All businesses must have access to accounting services whether they are big or small if they want to see continued success into the future. Big businesses generally have no problem hiring and retaining professional accounting personnel and services but small businesses face a myriad of challenges when it comes to their tax and accounting needs. That is why it is always important for these businesses to have insurance against tax investigations because numerous times, they will be in the radar of the CRA who would want to see if the business has accurate asset declaration and is in compliance with tax obligations.
To stay one step ahead in the game, it is important to know some of the common mistakes and problems faced by many other small businesses in Canada. Here is a look at some of the most common accounting and tax issues faced by these small businesses:
Your Bookkeeping Time
Professional accounting begins with very good bookkeeping. Your record keeping must be excellent and have meticulous records on everything including all monthly receipts and expenditures. Generally, record keeping is quite a time-consuming exercise and may even distract you from the day to day running of your business which is why it is always important to hire a tax professional that will take care of your tax records.
You might also face a tax audit in the future so it is always important to have insurance against tax investigation. With excellent record keeping for your small business, you can always have excellent pay offs in the future. It means you will have an easier time when it comes to filing your tax reports and will also lower your accounting expenses. To insure further against future accounting costs when filing your taxes, you can also take up the insurance against tax investigation.
In the early years of the business, record keeping will seem quite easy but as your business grows and the records pile up, the task is going to get a little more tedious. If you are an entrepreneur working 16 hours a day to grow your business, the last thing you want is spending several hours a week organizing your expenses and bookkeeping. That is why it is always important to outsource it to your accountant. Outsourcing also helps you streamline you day to day business operations and run your business more efficiently.
Many Canadian smaller businesses generally fail to adhere to business regulations both at the local and national level. If you do not do things the right way, you might find yourself subjected to various fines by the CRA and various other Canadian authorities which will deeply cut into your business bottom line. It is also important to note that tax and business regulations change frequently and you need to keep track of these which may take up a lot of your business hours. Keep track of these by hiring a professional accountant.
Failing to Have a Partner Agreement
Most small businesses start out without partner agreements. Even if you are starting out a business with a close friend or even a family member, it is always important to have a partner agreement in place. This agreement should be very business-focused and not a gentleman’s agreement.
Failing to Launch the Business as a Corporation or LLC
How will your business be referred to for taxation or legal purposes? Small startups have various legal options available for them including sole proprietorships, partnerships, LLCs, corporations, limited liability companies etc. If you will be in business for the long term =, it is always best to start out as an LLC or as a corporation.