T4 resulting in late filing penalties. This was a highly educated professional in her field who mishandled payroll. Even if you only have yourself on the same salary every month, it is still possible to do it incorrectly.
  • We will not file a return that is not reasonable by CRA standards.
    • Our job is to keep you off of the CRA radar. We have filed thousands of returns of all types. We will let you know if a return does not make sense before we file it and could cause the CRA to investigate it. We will work with you to make it reasonable.
  • We have not had an audit that we were not expecting.
    • Certain types of returns are red flags for audits eg. large GST refunds. We anticipate this, let the client know in advance that we are expecting this, and tell them how we are going to handle it.

Leave the books to your professional bookkeeper buddies and focus on what you love! 🙂

Why having a professional bookkeeper is important for the success of your business

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The success of your business is OUR business. We have the big picture in mind. It is much more than posting income and expenses (though we can never have enough of that sweet click click click sound of the POSTED stamp as it graces your business receipts).

Call us your personal bookkeeping miracle workers! We will turn your messy, torn-up pile of receipts into a beautiful, sparkling file your accountant will be proud of.

Not convinced?

Here are five reasons why having a certified bookkeeper on your team of professionals is important for the success of your business:

  • Corporations: We know what an accountant needs to file your corporate year-end
  • Actually reconciling your bank and credit card to the statement balance. It is more complicated than just checking off everything in the bank rec screen in Quickbooks. Go figure!
  • Reviewing all of your accounts for accuracy and highlighting any issues so that the accountant knows where to direct his/her attention
  • We will deliver your year-end in a reliable software that the accountant is used to
  • Sole Proprietor: We know what is needed to complete your year-end so we can file your tax return and/ or GST/ PST returns

Why is all this important?

  • You will save on accounting fees if the accountant receives a clean set of books in a format they are accustomed to seeing
  • The accountant and bookkeeper speak the same language. You will save time because the accountant will ask the bookkeeper questions about the year-end instead of asking you
  • Sole proprietors: similar to above, but we will do your bookkeeping anticipating doing your tax return at the end of the year. We will look/ask you for any additional write offs that you may not have provided to us based on other businesses in your industry. Our job is to ensure that your tax liability is as low as possible while still compliant with the CRA rules
  • We will ensure that you get the maximum write-offs possible based on our experience filing thousands returns
    • We will ask you about certain items you might never have thought you could even write off eg: Business insurance, WorkSafe BC, Meals
    • We will ask you about incomplete entries we think should be there eg do you have certain months missing for rent or telephone? Did you pay for utilities?
    • Forgot your bank and credit card statements? We will send you a reminder to send us your statements with any additional business expenses that may not be in your folder
  • We will review your expense totals to make sure they are reasonable

Stay tuned for next week’s post to see how your business will benefit from having a professional bookkeeper on your team!

Why hire a professional bookkeeper?

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Sure, we’re smart, cool and fun! But as a small business owner, do you need a professional bookkeeper?

We have the big picture in mind. It’s much more than posting income and expenses. We know what needs to be done to file your year-end accurately while ensuring that your tax bill is as low as possible. (BOOYAH! And no mad taxman high-jumping it to your back!)

Over the next couple of weeks, we will elaborate on two topics:

  • why having a professional bookkeeper on your team of professionals is important for the success of your business
  • how your business will benefit from having a professional bookkeeper on your team

Need a bookkeeper, like, yesterday and can’t wait for next week’s blog post? Get the process rolling now here. 🙂

Tax Installment Series: How do you calculate your tax installment payment?

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Tax installments got you scratching your brain?

Thanks to our tax installment blog series, you know that tax installment are pre-payments made on certain dates to avoid paying a large tax bill in a lump sum on April 30th and to consider your net tax owing when paying by tax installments

This week, we keep the tax installment party going by answering two important questions:  how to calculate your installment payment and when do you have to pay your 2017 installments?

 

How do you calculate your installment payment?

Here are three ways to calculate your installment payments:

  • No-calculation option: Recommended for individuals whose income, deductions and credits stay about the same from year to year.
    • Canada Revenue Agency (CRA) will determine the amount of your installment based on your latest assessed tax return
    • CRA will send you a reminder
  • Prior-year option: This is the best option if your 2017 income, deductions and credits are similar to 2016 amount but WAY different from those in 2015.
  • Current-year option: This is the best option if your 2017 income, deductions and credits are SUPER different from 2016 and 2015.
    • You determine amount of your installment payments based on your estimated 2017 (current year) net tax owing, CPP contributions payable and EI premiums. Use the Calculation chart for installment payments for 2017 to calculate your total installment amount due.

 

Here’s an important tip from CRA:

When do you have to pay your 2017 installments?

If you are required to pay installments, the CRA needs to receive your 2017 installments BEFORE December 31, 2017. 

Here are suggested dates to pay your tax installments for 2017:

  • March 15
  • June 15
  • September 15
  • December 15

Whether you pay in a one lump sum or make monthly installments, as long as you pay your full installments before December 31, 2017 you will avoid installment interest. 

If you missed your March 15, not to worry. Just make sure you make it up before the end of the year.

If you are unsure if you have to pay installments, go here.