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Deciding the structure of your business (1/3)

2/24/2016

Once you have developed your business idea and expect to run your business and get a profit from it, it’s time to decide the structure of your future way of life.

There are 3 way of structure your business: as a sole proprietorship, a partnership or a corporation. Today we will go over the first type of business.

A sole proprietorship is an un-incorporated business with just one owner: You!
You are then responsible for paying personal income tax on the profit of your business. A small business run by one owner is the easiest and less expensive way to set up your enterprise. The government regulations are usually minimal.

There is no legal distinction between you and the business, then you are personal responsible for the business decisions, financing and debts. In case your business is not able to cover its debts you are hold to pay by the creditors. Maybe you have to declare bankruptcy.

As a sole proprietorship you are considered a self-employed (not salaried) and you need to pay taxes based on the personal rates. Good news? Any loss can be used to reduce your taxable personal income.

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Home Office Expenses

2/1/2016

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You are now an entrepreneur, and you have decided you can work from home. Are you aware you can claim for your business part of your home expenses? But there is a trick: you need to spend most of your time working at home! (generally interpreted as more than 50% of the time). The space must also be used on a regular and continuous basis for meeting with your clients. Based on the square footage of your home office, you can then apply the calculated percentage to expenses as: mortgage interest (not principal), property taxes, home insurance, heat, hydro, water, maintenance costs or rent if you don’t own the house. Any expenses incurred solely for the home office can be deducted in full. As a self-employed you are not allowed to increase your loss with the home office expenses, but the good news is you can carry them forward to subsequent years and use them when you generate income. If you are registered for the GST/HST program, you can also claim input tax credits (ITC) for the portion of your home related to your business.

TIP: Avoid claiming depreciation on the portion of your home used for business purposes. It can be negative tax implications if you decide to sale your home. If you claim the depreciation, that portion of your home may be excluded from the principal residence status and any gain can be taxed.

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Author

Dayani Castro, was born in Cuba, and is a proud Canadian citizen who pay her fare share on taxes and likes to contribute to the economy.

In her own words: "I am from Cuba, moved to Canada 10 years ago with my daughter and we love it here. Won't go into politics but I took the decision to up-root my family to find better opportunities for my daughter to become a powerful and an independent woman. I open my bookkeeping and tax business 5 years ago, and love helping immigrants - specially women - navigate the process of creating and growing their business. As a single mom, immigrant an entrepreneur I recognize the importance of a supporting and loyal community when you need to start from Zero and build your dreams in your new country."

Dayani's vision is to help as many immigrants as possible to create thriving business, giving them the opportunity to be independent, give back to the society and create new jobs.

Deciding the structure of your business (1/3)

Home Office Expenses﻿

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