1. When should I incorporate my business?

   A: From a complete financial perspective, you should incorporate your business when you are able to retain savings in the corporation as profits in a corporation are taxed at a lower percentage. However, if you start to make over $60,000 a year to be paid to you from your business, then we might also want to consider incorporation as it opens to ability to pay yourself out in dividends, which can result in paying less taxes.

   However, a consequence for incorporation is that accounting fees will general increase due to more work needed to be done to file a corporate tax return.

2. Should I pay my workers as an employee or subcontractor?

   A: This heavily depends on the court test set out by CRA to help determine if your worker is an employee or subcontractor. Most people would generally want to be paid as a subcontractor because they can:

   1. Not have the income show on paper, whereas, an employee is issued a T4

   2. Subcontractors have the ability to deduct expenses that come from their work which will lower their taxes owing

   3. Employers will not have to make CPP and EI contributions

      1. Employers are able to terminate the contract easier without having to consult labor standard laws

         However, not anyone can be deemed as a subcontractor as there are 5 tests the CRA will use which includes:

         a. Control (The more control the employer has in the relationship regarding how work is done, the more likely the individual is an employee)

         b. Tools and equipment (If the employer owns the equipment, then the worker is more likely to be deemed an employee)

         c. Financial risk (If the employer is taking more financial risk in the engagement, such as paying the worker despite if the contract was successful or not, then the worker is more likely an employee)

         d. Responsibility for investment and management (If the worker has not made any capital investment, manage any other staff, or pays individuals to do the work, then the worker is more likely an employee)

         e. Opportunity for profit (If there will be no extra pay beyond the regular salary, then the worker is more likely to be deemed an employee because subcontractors have the opporunity to make profit and to experience a loss)

         If an individual is deemed as an employee while they are being paid as a subcontractor, the CRA will impose penalities for the EMPLOYER to pay the missing CPP and EI contributions of both sides. In short, the individual will not be deemed liable but may have their tax return changed.

3. What financial records should I keep for my business?

A: It is important to always retain your general ledger, adjusting journal entries, financial statements and trial balance from your prior yearend so that it will be easy transition for your new accountant.

In terms of receipts, it is important to have a copy of them for at least 7 years, either digital or physical as the CRA can request them within a 3 year time gap.

4. How come I do not see any prices for your service?

A: In accounting, it is difficult to quote a price due to the complexity of each business and individual. The purpose of a free consultation is to help uncover a price that would make sense for both parties. Our prices are fixed and no adjustment will be made without approval of both parties.