There are many factors to take into consideration when you are selecting an accountant that is best suited to your business and your needs. Before choosing your accountant, take a moment to reflect on the following questions:

• Qualifications
  Does the accountant have the necessary qualifications to meet your needs?
• Expertise
  Is the accountant knowledgeable? Does he/she have experience with your industry and size of business?
• Confidence
  Is the accountant trustworthy? Do you feel confident following their advice and suggestions?
• Fees
  Fees should be discussed and agreed upon prior to engaging an accountant. Typically, fees are based on the standard hourly rates of the professionals involved in the work. Are you comfortable with the standard hourly rates of the firm?

A good relationship with your accountant comes from trust and confidence. Ultimately, you need to feel comfortable listening to the strategies devised by your advisor and have the necessary confidence in the strategies to execute them successfully.

If your gross revenue exceeds $30,000, then you must register for GST. The GST you collect can be reduced by the GST you pay out on all your business expenses. The net GST must be remitted quarterly.

Contact your professional advisor to discuss whether or not you need to file for GST.

With certain restrictions, the Canada Revenue Agency (CRA) allows taxpayers to deduct the expense of a home office; however, this deduction differs according to the definition of your business relationship. Are you an employee or a self-employed individual?

If you are an employee, are you required, under a contract of employment, to rent an office away from your employer’s place of business, or use a portion of your home? If yes, and your home is the principal location for performing duties of employment, and it is used on a regular and continuous basis for meeting people in the ordinary course of employment, then you (the employee) can claim a deduction on your personal income tax return.

If you are considered a self-employed individual under the CRA guidelines, and you use part of your home for an office, then you are entitled to claim a deduction on your personal income tax return. The expenses can only be deducted against the income from that business.

Contact your professional advisor to discuss whether or not you are entitled to claim a deduction on your personal income tax return for home office expenses.

Below, is a summary of some of the more pertinent questions to consider when determining the status of a business relationship:

• Who has the right to hire or fire? Who determines the wage or salary to be paid? Who decides on the time, place and manner in which the work is to be done?
• Who supplies and pays for the equipment, tools and the related maintenance expenses?
• Who bears the risk of loss (i.e. losses due to bad debts, damage to equipment or unforeseen delivery delays)?
• Who is responsible for liability insurance?
• Does the worker receive any benefits or vacation pay?

The Canada Revenue Agency (CRA) has tests to determine a taxpayer’s status. For details on these tests, please refer to the CRA publication RC4110 entitled Employee or Self-employed? This publication is available online at the CRA Website (www.cra-arc.gc.ca).

Contact your professional advisor to determine the status of your business relationship.

Several of the advantages to incorporating your business include:

• Lower tax rates for active business income of privately-owned Canadian corporations.
• Tax deferral – that is leaving a certain amount of income in the corporation for a period of time in order to defer tax at the shareholder level.
• Non-calendar fiscal year, which may suit your business cycle.
• Shareholders can determine when, how much and the mix of remuneration to be distributed (i.e. salary and dividends).
• Incorporation limits your personal liability by ensuring that your personal and corporate assets remain separate. However, be aware that if you have given personal guarantees to obtain financing, incorporation may not protect you from all creditors, because the owner ends up being personally liable if the corporation cannot meet its repayment obligations.
• Possibility to shelter capital gains for each shareholder that arises when the shares of the corporation are sold.

Contact your professional advisor to discuss whether or not it is beneficial for you to incorporate your business.

For an interest expense to be deductible, the interest expense must be paid or payable on borrowed money that is used for the purpose of earning income from a business or property. Interest is not deductible if the borrowed money is used to purchase items such as a home, personal car, or vacation as these items do not yield income from a business or property. However, you may be eligible to deduct a portion of the interest expense on your mortgage if you maintain a home office or on a car loan if you use your car for business or employment purposes.

In short, if taxpayers can demonstrate that borrowed funds can be linked to an income-producing use, the interest is deductible.

Contact your professional advisor to discuss whether or not your interest expense is deductible.

It is necessary to consider your cash flow requirements, ability to obtain a loan and associated risks when deciding whether or not to purchase or lease your capital assets.

The initial cash requirements may suggest that leasing or purchasing the asset with a loan is preferable, instead of purchasing for cash, because the payments for the use of the asset are spread over a longer time period and cash resources can then be used for other priorities.

To obtain a loan from a financial institution, collateral is likely to be required as security; however, this may not be possible because few assets are initially available within the business. A bank is unlikely to accept the newly purchased asset as collateral for a loan. As an alternative, personal assets, such as a house, may be required to secure the loan.

Using personal assets as collateral is not likely to appeal to the owner of a new business. In this case, leasing the asset may be preferred because a leasing company usually will accept the asset itself as security for the lease.

Contact your professional advisor for assistance in determining which method is most advantageous for you and your business.