Whether you are preparing for small business ownership or have owned a business for some time, tax planning is a major component of managing a business.
The Canadian Federation of Independent Business reports that the total tax burden is the top concern of small and medium-sized businesses. This is especially important as income taxes can have a significant impact on your cash flow. The following is a list of simple tax considerations, however, I strongly encourage small business owners to seek professional advice in order to prepare tax returns and investigate methods to minimize tax liabilities.
Don’t surprise your accountant with a box full of personal/business receipts to sift through!
Overall you can minimize your family taxes and claim additional personal exemptions. I recommend you consult a professional to manage tax documentation as certain rules have to be met to qualify for this consideration.
The CRA says business expenses are “certain costs that are reasonable for a particular type of business, and that are incurred for the purposes of earning income. Business expenses can be deducted for tax purposes. Personal, living, or other expenses not related to the business cannot be deducted for tax purposes.”
I suggest business owners consult an accountant or the Canada Revenue Agency to determine which expenses are deductible for your particular business.
Common deductible expenses include accounting and legal (only expenses incurred to earn income), advertising (if used in Canadian media), business entertaining, automobile expenses (for a personal auto, only the portion used for business purposes), interest expense (business loans, credit cards, and lines of credit), repairs & improvements (improvements should be depreciated using capital cost allowance rates), and office expenses (including use of household expenses).
There are many other areas in tax management that can be discussed with your accountant. The basic idea is for you, as a business owner, to have a general idea of how tax planning can help you save money and manage your cash flow. Make sure you enlist the help of a professional and be up to date in changes in tax legislation that can affect your business. For more information please visit www.cra-arc.gc.ca.
Mauricio Vizconde is a BMO Branch Manager in Saskatoon.