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Should my business register for HST?
Generally speaking, businesses that engage in a commercial activity in Canada (with a few exceptions) must register for HST unless annual taxable revenues do not exceed $30,000. A business can, however, voluntarily register if their annual revenues are below $30,000. Once a business has registered, it must remit the tax (see table below) it collects on its taxable sales less the goods and services tax it pays on expenditures. The timing for remitting the tax, completing the GST returns and instalment payments usually depends on gross revenues. All of this certainly has an impact on a business’ cash flows. The HST in Quebec, Revenu Québec administers the GST/HST. If your business is located in Quebec, visit the Revenu Québec web site.
Should I incorporate my business?
A corporation is a separate legal entity. There are both advantages and disadvantages to incorporate a business. The principal advantages to incorporating are for potential tax deferral purposes (a Canadian corporation’s rate of tax from active business can be as much as 25%-30% less than that of an individual taxpayer) and limited liability protection (shareholders of a corporation are generally not personally liable for the debts of the corporation). However, the main disadvantages to operating as an incorporated entity as opposed to operating as an unincorporated business or sole proprietorship is that it is more costly (both in terms of setting up the company and annual professional fees in maintaining the company). A review of your situation and objectives is important to determine your best route.
Can I pay a salary to my wife and kids?
In order to successfully claim a deduction of salaries to family members, such remuneration should be reasonable, be commensurate with the type of work or duties done by the family member, and be actually paid out. You should also remit deductions at source on such salaries where applicable.
Can I claim home office expenses?
You are able to deduct home office expenses if your home represents your principal place of business or you are using a designated room/area in your home for your business and you meet clients on a regular and ongoing basis. The type of home office expenses that you may claim are rent, mortgage interest, property taxes, insurance, utilities, repairs & maintenance, alarm fees etc.
Can I deduct meals and entertainment?
You can generally deduct 50% of the costs of meals and entertainment provided they are incurred for business purposes.
What other business expenses can I deduct?
There are a vast array of expenses businesses can deduct. However, in order to be able to claim expenses, the expenses must be incurred to earn business income (i.e. you cannot claim personal expenses), they cannot represent capital expenditures (i.e. such as a automobiles, furniture, & fixtures, computers, buildings etc) in which case such items are effectively capitalized and depreciated over time and they cannot be specified disallowed by the Income Tax Act. Please refer to the page entitled “List of Deductible Expenses”
Should I buy my car personally or through my business? Should I lease or buy the car?
The decision depends on a number of factors such as expectant number of business kilometres you will drive, cost of car, how long you expect to keep your car, financing vs lease terms offered, your cash flow & working capital situation etc. Accordingly, it is important to analyse and quantify your situation to make a rational decision.