FREQUENTLY ASKED QUESTIONS —
Corporate Businesses
HOW DO I PAY MY CORPORATE TAXES?
CRA offers many payment options.
If paying by cheque, make your cheque payable to “Receiver General of Canada” and send it to:
Canada Revenue Agency
PO Box 3800 STN A
Sudbury ON P3A 0C3
Attach a remittance voucher, or else clearly mark on the cheque your SIN or business number (ending RT0001 for HST payments, RP0001 for payroll and RC0001 for corporate taxes) and the period it applies to (year or quarter).
HOW DO I GET AN HST NUMBER?
You can get an HST number online, by phoning CRA’s business inquiries line at 1-800-959-5525, or by completing form RC1 and mailing it to CRA.
Unless you have over $1.5 million in sales, we recommend registering as an annual filer (as opposed to a quarterly filer) – this will save you administrative work and accounting fees.
You will receive your HST number in about business 10 days.
Note: If you owe over $3,000 in HST for the year, you must make instalments quarterly or monthly. If you do not, CRA will charge you interest on the balance owing.
WHAT IS MY CORPORATE FILING DEADLINE?
Corporate tax returns are due six months after the corporate year end. However, interest will accrue on any outstanding balance owing as of 3 months after corporate year end date.
We recommend you submit completed corporate tax packages to our office within 30 days of your year end.
WHAT INFORMATION DO YOU NEED TO DO MY CORPORATE TAX RETURN?
Please complete our corporate tax package found on Forms & Tools webpage. Make sure to provide complete contact information.
The tax package has a complete checklist which will help you determine exactly what types of information, documentations or slips you will need to submit.
New clients, please include a copy of your last Notice of Assessment and a copy of your last filed tax return with your package.
If our office will be tallying your receipts, our bookkeeping department would be happy to meet with you to go over what information they’d like to see.
YOUR OFFICE IS DOING MY BOOKKEEPING – WHAT DO I NEED TO PROVIDE?
In order for us to do your bookkeeping as efficiently as possible, please submit the following:
Bank statements for the fiscal year (attach cancelled cheques, but no receipts. Indicate the source of all deposits. For e-transfers, provide the name of the payee.)
Credit card statements for the fiscal year (but no receipts)
Cash receipts (if possible, sorted and grouped by expense category, but NOT by month)
The following will slow down the bookkeeping process and therefore increase your accounting costs:
Paper receipts in multiple currencies
Paper receipts or that relate to different fiscal years
Duplicates (aka paper receipts for purchases reflected on a bank or credit card statement)
Paying personal expenses with a business bank or credit card.
HOW CAN I BEST ORGANIZE MY RECEIPTS?
Here are a few tips to help get you organized:
Set a specific time to pay bills and to empty wallet, pockets or handbag of receipts, and take the time to file both bill statements and receipts.
Establish one place to store receipts and invest in some organizing tools. A letter-sized accordion file can handle small cash receipts. Label each section appropriately (“Auto”, “Professional Development”, etc.) and file according to category.
Avoid mixing receipts from different years. Start a fresh collection each year (or corporate year-end, if not December 31).
If you’ve been traveling for business, avoid mixing currencies.
Keep personal and business related receipts separately.
Keep an envelope or small accordion file in the glove compartment of your car to contain fuel, car wash, parking and service receipts. Periodically transfer the contents to your main file.
Most people remember to ask for a taxicab receipt but if you use public transportation, also remember to ask for a receipt for bus tickets, subway tokens or transit pass. Transfers, though, are not acceptable as receipts. Discard them. Airline boarding passes are not acceptable as receipts.
Keep track of business related entertaining expenses by noting your client’s name and the company or project on the back of the receipt.
Pet expenses (pet food, veterinary services, etc.) are not allowable expenses except under very special circumstances e.g. you run a security firm and employ trained guard dogs.
Parking and/or traffic violation tickets are not allowable expenses.
Credit and debit card receipts often have two parts – the receipt portion showing the item(s) you purchased and the transaction record. To avoid duplicating the amount, staple the two parts together.
CAN I USE MY CREDIT CARD STATEMENTS AS RECEIPTS?
The credit card receipt by itself is not adequate; there must also be a proof of purchase (ie, store receipt). Credit card receipts must be maintained as a supporting document and the credit card account must be in the taxpayer’s name. Without both of these documents, in the event of a Canada Revenue Agency audit, the expenditure will be disallowed.
SHOULD I INCORPORATE?
The question of whether or not to incorporate can depend on several factors such as limited legal liability, tax planning and circumstances of the services being performed. There are many tips and traps associated with incorporation which should be considered. TIPS
Deductible business expenses related to a corporation are similar to that enjoyed by a self-employed individual. Similar record keeping responsibilities are also required.
Limited Liability: A corporation is considered as a separate legal entity and can provide protection to its shareholders and directors from creditors in the event of severe financial issues (ie individual’s assets would not be at risk).
Tax Planning: Small corporations (CCPCs) in Ontario have a tax rate of 15% (10.5% federal, 4.5% provincial) (as of Sept 2017); the 2017 budget proposes reductions in the federal rate to 10%, effective January 1, 2018, and to 9%, effective January 1, 2019 for all taxable income below $500K per year. Tax savings can be achieved by paying out monies to shareholders as dividends. Income splitting also may provide a tax efficient manner to withdraw funds from the company.
Job Circumstances: Often productions will only allow you work if you are incorporated. Being self-employed is not an option. They will request on a regular basis your Schedule 50 (List of Shareholders) and the company’s annual Notice of Assessment (indicating that the annual filing has occurred).
TRAPS
One time cost of incorporation and annual accounting fees can be substantial as compared to personal income tax return preparation fees.
There are numerous filing requirements such as tax, HST and payroll returns, monthly payroll remittances, instalments, etc.
Income withdrawn from the company must be reported annually on a T4 (wages) or on a T5 (dividends).
Any business losses incurred must remain within the corporation and cannot be transferred to an individual.
After considering the above-noted issues, the final decision to incorporate should depend on whether or not you can achieve tax savings. You must assess what your taxable earnings would be after deducting business operating expenses and what you would withdraw as a salary. Net corporate earnings should be a minimum of $ 40K per year. After this point, the advantages of being incorporated begin to rise.
US citizens/green card holders/resident aliens must also consider US tax law. Additional tax planning is required to avoid double taxation and/or a mismatch in foreign tax credits. Please call our office if you are US person who is considering incorporating in Canada.
WHAT INFORMATION DO YOU NEED TO CREATE MY CORPORATION?
In order to create your corporation, please provide the following information:
Name
SIN
Contact info: telephone, email, mailing address
If more than one shareholder: name, SIN, % of company each holds, and if separate classes of shares should be created
For a named (as opposed to numbered) company, a name search is required: provide three name choices
Please allow our office 2-7 business days to complete your incorporation. You will receive your HST number in about 10 business days.
If submitting your information electronically, please do so using our secure Portal system at https://cchportal.ca/portalthin.
Your user name is your email address.
If you have forgotten your password, click on “reset”.
If you don’t yet have a portal, you can request one at New Portal Request
SHOULD I INCORPORATE PROVINCIALLY OR FEDERALLY?
Being incorporated federally allows you to work across Canada, and protects your business name throughout Canada.
There is some additional paperwork, in that you will need to file an additional annual return (in addition to the corporate tax return) to keep the corporation open. The cost for this additional return is minimal. Should you need to dissolve your corporation, you can do so on-line within few days.
If you incorporate in a certain province or territory, you can only operate your business in that province or territory and your name is only protected in that jurisdiction.
Dissolving a provincially incorporated company is a lengthier and more involved process than dissolving a federal incorporated company.
CAN I INCORPORATE MY BUSINESS MYSELF?
Yes, it is possible to incorporate your business yourself. See the Innovation, Science and Economic Development Canada website for details on federal incorporation, or by clicking here for provincial incorporation.
HOW SHOULD I SET UP SHARE CLASSES IN MY CORPORATION?
The Articles of Incorporation specify the classes and any maximum number of shares that the corporation is authorized to issue.
The articles can allow for one or more classes of shares. Setting up more than one class of shares allows flexibility with paying dividends and assigning voting rights.
There is no limit on the number of classes of shares that can be set out in the articles. If there is more than one class, the rights, privileges, restrictions and conditions for each class must also be specified in the articles.
If there is only one class of shares, those shares must, as a minimum, have:
the right to vote
the right to receive dividends (if the board of directors has declared any)
the right to receive the remaining property of the corporation after it is dissolved
If there are several classes of shares, each of the three rights have to be assigned to at least one class of shares, but one class does not need to have all three. Also, each right can be given to more than one class.
HOW DO I PAY MYSELF IF I AM INCORPORATED?
Your corporation can pay you a salary (you can be an employee of your corporation) or dividends (as a shareholder of the corporation), or a combination of the two. As each individual’s situation is different, an analysis must be done to determine the optimal approach, which can also vary from year to year.
Some of the considerations involved are:
