Canada’s GroYourBiz (GYB) initiative has welcomed the support of one of the nation’s leading professional services companies, KPMG, as a sponsor for the organization.
GYB assists women entrepreneurs and business owners through peer advisory boards. The partnership with KPMG aims to help females in the business community to develop professionally and to expand their business.
Barbara Mowat, GYB president, said KPMG would provide a great service to the organization.
“All businesses, no matter their size, face issues of cost control,” Mowat said. “Welcoming KPMG in Canada as a sponsor is sure to set our members up for even greater success with their diversified industry knowledge and business advice.”
As GroYourBiz’s newest Canadian sponsor, KPMG will join the GYB advisory board to support GYB in its efforts to help Canadian female entrepreneurs succeed in Canada and abroad.
This support was evident at a recent Kamloops advisory board meeting, during which KPMG partner Sue Porter shared her knowledge on the implications of taxation to both incorporated companies and proprietorships.
Porter was one of the first females to be named as a partner with KPMG in Kamloops. A practicing Certified General Account, she assists small to medium size companies and individuals to help them achieve their goals and dreams.
The Q&A below covers some of the questions Porter said she often addresses with her clients.
How long do I need to keep my taxation records for?
Whether your business is incorporated or not you are required by law to keep records for a seven year period,” says Porter.
She also encourages people to place a date on the documentation received from your accountant after your taxes are complete, so you know what date you can shred your documents.
What kind of write-off is a business expense?
“It really comes down to if you’ve incurred something that’s actually going to assist you and generate business income, and you can validate that argument, it’s probably a business expense,” says Porter.
She advises that making a mortgage payment or paying for your kids daycare is not likely to be a legitimate business expense. Porter also warns those that sell products online to take caution.
“Your accountant is going to ask you information about how much you sell online, because you’re required to disclose that information to the government. The government are trying to determine if there’s an underground economy.” she said.
Will Revenue Canada go back further than seven years if you’re being audited?
“No, usually they will go back one year first, then if they find something questionable they’ll go back two to three years, but they’re not going to go back more than seven years,” says Porter.
She adds that it is possible to apply to Revenue Canada to destroy your records earlier, but Porter has never heard of this process being done.
“I worry that if you ask, they might pay you a visit,” said Porter jokingly. “Our observation in the last two years is that there are ton of auditors out there right now. They’re sending out auditors in droves . . . they’ve hired double the amount of auditors than I’ve ever seen. If there’s ever a time to be conservative, it might be 2014,” advises Porter.
Do I need to keep a log book for my automobile?
“Yes,” says Porter. However she advises that you can avoid the traditional method of keeping a log book in your glove box and pulling it out for each trip in by using a smartphone app.
What is the difference between proprietorship and incorporation?
You are taxed at gradual rates/personal rates, which can be quite high for those that make up to $150,000 yearly you are taxed at almost 47 per cent. For businesses that are operating as a proprietorship and it makes $100,000 but only spends $20,000, the business is taxed on $100,000.
Whereas a corporation in B.C. on your first $500,000 you pay tax at 13.5%.” “If you have multiple corporations and they are related, they will share the same $500,000. In other words you have $500,000 small business limit. If you have two corporations that are owned by the same person or same group of people they share that same $500,000. If you made more than $500,000 between the two someone will end up paying tax at a higher rate which is 26 per cent.
The year-end for a proprietorship is January to December, you cannot change this date. For incorporated companies you can choose a year-end that fits your business.
“When you’re incorporated, the business is a totally separate legal entity from you,” says Porter.
When you are a proprietorship you own the assets.When you have an incorporated company the company owns the assets, as the corporations money was used to purchase the asset.
I want to incorporate to risk being sued, is this a good idea?
“Yes, if you have a risky business where insurance is not going to cover the costs of being sued, then it’s probably best to incorporate,” advised Porter.
I want to incorporate, what key things should I know in terms of taxation?
“It’s not a one size fits all for everyone, says Porter. “When people come to see me, I usually ask them very specific questions up front.”
“Are you spending everything you’re making?” “If you are, then you’re probably not going to benefit from being incorporated,” says Porter.
“Do you have a spouse or a child over the age of 18 that’s in a lower tax bracket than you are?” “If the answer is yes, potentially you can benefit from incorporation,” she said.
“How good are you with math?”
Porter says when she asks this question she always goes back to the first scenario. If her client tells her “I’m spending everything I’m making . . . and my accountant says I’ve made money and owe revenue Canada money and I don’t have that money”, then her suggestion would be to incorporate.
“Even though you are not getting the advantage, you can physically pay yourself a salary and pay the tax as you go. From that perspective it’s protecting yourself,” says Porter of the benefits of incorporation.
Cathy Earle is a member of the GroYourBiz Kamloops Chapter. Through her company Peaks Media she consults clients in Canada and Australia on how to get the most out of their internet presence through web and social media integration. She writes a monthly blog post on GroYourBiz chapter members entrepreneurial successes.