We’re back to bring you the second part in our four-part series on Pre-Business Expenses. If you missed the first week, you will want to check out Training Certificates and Coaches. This week, let’s take a closer look at receipts you have been accumulating from those meetings and events you are attending before you are incorporated or registered as a business. Keep in mind, you can claim these expenses, but you also have to demonstrate it created results for revenue.
Most business are developed on the spot because a connection has been made between two parties to provide products or services. If you are the person on the side who is providing the service and are not incorporated or registered as a business, the meetings you had, travels you are taking and additional costs can be used as an expense against the revenues you will earn from that contract.
Before I talk more about revenues and expense, the definition of these are as follows:
Expense is something you incur to earn income from your business activities.
Revenue is income earned from business activities regardless of if you have received the amount for payment.
To you as a pre-business owner, you can deduct the expenses you get from things like meetings, events, cell phone charges, travel, and anything else that got you to that point of contract job. But there is a catch for some of it!
Meals and coffee meetings.
As much as I love to collect these receipts , you MUST put the client’s name on the top of the receipt and then what project it will be attached to for revenue. I have seen the Canada Revenue Agency audit meal receipts before and want to know the name of who you were dining with.
Travel for business.
This includes, travel to the client’s location, the price of products or anything that pertains to you being in motion to achieve what is needed to get things done for a job contract. To record these expenses you will need to keep a log book.
When you start getting your business incorporated or registered through CorePro8, you will then need to add the expenses of that into your record keeping using Quickbooks online or Xero (which can be done inside CorePro8).
This one can be a bit more touchy. For recording the expense you can not deduct 100% of the bill. You will need to take the percentage of time you spent on phone, and multiply it by the bill amount. So if you used 100 minutes out of 1000-minute, montly plan talking on the phone with clients, you take the 10% and multiply it by the total cost of your phone bill for that month.
So there you have it. Some items you can consider to deduct as a pre-business owner. It may be a few pennies here and there but it makes a difference in what you will be owing to the government in taxes. Next week is the topic on tips on what tools and supplies you can expense or bring into your business.
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