Tag Archives: Small Business

Tax Issues for Small Business

Tax Issues for Small BusinessTax issues for small business owners can take them away from focusing on their main business objectives. As a result small business owners risk heavy penalties and professional fees by mixing personal and business records. It makes it difficult for them and the government tax auditors to assess if there are any irregularities.

Combining personal and business accounts is one of the most costly mistakes many new business owners make. Subsequently this mistake can cost thousands in tax penalties and professional fees.

Business owners may find it easier to deposit checks to a personal bank account. Or perhaps to charge business expenses to a personal credit card. As a result these actions place them and their businesses at risk. Making mistakes regarding claiming personal vs. business expenses is a  mistake that can cost them thousands of dollars.

Keep a separate bank account and credit card for your business expenses and never mix the two. With separate accounts there is a record of all expenses, the date, the item purchased and how much was spent. Not room for confusion and errors to creep in.

A business is required by law to keep adequate and accurate records of all income and business expense.

Tax Issues for Small Business – Tips

  • Keep personal and business separate.
  • Have two separate bank accounts: a personal account and a business banking account.
  • Keep good records.
  • Seek expert advice. Include a business banker, tax and legal professionals.
  • Have an expert complete your taxes

If you are organized, keep excellent records. Have a tax adviser complete your business income tax records. As a result there is a lot less chance that the government tax people are going to start checking. Believe it or not, by being organized, you will also save time in the long run. Subsequently this means a whole lot less frustration with your taxes. You will also have more time to spend on your business. Which is the main area you want to spend time on.

Looking for missing receipts and miss-filed receipts is really a waste of time. In addition straightening out transactions regarding whether they should be charged to your business or personal expenses is not the best use of time. Therefore keep your tax issues for small business to a minimum and focus your time on running your business.

Starting a New Business

Starting a New BusinessMany consumers across North America are thinking about starting a new business. These consumers may have either been laid off prematurely. Or they retired prematurely or have retired but need something to do in their daily lives. As a result starting a new business is one solution to meet this need to be busy and involved in their lives.

Many consumers find themselves in a position where they are able to start a new business. Technology is providing many new solutions and opportunities for business people. Whether it is a technology solution that is being offered. Or technology that is being used to enable a small business, many consumers are taking advantage of this huge opportunity. Therefore they are creating their own small businesses. Millions of Canadians and Americans this year will develop and start their own small business.

Starting a New Business – Seniors

Seniors and people over 50 are part of the fastest growing group of people who are starting new businesses. The majority prefer to be self-employed and prefer to be their own bosses. Even though they may have left an employee position, they have much more freedom and opportunity when they run their own business. The self-employed are more likely to be educated with over a third of new business owners having a university degree. Women tend to be more successful than men at starting and maintaining a new business.

Educational services and healthcare services are the fastest-growing new business opportunities.

As a result, the following segments appear to be some of the major areas the people are starting new businesses in and provide many opportunities.

Starting a New Business is a Challenge

Starting a small business is not for the faint of heart. Government regulations, incorporation, banking and technology services need to be resolved. They are needed to operate the business. For example a strategic plan and a business plan are required. Along with a product development, service development and marketing plans. They are all required to develop a long-term successful business opportunity. A lot of hard work and long hours is often needed to get the business started. Subsequently you must keep it profitable in the short-term.

Increased connectivity – Technology is increasingly leading to a higher level of cooperation between small business, self-employed and larger firms. As a result larger firms are calling upon the specific expertise of smaller enterprises to complete projects. This kind of cluster of competencies and strategic alliances will be temporary. As a result at the end of a particular project they will dissolve. They will reform into other groups that are focusing on a particular solution, project or customer.

Outsourcing

Growth in outsourcing – Canadian small businesses are in a co-evolutionary relationship with corporate business in the economic landscape. Small businesses are needed by large corporations to create the necessary reach and depth into local markets as distributors and agents for products and services. Small-business owners also provide temporary manpower in terms of contract services to larger business and government.

Increased demand for personalized products – An aging population means growing sophistication and a rapid change in consumer tastes. This is positive for self-employment as small scale operations are flexible and can support increased demand for personalized services given their ability to focus on niche markets. Small-business owners can focus on providing services to a growing senior population. They are unable or unwilling to do much of their own work around their homes and yards.

For more thoughts about changing lifestyles, click here.

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Small Business Tax Savings

Small Business Tax SavingsPerhaps you are a  small business owner. Your corporate year end coincides with the end of the year. There are some things you can do before year end to save on tax before the new year.

Many small business owners find themselves busy wrapping up their fiscal year end by maximizing sales. Making sure that all shipments are on their way before year end. They could be missing out on substantial  tax savings. If they fail to take advantage of  opportunities their company’s income tax commitment could be high.

Small Business Tax Savings

Small business owners have some unique tax-saving strategies they can employ. These strategies should help boost their overall savings for the current tax year.  For example, perhaps you’ve been mulling over the purchase of new business assets. Purchasing these assets prior to the end of your tax year could be the most advantageous time to take action from a tax perspective. Sales tax rebates, additional depreciation claims etc can be maximized if you purchase these things prior to your corporate year end.

Discuss These Issues with Your Accountants

Discuss year-end tax strategies with a financial adviser or tax professional. Many of these activities must be completed by December 31st if this is the end of your company’s tax year in order to realize tax savings.

There are a couple of areas that small business owners can focus on. However based on your specific business situation there may be additional areas that you can take advantage of. Talk to your tax accountant prior to the end of your year end

Now is the time to purchase business assets

If you’re self-employed or a small business owner, you may wish to consider accelerating the purchase of new business equipment. Or office furniture that you may have been planning to purchase in the following year. Under the tax rules, you are generally permitted to deduct, under the “half-year rule,” one half of a full year’s tax depreciation. Even if you bought it on the last day of the year. For 2012, you can then proceed to claim a full year’s depreciation. Check with your tax accountant on the depreciation rules in your country.

For computer equipment purchased before year end, you can write off 100 per cent of the cost in the year of acquisition. With no half-year rule in many cases. These rules will depend on where you live and the local tax rules that are applied.

Rethink year-end compensation

An incorporated business facing an approaching December 31 corporate year-end may wish to revisit the  salary-dividend mix for 2011. It may make more sense for small business owners to pay themselves exclusively through dividends rather than salary in 2012. This precludes them from making an RRSP contribution next year as dividends are not considered “earned income”. They may be better off saving money inside their corporations rather than inside an RRSP.

Talk to your adviser about the potential tax savings advantage dividends may offer over salary. Also about the tax deferral advantage of leaving funds inside the company as opposed to paying them out immediately.

Have your corporation reimburse rewards-paid travel

Some owners use personally-earned credit card rewards points, such as Aeroplan Miles, to travel for business. Have your corporation reimburse you for the value of the travel. Your corporation can deduct the expense and it may be  non-taxable to you personally.

Make sure tax-planning for your business stays a priority all year long. It’s important for small business owners to review these and other strategies with an adviser on a regular basis. Discussing your tax situation with a professional can help you ensure you’re taking advantage of all the available tax minimization strategies.