|Posted on 1 October, 2019 at 21:30|
A couple of friends asked me about the new company’s set up and how they do taxes pay.
I explained to them other day. I feel happy to share this information here below;
In general words, if you are self-employed, CRA consider that you have a business. If you have a business by yourself, you are considered as a sole proprietorship. If you have a business with a partner, then you have a partnership.
For income tax purposes, CRA define a business as an activity where there is a reasonable expectation of profit. However, for GST/HST purposes, a business can also include an activity whether or not it is engaged in for profit and any regular and continuous activity that involves leasing property
The three most common types of business structure are:
• sole proprietorship;
• partnership; and
As a sole proprietor, you may be required to register for the goods and services tax/harmonized sales tax (GST/HST) if you provide taxable supplies in Canada. For more information link to Basic information about GST/HST https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses.html or consult Guide RC4022, General Information for GST/HST Registrants http://www.cra-arc.gc.ca/E/pub/gp/rc4022/README.html.
For Sole proprietorship pays taxes by reporting income (or loss) on T1 income tax and benefit return. The income (or loss) forms part of the sole proprietor's overall income for the year.
A partnership by itself does not pay income tax on its own. Instead, each partner includes a share of the partnership income (or loss) on a personal, corporate, or trust income tax return.
The above 2 have to either file their financial statements or a numbers of forms as applicable according to CRA, for these forms and guide, please link to:
A corporation is a separate legal entity. The owners are referred to as shareholders.