What else is more rewarding than making money doing something that you love?
Well, would you consider paying the least taxes (legally) possible as the cherry on top?
If you are an independent woman pursuing a career out of passion, here are three smart tax tips to keep in mind while growing your business.
From a legal standpoint, incorporating should be one of your top priorities. However, accountants have opposing views on when the best time to incorporate is for your business. Some accountants say it depends on your financial needs, but most accountants would definitely advise you to incorporate. It makes your tax planning so much easier. Let me break it down as follows:
If you are single and don’t have any dependents, incorporating is your number one tax saving strategy. RRSP, charitable and political donations reduce your liabilities but you may exhaust these deductions sooner than you can count on.
If you are married/common-law and your partner is also making a significant amount of income (either from business or employment), incorporating is a very good way of controlling how much money you’ll have flowing through to your personal account. The goal is to have the least amount of tax liability in the family.
If you are running a nonprofit organization, it’s best to incorporate as well. Anything you collect under this operation will have to be declared as your revenue if your nonprofit is not CRA registered and you’re running it under a sole proprietor structure.
Register for GST as soon as possible.
It is not a requirement to make $30,000 before getting your GST number!
The requirement is once you start making $30,000, then you must register for GST. If you register for GST in the early years of your business, you may be entitled for a refund. The CRA only requires that threshold because once you get to that level of income, the likelihood of you getting a refund is much much lower. Don’t you want to benefit from some refunds? 🙂
Work with professionals in the field of accounting. Avoid doing your own taxes – personal or corporate. Also avoid “cheap” services. Quality may not be very pocket-friendly but it definitely pays off. A few other things to note when working with accounting professionals are:
Find an accountant who matches your personality. Most accountants are conservative. Meaning, they may be very limiting in terms of allowing you to claim expenses for your business. They are trying to ensure that you stay away from CRA’s radar. However, if you are more of the aggressive type, it’s ideal that you work with someone who will back you up with your claims. Also, make sure that you and your accountant understand each other. It’s difficult enough to understand taxes for most business-owners. The last thing you need is someone explaining taxes in a language that is completely foreign to you.
Touch base with your tax accountant year-round. This may get costly as some accountants charge by the hour for consultations but it can definitely be helpful. Some clients bring along their bookkeepers when meeting with their tax accountant so that they have someone to follow through on the plan throughout the year.
Tax is unavoidable, but there are certainly ways of deferring it and paying the least of it, in legal ways.