NEW BUSINESS GUIDE An Entrepreneur's Guide for New Ventures 2021 - Clearline CPA
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NEW BUSINESS GUIDE
An Entrepreneur’s Guide for New Ventures
2021
T ABLE OF C ONTENTS Foreword ............................................................................................................................2 Registering for a Business ................................................................................................... 3 Selecting an Organizational Structure ................................................................................ 5 Goods and Services Tax ...................................................................................................... 9 Payroll Deductions and Filings .......................................................................................... 12 Taxes on Your Business Income ........................................................................................ 16 Registering for WorkSafeBC .............................................................................................. 19 Keeping Records ............................................................................................................... 21 Accountants’ Reports........................................................................................................ 22
New Business Guide | 2021 F OREWORD Navigating the world of accounting, taxes and the Canada Revenue Agency is complicated. But with the right knowledge and an intimate understanding of the rules, it doesn’t have to be. This new business guide was developed to outline some of the foundational concepts of operating a business in Canada. This guide certainly isn’t exhaustive and may even leave you with more questions. That’s why our team of professional accountants is here. We get it, we’re business owners too. Time is limited; and while we haven’t figured out a way to give you more than 24 hours in a day, we can at least look after the vital area of finances for you. At Clearline CPA, we believe accounting is the heart of any business. Financial decisions matter and we want to help you make better ones. We take the time to understand your unique situation and needs in order to offer individually tailored services and solutions. That’s why our mission is to provide service excellence to businesses and people, unlocking future potential. With a significant portion of your hard-earned money going to taxes, partnering with a professional accountant you know and trust is essential. With offices in downtown Vancouver, North Vancouver and Surrey, we make it easy to get the professional advice you need. Read more about the services we offer on our website at www.clearlinecpa.ca. As you take the first step towards setting up your business, we encourage you to read this guide and compile your questions. Then, let's sit down for a cup of coffee to discuss how we can help.
New Business Guide | 2021
R EGISTERING FOR A BUSINESS NUMBER
W HAT I S A B USINESS N UMBER ?
The business number (BN) is a common client identifier for businesses to simplify their
dealings with federal, provincial, and municipal governments. It is a unique nine-digit
number assigned to a business by the Canada Revenue Agency (or “CRA”) to identify the
business’ accounts with the CRA. A business number appears as follows:
Registration Number Account Identifier
1 2 3 4 5 6 7 8 9 R P 0 0 0 1
Program Reference Number
Identifier
The nine digits are your registration number. The two letters identify the type of
account; in this case, a payroll
deductions account.
The business number identifier is used to register for program accounts with the Canada
Revenue Agency. It will stay the same no matter how many or what types of CRA
accounts you have. Below are some typical accounts and their respective program
identifier:
Program Name Program Identifier
Corporate Income Tax RC
Goods and Services Tax (GST) RT
Payroll RP
W HO N EEDS A B USINESS N UMBER ?
All corporations and any proprietorships or partnerships that are required to collect GST
or have employees on payroll are required to obtain a business number. See our section
“Selecting the Right Organizational Structure” (page 5) for more details on the legal
forms that businesses can have.
W HEN S HOULD I A PPLY F OR A B USINESS N UMBER ?
You should have a business number before you hire employees so that payroll
deductions can be remitted at the appropriate time. Also, you must register for a
business number before you collect any GST on sales so that these amounts can be
remitted appropriately. See our section “Goods and Services Tax (GST) Returns and
Filings” (page 9) for more information on collecting and remitting GST.
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New Business Guide | 2021
H OW D O I A PPLY F OR A B USINESS N UMBER ?
Before you register for a business number, you will need some basic information like:
Social insurance number of at least one owner, partner, director or officer;
Organizational structure (page 5);
Business name;
Location of business;
Contact person and their connection to business;
Description of the business activity;
Amount of sales and relevant reporting period (page 10);
Fiscal year of your business.
Once you have gathered this information, you can register for a business number in
several ways: by mail, phone, or online.
MAIL OR FAX:
You have to complete Form RC1, Request for a Business Number. Copies of this
form can be obtained from the CRA’s website at www.cra-arc.gc.ca. For a
business in British Columbia, the form should be mailed to the following
address:
Fraser Valley Tax Services Office or
Vancouver Tax Services Office
9755 King George Boulevard
Surrey, BC V3T 5E1
It can also be faxed to (604) 587-2010 or (604) 689-7536.
If you require assistance in completing this form, please refer to Guide RC2, The
Business Number and Your Canada Revenue Agency Accounts, which can also
be downloaded at www.cra-arc.gc.ca.
PHONE:
Read Form RC1 and be prepared to answer all questions in part A of the form
as well as any questions that relate to the program accounts you want to open.
To register over phone, call the toll-free number 1-800-959-5525.
ONLINE:
You can register online at www.businessregistration.gc.ca.
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New Business Guide | 2021
S ELECTING A N O RGANIZATIONAL S TRUCTURE
Understanding the different types of organizational structure is an important first step
to setting up a business. The three most common types of business structure are sole
proprietorship, corporation, and partnership.
S OLE P ROPRIETORSHIP & S ELF -E MPLOYED I NDIVIDUALS
A sole proprietorship is an unincorporated business that is owned by one person. It is
the simplest kind of business structure. The owner of a sole proprietorship has sole
responsibility for making decisions, receives all the profits, claims all losses, and does
not have separate legal status from the business. The profits or losses from conducting
business are claimed on the owner’s personal income tax return each year.
It is easy to set up a sole proprietorship. Simply operate as an individual or as a
registered, unincorporated business. If you operate as an individual, just bill your
customers or clients in your own name. If you operate under a registered business
name, bill your clients and customers in the business's name. If your business has a
name other than your own, you'll need a separate bank account to process deposits.
If you are a sole proprietor, you pay personal income tax on all profit generated by your
business. You also assume all the risks of the business. Even your personal property and
assets are available to settle any debts and liabilities of the business.
As a sole proprietor, you may be required to register for the goods and services
tax/harmonized sales tax (GST) if you provide taxable supplies in Canada. See our
section “Goods and Services Tax (GST) Returns and Filings” (page 9) for more
information. Before filing your first GST return, please contact us.
T A X O B L I G A T I O NS OF A S O LE P R OP R I E T O R
A sole proprietor pays taxes by reporting income (or loss) on their T1 income tax and
th
benefit return, which must be filed every year by June 15 . It is important to note that
th
any taxes owing are due by April 30 . The income (or loss) forms part of the sole
proprietor's total taxable income for the year. Listed below are some reasons why you
have to file a T1 return if you are a sole proprietor:
you have to pay tax for the year;
you disposed of a capital property or had a taxable capital gain in the year;
you have to make Canada Pension Plan/Quebec Pension Plan (CPP/QPP)
payments on self-employed earnings or pensionable earnings for the year; or
you received a demand from the Canada Revenue Agency to file a return.
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New Business Guide | 2021
S UMMARY OF A DVANTAGES AND D ISADVANTAGES OF S OLE -P ROPRIETORSHIP
In the table below we have summarized a few of the advantages and disadvantages of
being a sole proprietor or a self-employed individual.
Advantages Disadvantages
• Not complex • Personal liability for the debts of
• Low cost – do not have to file your business is unlimited
annual reports or separate tax • No access to low corporate tax
returns rates available to small
• Tax losses incurred during the businesses
start-up period of your business
can be deducted against other
forms of personal income
(employment, investment)
C ORPORATION
A corporation is a separate legal entity. It can enter into contracts and own property in
its own name, separately and distinctly from its owners. It is a separate legal entity with
a perpetual existence and can generally raise larger amounts of capital more easily than
sole proprietorships or partnerships.
When forming a corporation, the owners transfer money and property to the
corporation in exchange for shares. The owners are referred to as shareholders. You can
buy and sell shares in a corporation without affecting the corporation's existence. A
corporation continues to exist unless it winds up, amalgamates, or surrenders its charter
for a reason such as bankruptcy.
T A X O B L I G A T I O NS OF A C O R P OR A T I O N
A corporation must file a corporation income tax return (T2) within six months of the
end of every tax year and it usually pays corporate income taxes in monthly or quarterly
instalments.
Although we will describe, under “Taxes on Your Business Income” (page 16), some
components of the tax filings that will apply to corporations, this guide does not discuss
the intricacies of the filings that apply to this organizational structure. For more
information on tax obligations of a corporation, please contact us.
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SUMMARY OF A D V A NT A G E S A ND D I SA D V A NT A G E S OF C OR P O R A T I ON S
In the table below we have summarized a few of the advantages and disadvantages of a
corporation:
Advantages Disadvantages
• Access to low corporate tax rate • Most complex – a unanimous
can result in significant tax shareholder agreement should be
deferral prepared if there is more than one
• Access to the lifetime capital shareholder
gains exemption when you sell • Higher professional fees –
your shares professional accounting fees for
• Opportunities to split income preparation of financial
within the family where statements and corporate tax
appropriate return
• Personal liability is limited to the • Tax losses during the start-up
amount of your investment in period of your business are
the corporation trapped in the corporation and
cannot be used to offset personal
income
P ARTNERSHIP
A partnership is an association or relationship between two or more individuals,
corporations, or partnerships that join together to carry on a trade or business. Each
partner contributes money, labour, property, or skills to the partnership. In return, each
partner is entitled to a share of the profits or losses of the business. The business profits
(or losses) are divided among the partners based on the partnership agreement.
Like a sole proprietorship, a partnership is easy to form. In fact, a simple verbal
agreement is enough to form a partnership. However, prudent partnerships are
governed by a written agreement setting out rules for partners entering or leaving the
partnership, the division of partnership income, and other matters. If money and
property are at stake, we recommend that you have a written agreement. The
partnership is bound by the actions of any member of the partnership, as long as these
are within the usual scope of the operations.
T A X O B L I G A T I O NS OF A P A R T NE R S HI P
A partnership by itself does not pay income tax on its profits and does not file an annual
income tax return. Instead, each partner includes a share of the partnership income (or
loss) on a personal, corporate, or trust income tax return, depending on the legal
structure of the partnership. You do this whether or not you actually received your
share in money or in credit to your partner capital account.
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Some partnerships that carry on a business in Canada, or a Canadian partnership with
Canadian or foreign operations or investments, may have to file a Form T5013,
Statement of Partnership Income, for each fiscal period of the partnership. For more
information on filing Form T5013, please contact us.
SUMMARY OF A D V A NT A G E S A ND D I SA D V A NT A G E S OF P A R T NE R S HI P S
In the table below we have summarized a few of the advantages and disadvantages of
being in a partnership:
Advantages Disadvantages
• Potentially lower professional • Personal liability for the debts of
costs than corporations your business is unlimited
• Tax losses incurred during the • More complex than
start-up period of your business proprietorships – a partnership
can be deducted against other agreement is required
forms of personal income
(employment, investment)
W HICH O RGANIZATIONAL S TRUCTURE S HOULD I C HOOSE ?
The type of organizational structure you use depends on your goals and requirements. It can
be hard to make this decision without having all the information you need. Contact us to
discuss which organizational structure best fits your business needs and personal objectives.
New Business Guide | 2021
G OODS AND S ERVICES T AX (GST) R ETURNS
AND F ILINGS
W HAT IS GST & D O I H AVE T O C OLLECT GST?
The GST is a tax that applies to the supply of most property and services in Canada. If
your business has registered for a GST account with the CRA you must charge and
collect GST on all taxable goods and services. You are required to register for a GST
account and collect GST on sales if your total revenues from taxable supplies are over
$30,000 in a single calendar quarter or over four consecutive calendar quarters.
W HAT A RE “T AXABLE G OODS & S UPPLIES ”?
Most goods and services sold and provided in Canada are taxable for GST purposes.
Common examples of goods and services for which you would not charge GST are:
basic groceries
prescription drugs
used residential housing
medical and dental services
child care services
If you are not sure whether your business is required to collect GST, please contact us.
W HAT A RE I NPUT T AX C REDITS ?
In addition to charging and collecting GST on sales made to your customers, you will also
be able to claim a refund of the GST that you paid on purchases of goods or services that
you use, consume, or supply in your commercial activities. GST paid on purchases is
referred to as “input tax credits” (or “ITCs”).
W HAT I S V OLUNTARY R EGISTRATION ?
If you are a sole proprietor, partnership, or corporation and your total revenues are
$30,000 or less in any single calendar quarter and in the last four consecutive calendar
quarters, you are considered a small supplier. As a small supplier, if you are engaged in a
commercial activity in Canada, you can choose to register for GST, even though you are
not required to.
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If you register voluntarily, you have to charge and remit the GST on your taxable
supplies of goods and services, and you can claim ITCs for the GST paid or payable on
purchases related to these supplies. You have to stay registered for at least one year
before you can ask to cancel your registration. If you choose not to register, you do not
charge the GST, and you cannot claim ITCs.
H OW O FTEN D O I F ILE A GST R ETURN ?
The regularity with which your business is required to file GST returns is determined by
its annual sales. In the table below, we provide you with a guideline for assigned and
optional reporting periods for GST filings:
Annual taxable supplies Assigned Optional reporting
threshold amounts reporting periods periods
$1,500,000 or less Annual Monthly, Quarterly
More than $1,500,000 up to Quarterly Monthly
$6,000,000
More than $6,000,000 Monthly None
As is shown above, unless your business’ annual sales exceed $1,500,000 you are only
required to file GST returns once per year.
Once your business is registered for a GST account, the CRA will send you personalized
GST return forms for use in filing the GST returns. GST returns can be filed by mail or
online, via your financial institution or My Business Account on CRA’s website.
10D O I H AVE T O M AKE GST I NSTALMENTS ?
Instalments are periodic payments that GST registrants have to remit to the CRA to
contribute towards the net tax owing on their annual GST return. For anyone who is an
annual filer, and has net GST of $3,000 or more owing to CRA for a fiscal year, you have
to make quarterly instalment payments throughout the following fiscal year. If you do
not remit instalments you may incur a penalty and/or interest.
These quarterly payments are due within one month after the end of each of your fiscal
quarters and are usually equal to a quarter of your net tax from the previous year. You
may also choose to base your quarterly instalment payments on an estimate of your net
tax for the current year if you expect that your net tax for the current year will be less
than it was for the previous year. GST remittances and instalments are complicated and
have repercussions if submitted late or incorrectly. Consult us to guide you through the
process of GST registration and remittances.
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P AYROLL D EDUCTIONS AND F ILINGS
D O I N EED TO R EGISTER F OR P AYROLL A CCOUNT ?
You need to register for a payroll account if you:
pay salaries or wages;
pay tips or gratuities;
pay bonuses or vacation pay;
provide benefits or allowances to employees; or
need to report, deduct and remit amounts from other types of remuneration
(such as pension or superannuation).
W HAT A RE S OURCE D EDUCTIONS ?
Source deductions (or “payroll deductions”) are amounts withheld from the gross salary
of an employee and remitted to the CRA. You are required to withhold source
deductions if your business pays salaries to employees. A business has to withhold
income taxes, Canada Pension Plan (“CPP”), and Employment Insurance (“EI”) from its
employees’ salary and remit these amounts along with the employer’s share of CPP and
EI.
H OW M UCH A M I REQUIRED T O W ITHHOLD A ND R EMIT ?
Payroll deductions are complex calculations and should be done with the help of an
accountant who has an understanding of payroll taxes. However, you can use the online
payroll calculator (www.cra.gc.ca/pdoc) provided by the CRA to do your own
calculation. If you use accounting software, you can use the built-in payroll feature to
calculate the required payroll deductions.
The first step to begin payroll calculations is to have all your employees complete both a
federal and provincial Form TD1. Some of your employees may also be CPP or EI
exempt which means that you are not required to withhold the exempt item from their
pay.
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W HEN I S S OMEONE E XEMPT F ROM CPP & EI?
There are many reasons a person may be exempt from paying CPP and EI. Below are
some reasons:
An employee is considered CPP exempt when they are
o Under 18 or over 70 years of age
o Receiving a CPP retirement or disability pension
An employee is considered EI exempt when they are
o Related to a shareholder of the business (yourself, spouse, children,
etc.)
If you are not sure whether someone is exempt from EI or CPP, contact us to learn
more.
H OW O FTEN D O I H AVE T O M AKE R EMITTANCES ?
The frequency with which you are required to remit payroll deductions is determined by
the “remitter type” your business falls into. There are four remitter types that are
differentiated based on the business’ average monthly withholding amount (AMWA),
the amount of payroll deductions withheld from employees on a monthly basis plus the
employers portion of remittances:
QUARTERLY REMITTER
AMWA < $3,000 in either the first or second preceding calendar year.
All payroll returns have been filed on time and all GST returns have been filed
on time for the preceding 12 months.
REGULAR REMITTER
AMWA < $25,000 in the second preceding calendar year.
Must file and remit monthly by the 15th of the month following the month
which the amounts were withheld.
THRESHOLD 1 ACCELERATED REMITTER
AMWA of $25,000 - $99,999 in the second preceding calendar year.
Amounts withheld in the first 15 days of the month are due by the 25th of the
same month.
Amounts withheld from the 16th to the end of the month are due by the 10th
of the following month.
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THRESHOLD 2 ACCELERATED REMITTER
AMWA > $100,000 in the second preceding calendar year.
Amounts withheld are due by the third working day after the following periods:
o The 1st to the 7th of the month.
o The 8th to the 14th of the month.
o The 15th to the 21st of the month.
o The 22nd to the end of the month.
New businesses are considered regular remitters until they qualify as another remitter
type. Please note the AMWA for determining remitter type is combined with the
AMWA of any associated corporations.
H OW D O I R EMIT P AYROLL W ITHHOLDINGS ?
You can make payroll remittances either electronically, by mail or at your financial
institution. If you decide to make payroll remittances by mail you will have to include a
letter with your first remittance indicating:
that you are a new remitter;
the period which your first remittance covers;
your (Company’s) name, address, telephone number; and,
your business number.
After making this first remittance, the CRA will send you personalized PD7A forms which
you can use to make future payroll remittances.You can also file payroll returns at your
financial institution by either providing a completed PD7A along with your payment or
filing electronically using their software. Your financial institution will be able to provide
you with assistance in filing your payroll returns electronically. Threshold 2 remitters
must make their payroll remittances electronically or in person at a financial institution
on or before the due date.
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W HAT A RE T HE R EQUIRED F ILINGS F OR P AYROLL ?
At the end of each calendar year that you have paid employees’ salaries and wages you
are required to prepare a T4 slip for each employee and a T4 summary for the CRA. A
T4 slips summarize wages, payroll deductions, and any benefits for each employee.
These slips are used by employees in preparing their personal income tax returns.
A T4 summary form combines information from all of the business’ T4 slips including
gross salaries, CPP and EI withheld as well as the employer’s portion of CPP and EI
remitted. Preparation of the T4 summary should indicate whether you have made the
required amount of payroll remittances during the year and any deficiency or
overpayment should be remitted or refunded upon filing of the T4 summary.
T4 summaries and T4 slips are required to be filed and distributed to employees by the
last day of February each year. Incorrect filings can result in interest and penalties. We
strongly recommend that you work with a professional accountant to ensure your filings
are accurate.
P E N A LT I E S
Penalties for failure to deduct payroll withholdings and making late remittances are 10%
of the total payroll remittance for the first offense and up to 20% for repeat offenses.
These severe penalties make it imperative that the correct amount of payroll is withheld
and that these remittances are made on time.
E MPLOYEE V ERSUS C ONTRACTOR
The distinction between employees and independent contractors is a complicated area
of tax law and is the source of many disagreements between taxpayers and the CRA. It
is important to seek professional advice in determining whether the CRA would consider
the people working for your business to be employees or independent contractors as
the interest and penalties associated with failing to withhold and remit payroll
deductions on payments to employees can be significant.
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T AXES ON Y OUR B USINESS I NCOME
Regardless of whether you have decided to structure your business as a proprietorship,
corporation or partnership, tax will be paid on your business’ income either at the
personal or corporate level.
S OLE P ROPRIETORS AND S ELF - EMPLOYED I NDIVIDUALS
If you earn self-employment (proprietorship) income the filing deadline for both your
and your spouse’s T1 personal tax returns is extended to June 15 (any taxes owing are
still payable by April 30). Since the filing of tax returns is more complicated for
partnerships and corporations, we will focus on these entities in the paragraphs below.
C ORPORATIONS
Corporations are considered separate taxable entities therefore corporations pay tax
directly on their income. Typically, a corporation’s profits are distributed to its
shareholders in the form of salaries, bonuses, or dividends. Provided that all of your
business income is not immediately required for personal purposes, one of the
advantages of earning business income in a corporation is that you may be eligible for
the low corporate tax rate on the first $500,000 of annual active business income. This
can result in significant deferral of income taxes until the time at which the income is
needed for personal purposes.
D E CI D I N G ON A F I S CA L Y E A R - E ND F OR Y OU R C OR P OR A T I O N
You are free to choose the fiscal year-end for your corporation provided that your first
year-end is within 53 weeks after incorporation. You declare your chosen fiscal year-
end upon filing of your corporation’s first income tax return. There are both operational
and taxation issues that should be considered before deciding on the most appropriate
year-end for your business. For example, some degree of tax deferral may be achieved
by having a year-end in July or August whereas operationally it is beneficial to have your
fiscal year-end during the slowest point in your business cycle. It is important to obtain
advice from a professional accountant when choosing a year-end for your company.
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P ARTNERSHIPS
Partnerships are not considered a separate entity for income tax purposes which means
that partnerships do not pay tax on their business income. Instead, business income
from partnerships is taxed directly in the hands of its partners based on the division of
partnership income as defined in the partnership agreement.
Partnerships with more than five partners or with a partner that is itself a partnership or
corporation are required to file an annual partnership information return (T5013) with
the CRA and provide T5013 slips to its partners. Partnerships that do not meet these
criteria are not required to file annual returns with the CRA.
H OW D O I P REPARE A T AX R ETURN ?
Corporate tax returns are typically prepared by your accountant at the same time as the
annual financial statements because the Income Tax Act requires that corporate income
tax returns be prepared based on financial statements prepared in accordance with
Canadian Generally Accepted Accounting Principles (GAAP). The filing deadline for
corporate tax returns is six months after the fiscal year-end you have chosen, and any
taxes owing are due three months after your fiscal year-end.
C O R P OR A T E I N ST A LM E NT P A Y M E N T S
If your corporation has taxes owing of more than $3,000 in its first fiscal year you will be
required to make corporate tax instalment payments during the subsequent year.
Depending on your circumstances these payments may be required either quarterly or
monthly and will generally be based on the amount of taxes payable from the prior year.
17H OM E O F FI CE E X P E N SE S
If you run your business primarily out of your home, or if you have a portion of your
home dedicated to meeting customers on a regular and continuous basis, you can
deduct a portion of your home expenses (utilities, mortgage interest, property tax, etc.)
against income from your business. The deductible portion of home expenses is
determined based on the square footage of your home that is used for business
activities.
B U SI N E S S U SE OF A P E R S ON A L A U T OM OB I LE
If you use your personal automobile in carrying out your business, the business portion
of your automobile expenses will be deductible against income from the business. The
CRA requires that you maintain a vehicle log to accurately determine the portion of
vehicle usage that is attributable to business purposes.
Not all home office expenses and personal automobile expenses are deductible. Consult
with us to understand the difference between deductible and non-deductible expenses.
18R EGISTERING FOR W ORK S AFE BC
W HAT I S W ORK S AFE BC?
WorkSafeBC is a liability and disability insurance system set up to protect both
employers and workers against the impact of work-related injuries. It compensates
workers injured on the job for lost income, health care and other costs related to their
injury. It protects employers from being sued by their workers if they are injured on the
job. It also protects employers and workers against the risks and expenses of injury and
the uncertainties of litigation.
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W HO I S R EQUIRED T O R EGISTER ?
You are required to register with WorkSafeBC when you:
are an employer with paid workers (even if you are the only person employed
by your corporation)
have hired contractors or subcontractors that are not registered and in good
standing with WorkSafeBC
are in the process of determining whether your contractors and subcontractors
are registered and in good standing with WorkSafeBC
H OW D O I R EGISTER ?
You can register online on their website (www.worksafebc.com) or by mail (the
registration form can be found on the website).
W HAT H APPENS I F I D ON ’ T R EGISTER ?
If you fail to register with WorkSafeBC you may be subject to fines under the Workers
Compensation Act. You will also be liable for any injuries to employees resulting from
their employment with your business.
H OW M UCH W ILL I H AVE T O P AY I N P REMIUMS ?
Your premiums are determined based on the nature of your business activities and the
amount of salaries and wages that you pay or payments to non-insured contractors that
your business makes. After reviewing your registration information WorkSafeBC will
assign your business a base rate for premiums based on the nature of your business. In
future years your premiums may increase or decrease based on your safety record.
H OW O FTEN D O I H AVE T O R EMIT P REMIUMS ?
WorkSafeBC will begin sending you invoices once you have registered your business. If
your annual premiums are $1,500 or less you will only be required to make annual
remittances, otherwise you will be required to make quarterly remittances.
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K EEPING R ECORDS
In order to prepare financial statements and tax returns you must keep records of your
business transactions. Most businesses use computerized accounting software packages
to record their business transactions or hire a bookkeeper to take care of the accounting
for their daily business operations. Computerized accounting software can be either a
common “over the counter” commercial product (Quickbooks, Simply Accounting, etc.)
or a customized product depending on the specific nature and reporting requirements
of your business.
The CRA also requires your business to keep documentation such as bank statements,
deposit slips, cancelled cheques, and purchase and sales invoices to support the
information reported in your tax returns. Generally, these records must be kept for
seven years after the date of notice on your Notice of Assessment.
5 R EASONS W HY K EEPING R ECORDS C AN B ENEFIT Y OU
1. Complete and organized records can help you identify the sources of your income
and decide whether you should charge GST.
2. Complete and organized records can mean tax savings.
3. Complete and organized records can prevent most of the problems you might have
if CRA audits your income tax or GST returns.
4. Your records will keep you better informed about the financial position of your
business.
5. Complete and organized records may help you get loans from banks and other
creditors.
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A CCOUNTANTS ’ R EPORTS
Your business will require financial statements for many purposes such as preparation
of income tax returns, lenders’ and bankers’ review, internal decision making, and
planning remuneration of owner-managers. In most cases, external users of financial
statements (including non-active owners) will require that an independent public
accountant provide a report on your financial statements. Public accountants can
provide three types of reports on financial statements, as discussed in the following
paragraphs.
A UDIT R EPORT
This report offers the highest level of assurance to the users of financial statements. The
public accountant is required to perform audit procedures to arrive at an opinion with
regards to whether the financial statements are fairly presented. These procedures will
include, but are not limited to:
Documenting the business’ control systems to ensure that transactions are being
faithfully recorded in the business’ accounting records and that the business’ assets
are adequately safeguarded; and
Confirmation of balances both against internal documents (such as sales invoices
and cancelled cheques) and with external parties (bank, customers, suppliers etc.).
Since audits can be costly and time consuming, and because they are not typically
required by the external users of the financial statements, most small business owners
use their right to waive an annual audit.
R EVIEW E NGAGEMENT R EPORT
Compared to an audit report, review engagement reports provide a lesser degree of
assurance with regards to a company’s financial statements. The public accountant’s
responsibility in performing a review engagement is to ensure that the financial
statements are plausible. To make this determination, the accountant must acquire a
sufficient understanding of the business in order to make intelligent inquiries of
management and perform analysis on the financial statements.
Review engagement reports are often required by lenders and bonding agents when the
business has acquired significant financing or requires significant bid and performance
bonds. Review engagements are generally less costly than audit engagements.
22New Business Guide | 2021
C OMPILATION E NGAGEMENT (N OTICE TO R EADER )
Compilation engagements are most commonly performed when the only external party
using the financial statements is the CRA for income tax purposes. A compilation
engagement only involves the public accountant preparing the business’ financial
statements in proper form from information provided by management. The accountant
does not perform any procedures to verify the accuracy of the information contained in
the financial statements. As such, the Notice to Reader communication explicitly
informs users of the fact that the financial statements may not be appropriate for their
purposes.
23New Business Guide | 2021
A FTERWORD
If you’ve gotten this far you are either, exhausted and mildly overwhelmed, or like some
people, you skipped to the back to find out who done it!
At Clearline we want you to take away a clear message. Focus on your business and
your goals and let us take care of this. Sit down with us and together we will build the
business, personal and financial plans to achieve your goals. We have been doing this
for quite a while now, and since most of our business comes from referrals we must be
doing something right.
It is an exciting time, building a new business and reaching for your potential. We
remember that from when we started Clearline. Like you, we are still learning and
growing. Like you, we are building our future and we look forward to making yours a
reality.
Welcome to Clearline.
24M EET T HE P ARTNERS
Jeff Block, CPA, CA | Partner
Jeff has worked in public practice since 2002, providing
accounting and tax advice to business owners, professionals
and private companies. He has also provided audit and
assurance services to private companies, not -for-profit
o rga niz atio ns a nd c harities, in a dditio n to ac ting a s C hief
Financial Officer (CFO) for public and private companies.
Jeff articled with PricewaterhouseCoopers in Vancouver,
before founding Clearline Chartered Professional
Accountants in 2009. Clearline started with just a few
partners and staff in North Vancouver and has since grown
to a team of 35+ staff with offices in downtown Vancouver,
Burnaby, Surrey and North Vancouver. Jeff’s expertise may
be in accounting and tax but building a firm has taught him
a lot along the way about running a business.
Jeff was born and raised on a 52 -acre working farm in South
Surrey. He spends as much time outdoors as possible and
loves living in Vancouver’s temperate climate; after all it is
as close to California as he can get in Canada.
Tom Gillespie, CPA, CA | Partner
Tom, a Partner at Clearline CPA, primarily focuses on the
provision of assurance (audit and review engagement)
services to companies in sectors such as manufacturing,
construction, real estate, wealth management and financial
services. Tom is passionate about assurance services and
the benefits that these processes can provide to the
organizations he works with. Originally from Ontario, he
obtained his accounting designation while articling as an
auditor at a mid-sized firm in Ottawa working with both
private enterprises and not -for-profit organizations.
Subsequently, Tom moved to Bermuda where he joined an
international accounting firm in their investments and
banking audit department. While in B ermuda, his focus was
in auditing investment funds, banking organizations, and
related service companies.
Tom is also a co -founder of Clearline Consulting which
provides file monitoring, professional development,
assurance planning and on -going consulting services to CPA
firms and practitioners, helping them succeed and build
thriving practices.
Outside of the office, Tom enjoys golfing, skiing and
traveling with his family and friends.Bilal Kathrada, CPA, CA | Partner
Bilal, a Partner at Clearline Chartered Professional
Accountants, primarily focuses on income tax and
succession planning for Canadian owner -managed
businesses in various industries. Bilal received his
Bachelor of Commerce degree from the University of
Victoria and obtained his CA desi gnation in 2005. Prior to
Clearline, he worked in the tax group of a large
international accounting firm in Vancouver and a mid -
sized accounting firm located in the Fraser Valley. An
active proponent of community involvement, Bilal
volunteers as the treasu rer for the Surrey Cares
Community Foundation.
Outside of the office, he enjoys spending time with his
wife and daughter. He enjoys outdoor activities such as
golf and spending time with his family and friends.
Bridget Noonan, CPA, CA | Partner
Bridget, a Partner at Clearline CPA, primarily focuses on
the provision of assurance (audit and review engagement)
services to not-for-profit organizations. Bridget is
passionate about education and helping the organizations
members, committees, directors and/or board members in
the understanding of all matters related to the accounting
and auditing processes. Bridget was with a mid -size firm in
Vancouver for 12 years working with both public, private
and not-for-profit organizations as a senior manager in the
accounting and auditing department.
Bridget is also a co-founder of Clearline Consulting which
provides file monitoring, professional development,
assurance planning and on -going consulting services to CPA
firms and practitioners, helping them succeed and build
thriving practices.
Outside of the office, Bridget enjoy traveling and spending
time with her family and friends.Shane Schepens, CPA, CA | Partner Shane primarily focuses on income tax planning, r e o r g a n i z a ti o n s , a n d s u c c e s s i o n p l a n n i n g f o r C a n a d i a n owner-managed businesses in various industries. He received his Bachelor of Commerce degree from the U n i v e r s i t y o f N o r t h e r n B C a n d o b t a i n e d h i s C A d e s i g n a ti o n i n 2 0 0 3 . S h a n e s t a r t e d h i s a c c o u n ti n g c a r e e r i n 2 0 0 0 b y w o r k i n g f o r a l a r g e i n t e r n a ti o n a l a c c o u n ti n g fi r m f o r a p p r o x i m a t e l y ten years in their Prince George, Calgary, and Burnaby o ffi c e s . H e t h e n w o r k e d a n a d d i ti o n a l fi v e y e a r s f o r a m i d - s i z e d a c c o u n ti n g fi r m l o c a t e d i n S u r r e y , b e f o r e o p e n i n g h i s o w n a c c o u n ti n g a n d t a x p r a c ti c e i n S u r r e y w h i c h o p e r a t e d for four years. Now as Clearline CPA’s Tax Partner, Shane will be leading the further development of our in-depth tax department. O u t s i d e o f t h e o ffi c e , h e e n j o y s s p e n d i n g ti m e w i t h h i s w i f e , daughters, and beagles.
Unlocking Potential
North Vancouver Vancouver Surrey Burnaby
203-1133 Lonsdale Avenue 855 – 789 West Pender Street 211 – 5577 153A Street 5589 Byrne Rd #236,
North Vancouver, Vancouver, Surrey, Burnaby,
BC V7M 2H4 BC V6C 1H2 BC V3S 5K7 BC V5J 3J4
(604) 639-0909 clearlinecpa.caYou can also read
