Annie Noh is a whiz at business, but she learned soon after opening her health clinic in Toronto two years ago that she needed the help of a professional number-cruncher, especially for taxes.
Her business, Clear Living Clinic, specializes in colon hydrotherapy. While she got the best training, purchased high-tech equipment and hired the right staff, Ms. Noh initially didn’t put as great an emphasis on planning for tax season.
“I knew I had to have a good accountant, but just like most new business owners, I also found myself struggling with dealing with so many urgent tasks. So I put off looking for one until the last minute,” says Ms. Noh, 38.
Whether entrepreneurs seek a professional or use software to prepare their taxes, adequate preparation is key. We asked three tax pros to suggest tips for small businesses on maximizing deductions, minimizing costly mistakes and reducing the risk of an audit.
Choose the right business structure
Deciding whether to be set up as a sole proprietor, partnership or corporation is crucial, as each provides different benefits and risks, says Frank Fazzari, a CPA and managing partner of Fazzari + Partners LLP Chartered Accountants, based in Vaughan, Ont.
“Getting an accountant and lawyer involved at the beginning stages can ensure you obtain the maximum tax benefits,” Mr. Fazzari says. Consulting a tax accountant is also a deductible expense, he notes.
Most new small business owners are not well versed in what they need to set up from the start, says Rita Zelikman, a chartered professional accountant based in Thornhill, Ont. “Decisions like picking the right year-end, deciding how much to pay yourself or whether to do income splitting with other family members, choosing the right HST method to use – mistakes in any of these can cost you more in taxes.”
Manage cash flow
Sometimes money gets tied up in receivables if the owner or manager is not on top of collections, Ms. Zelikman says. “Income is calculated on an accrual basis, so even if you haven’t collected on a lot of receivables by tax time, or HST time, you still have to remit the tax/HST on those, which can leave business owners in a big cash deficit,” she says.
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