We’re back with the final entry in our month-long series on pre-business startup expenses. If you missed the previous entries, you can catch up by checking them out with these links: Pre-business: Tools & Supples ; Pre-Business: Meals and Travel.
Today, we address the fees spent on incorporating or registering your business.
The great thing about having your own business is all those write-offs, right? Not so fast! Just a reminder, there are limits to what can be deducted, and you must always have the correct proof of purchase when submitting your expenses to Canada Revenue Agency (CRA).
Before you can deduct the fees spent to incorporate or register your business let’s talk briefly about the different business structures and the cost to register or incorporate a business.
There are three types of business structures (excluding non-profit/registered charity) that are recognized by CRA: Sole Proprietorship, Partnership, and Corporation.
This is the fastest, most affordable, and easiest way to set up your business, but it is also the one that exposes you to the most risk. You are personally liable for cases brought against your business, and you may have to leverage your home and personal assets to pay off debts or settle claims. You also pay personal income tax on the net income from your business.
A partnership may be among individuals or corporations. Each partner contributes to the obligations of the business. The risks, along with the profit or loss, are shared among the partners.
A corporation is classified as its own entity. That means your personal assets are not taken to pay off the business’ debts or to settle claims, unless you have used personal assets, such as your home, as collateral. Corporations are taxed at a business –not personal– rate, and income tax filing is due six months after the end of each tax year. Since a corporation has limited liability and a separate tax rate, the ability to raise, maintain, and leverage revenue is far greater than as a sole proprietor.
When you are ready to start your business, more details and expanding information will be provided to you when incorporating or registering a business through CorePro8.
Based on what province or territory you are located in Canada, the fees will vary and the required certificates will be needed to make sure you comply with the laws from where you reside. These fees are as of Sep 2019, and do not include the name of a business and are paper submission.
The fee set by a province or territory to incorporate in Canada can be as low as $260 (New Brunswick), to as high as $454.75 (Nova Scotia). Just a reminder these are the fees set by the province or territory. You will always need a third-party to help ($150- $2,000). No one likes to shop around, but it is always recommended to not take short cuts either.
The fee for registering a business has always been around $100.
Once you have selected the method of incorporating/registering a business, the receipts (that includes CorePro8), and documents need to be submitted to your accountant so it can be expended.
This wraps up the Pre-Business expenses. If you have any questions or are not sure about any part of this, please post your questions or concerns on our facebook page, and we will help you figure it all out.
Next week, we are going to dive into ADVERTISING with SOCIAL MEDIA. This can be a very costly learning lesson if you do it wrong or hire the wrong company to help. CorePro8 hopes to mitigate the risk.