Congratulations! This is a huge step. There are a number of things that must be taken care of so you get off to a good start from a bookkeeping point of view.
The Bookkeeping Department can help you take care of everything for a reasonable fee.
Choose your business structure
The two most common ones are:
- Sole proprietorship – You are the business. The profit (or loss) from the business is treated as personal income for tax purposes. Any liability issues fall on your shoulders.
- Corporation – A separate ‘person’ in legal terms. Profits are taxed at a lower rate, generally speaking, than if they were your personal income. You have liability protection to a large degree.
If you are not sure which one is best for you, then let us introduce you to a great accountant (independent of The Bookkeeping Department) who can advise you.
Get a business number from the Canada Revenue Agency (CRA)
It’s kind of like a Social Insurance Number for a business. Note that:
- If you are forming a new corporation, you must get a business number.
- If you are a sole proprietor then you need a business number only if you are charging GST on sales.
Get a GST number if appropriate
The magic number is $30,000 of gross income in a year. After you know you will reach this level, then tell us and we’ll go get it for you.
- The GST number looks like 123456789 RT0001, where the nine digits out front is your business number.
- Note that after you get a GST number you must charge GST on your sales. If you issue invoices or receipts, then your GST number must appear on them.
- You will have to file a GST report to the CRA on a regular basis. This could be monthly, quarterly or annually, depending upon how you set it up.
- You will also have to send some of the GST you collect from sales to the CRA. The amount will be the amount you collect less the amount you paid out in the course of buying things for the company.
Get a payroll number from the CRA
You will need this only if you pay employees or yourself a regular pay cheque.
- The payroll number looks like 123456789 RP0001.
- You don’t need this until you start cutting pay cheques.
Get your bookkeeping software set up
- If you have us do your bookkeeping at our office, The Bookkeeping Department does not charge to do this.
- You can use a spread sheet to begin with, but this should not last long. Proper bookkeeping software make a big difference.
Decide on your Chart of Accounts
These are the categories for your company’s expenses and sales. Most are standard (e.g office supplies, fuel, sales), but you might have some unique things you want to track.
- We will review your Chart of Accounts and set it up how you want it.
- It’s not cast in stone; it can be changed from time to time.
Get into a bookkeeping rhythm
Doing this monthly is best.
- That’s how often your bank and credit card statements come.
- This stops the pile of invoices and receipts from getting too thick.
- You get your company’s financial reports back fast so you know what’s happening.
- Get your The Bookkeeping Department receipt envelopes (provided free) and begin to collect every receipt you get and every invoice you issue.
- Paper versions of everything please! The CRA doesn’t accept ‘soft’ copies.
