We’re back with the final entry in our four-week series on pre-business startup expenses. If you missed the first three blogs, make sure you check them out to learn about pre-business expenses on Meals and Travel and Tools and Supplies.
In this blog we’ll address how to prepare for registration and incorporation fees when you are starting a business in Canada.
You’re probably thinking “the great thing about owning a business is all those write-offs”, right? Not so fast! Its important to remember that 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 that you spent to register and/or incorporate your business, let’s talk briefly about the different business structures and the cost to register or incorporate a business.
The 3 Business Structures
There are three types of business structures (excluding non-profit/registered charity) that are recognized by CRA: Sole Proprietorship, Partnership, and Corporation.
1. Sole Proprietorship
This is the fastest, most affordable, and easiest way to set up your business. However, it 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.
2. Partnership
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.
3. Corporation
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. 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, CorePro8 can give you advice on your business startup steps. We guide you through important business decisions such as choosing your business structure, choosing your business name, payroll, and bookkeeping.
Business Registration and Incorporation Costs
Based on your province or territory, the fees for registering and/or incorporating your business online will vary and the required certificates will be needed to make sure you comply with the laws from where you reside. The following fees are as of September 2019. They do not include the name of a business and they 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 fees are 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 we recommend that you be mindful and not take shortcuts.
The fee for registering a business has always been around $100.
Deducting Business Registration and Incorporation Fees
Once you have selected the method in which you will register and/or incorporate your business, your receipts and documents need to be submitted to your accountant so it can be expended.
Remember, using a program like CorePro8 allows you to write off that expense!
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.
