Imagine you start tracking your calories to get into shape. You are hitting your calories every day according to myfitnesspal, but you’re not seeing any progress. Then your coach asks you, “are you tracking everything?” And you realize you haven’t been tracking that handful of nuts you have as a snack each day. It will be clear that if you are not tracking all these random snacks, it will be very difficult to actually measure your results.
Let’s apply this to business.
One of the simplest things you can do when starting your business is separate everything. All you need to do is open a new bank account and/or credit card, and be disciplined to use it solely for business purposes.
1. When you are constantly taking money out of the business account for personal reasons, it becomes very difficult to track your profitability. You’ll likely forget whether you took the money out for a business expense or a personal expense. And if you can’t remember, your accountant definitely won’t know.
2. If you keep taking money out for personal reasons, you’re either loaning the money to yourself, or will need to declare this as a salary or dividend, which will be taxed personally and can lead to a tax bill much higher than you originally expected.
Whether you’re self employed or have established a corporation, it is crucial that you keep these things separate.
Do you keep yours separate? Let me know in the comments.
1. Schedule a complementary call with us. No matter where you’re reaching out from, we will send you a link to quickly and easily book a call. During this call, we will talk about your specific business to find out exactly what kind of accounting services you need. You will also have an opportunity to ask a professional CPA any questions you like.
2. After we’ve determined which accounting services you need, we’ll ask you to send over a few documents that we’ll need to give you a fixed price for the services. Many accountants still use the outdated hourly billing model, but we believe that you should never be surprised by an accounting bill.
3. After you’ve provided us with the requested information, we will send you a personalized pre-recorded video with your options, and how we arrived at the fixed price.
4. Once you have reviewed and chosen which option you like best, we will send you a proposal that can be viewed and signed online.
5. Once the proposal has been accepted, we will schedule an onboarding meeting to get your books set up on autopilot
After completing this 5 step process, you will feel certain that you’ve finally found an accountant that is on top of you, and not one that you need to remind about you. You’ll also feel much more empowered and knowledgable about your obligations.
The way we dress can have a strong effect on our business results. Looking presentable can send a certain psychological trigger to our clients. Even if we don’t know WTF we are talking about, it can help us come across as a credible source for our clients.
But, the cost of your suit is actually not a deductible expense according to the CRA. Some exceptions could include businesses where you need to wear a costume or uniform, like a dance or fitness instructor who needs certain supplies to be able to teach. For most, this isn’t the case.
There is one way you may be able to make the cost of your clothing deductible – add your logo! Adding your logo to your clothing creates a legitimate advertising expense. You are now advertising your business every time you put on your clothing.
– Daniel Breez
At Measured Growth CPA, we work primarily with clients that have online or virtual businesses. This means that many of them may not have a physical office outside their own homes. And with Covid19 changing the world, this may be the case for more and more businesses.
If this is the case for you, you will be able to save some tax by deducting a reasonable portion of your home office expenses. Here are 9 common home office expenses that you should consider when filling your taxes:
- Mortgage Interest
- Home insurance
- Repairs and Maintenance
- Home Internet
- Home Telephone
- Cell phone
– Daniel Breez
If you’re always surprised with how much taxes you owe, you’ll want to read this.
One of the biggest mistakes I see business owners make is pulling out money from the corporation without any sort of tax planning. Pulling money out can happen in a few different ways:
- You are transferring cash directly from your business’s bank account to your personal bank account
- You are paying for personal items, such as your home expenses, personal vacations, etc. from the corporation’s bank account
- You have a company owned or leased vehicle that you also use for personal reasons
All of the above are examples of a business owner pulling money out of their company. So why is this a problem? Well, when you pull money out of the company like this, it becomes a “shareholder loan.” You are supposed to pay it back to the company, and if you don’t, you must include it in your personal income and pay tax on it, and if you’re a business owner, you should know by now that personal tax rates are much higher than corporate tax rates in Canada.
Tax planning is something that should be done throughout the year, not just during tax season. By then, it will be too late since you’ll have pulled out all that money already (and most likely spent it).
So next time you are thinking about paying for that personal vacation, or want to transfer some cash to your personal account, remember that this will most likely be something you will be taxed on at your personal tax rate. My best advice is to talk to your accountant, figure out how much money you need for personal reasons, and put yourself on a mix of salary/dividend to achieve the minimum tax you’ll need to pay.
– Daniel Breez