Going into business is an exciting experience full of opportunities for your future. Regardless, it can be somewhat daunting, especially if you are thinking about being self-employed in a sole proprietorship.
Here is some advice to help you better understand the structure and incorporation of a sole proprietorship.
What exactly is a sole proprietorship?
A sole proprietorship is quite simple to understand: it consists of one person (the owner) who is fully responsible for all aspects of the business. The owner can also hire employees, but he or she will be responsible for their salaries.
To start a sole proprietorship, you must register a business name with government authorities, obtain a tax number and open a bank account.
Setting up a sole proprietorship
Laws do not require a particular structure for sole proprietorships since they are only made up of one person. Consequently, when starting a business, the owners therefore have a lot of freedom on how to run it.
Although this freedom is beneficial for many reasons, it can get difficult to manage from a legal and financial perspective. Sole proprietorship owners should therefore call on different services for additional administrative support.
Why use a tax specialist to set up a sole proprietorship?
Self-employed workers have financial obligations specific to their type of business. Sole proprietors must report income on their personal income tax return and provide supporting documents.
Self-employed workers are also eligible for certain tax returns normally exclusive to private individuals.
Your company may therefore benefit from taxation services to help you get all the tax returns you are eligible for and pay back as little tax as possible.
You should also understand that the higher your business revenue is, the more taxes you will have to pay. A tax specialist can help you rethink the legal form of your enterprise to make sure that you benefit from it as much as you can. If this is not the case, tax specialists can even help you with business incorporation.
Benefits of accounting services for sole proprietorships
The accounting of a sole proprietorship is not overly complex. Owners simply need basic accounting knowledge to file their revenues and expenses.
However, sole proprietors already have a very heavy workload and could benefit from extra help with bookkeeping. This is where professional accounting services come in handy.
More efficient corporate taxation and accounting with T2inc
In conclusion, in Canada, a sole proprietorship is officially made up of one person: the owner. This provides freedom and flexibility for the business structure. Hiring a business tax and accounting service may help with the financial management of a sole proprietorship.
However, a potential drawback of this business structure is that the owner assumes personal responsibility for all services offered by the business. If your sole proprietorship grows quickly, it could quickly become a burden to manage.
Would you like to incorporate your sole proprietorship to simplify its management? The tax accountants at T2inc can help you every step of the way.
Contact us to know more about our services!
Frédéric Roy-Gobeil
CPA, M. TAX
As President of T2inc.ca and an entrepreneur at heart, I have founded many start-ups such as delve Labs and T2inc.ca. A former tax specialist at Ernst & Young, I am also a member of the Ordre des comptables professionnels agréés CPA and have a master's degree in taxation from the Université de Sherbrooke. With a passion for the world of entrepreneurship and the growth mindset, I have authored numerous articles and videos on the industry and the business world, as well as on accounting, taxation, financial statements and financial independence.
