If you are a business owner who is unsure about the need to engage an accounting firm, you are not alone in this dilemma.
For many start-ups and small businesses, saving costs is the foremost concern and rightfully so. Funds are often limited and the abundance of tax and accounting software makes ‘do it yourself’ appear to be a logical choice. As such, small business owners may end up relegating the task of engaging an accounting firm to the bottom of their priority list. Such an attitude often may not have favorable business consequences, considering that there may be several opportunities where small businesses can leverage the skills and resources of accounting firms to their benefit.
It is useful for a business owner to find the right accountant early on. How early depends on your specific situation but I would like to share some critical factors that you may bear in mind in reaching this decision.
1. You are thinking about incorporating your business
This is a good starting point for a conversation with a small business accounting firm. Incorporation may not make sense in every situation and it’s a good idea to obtain professional advice before you decide to incorporate your business. A business accountant can guide you on the legal structure that you may adopt and tax planning opportunities that may be available to you.
2. You have hired employees
As an employer, you are responsible for complying with the requirements of different government agencies, particularly the CRA and the provincial Workers’ Compensation Boards. A small business tax accountant can help you comply with these various requirements and keep you up to date if the requirements change.
3. You want to maximize deductions against business income
You are entitled to deduct certain expenses in calculating your taxable business income, but other expenses are only partly deductible while some are fully inadmissible. A business accounting firm can help identify which expenses to charge against business income to save taxes in a legal and optimal manner.
4. You are not familiar with sales tax regime
As a new business owner, you need to decide if and when you need to register for sales tax. The requirements for sales tax registration, collection and reporting vary across Canada. A small business tax accountant can help you manage the complexities of sales tax applicable in your specific situation.
5. You don’t know how to draw money from your corporation
There can be different avenues for you to draw money from the corporation, with each option having different tax implications for the corporation and you. With suitable professional advice from a small business tax accountant, you can draw an optimal amount from the corporation for your personal use with (hopefully) minimum tax burden.
6. You have personal income from different sources and are looking to save taxes
No one likes paying more taxes than they must. If you are already a high earner (maybe you have a salaried job and/or have investment portfolio), the addition of business income to your current income sources may push your taxes through the roof. You may benefit from tax planning strategies that a business accounting firm can help you implement.
7. You want to split income with your family members
Splitting income with spouse and other family members is subject to complex rules and requires careful tax planning. With the expertise of a small business tax accountant, you can create legitimate opportunities to split income and reduce taxes as a result.
8. You do not pay attention to bookkeeping
You may have a general aversion to numbers or you may not have enough time to devote to bookkeeping. Regardless, maintaining up to date books for your business is essential for timely compliance with tax filing requirements and, more importantly, is critical for you to evaluate the direction that your business is headed. A business accounting firm can guide you in setting up bookkeeping in Cloud, train you to do bookkeeping inhouse, or maintain it for you as an outsourced service.
9. You need a bank loan
A business accountant can be useful in putting together a bank loan application. Bankers often require business plan, including financial projections of your business for the next few years. While you may have a fair idea about business growth expectations over the following years, a business accountant can select objective assumptions, given the industry dynamics and your potential for growth, and explain to the lender how you meet the qualifying criteria.
If you find yourself in any of these situations and have not yet engaged an accounting firm, it may be time for you to start looking for one. Engaging the right accountant is critical to help you run and grow your business without stressing about your finances and taxes.
We are a CPA firm in downtown Toronto that provides tax, accounting, corporate and advisory services to businesses. We would be happy to answer any questions that you may have.