When starting your own new business, it often makes sense to choose a simpler structure, which is a sole proprietorship. This allows you to test the viability of your business idea and see if the lifestyle and associated stress that comes with running a business match your personality and align with your long-term goals. Alternatively, you may want to keep things simple and not add any unnecessary complexity. Registering and maintaining a sole proprietorship is relatively simple; many business owners don’t worry much about finances until after tax (when the mad rush comes). However, once you have a company, the level of complexity and effort increases.
Why go from a sole proprietor to a company?
There are several reasons why you might decide to convert your sole proprietorship into a company:
Growth
Your business is experiencing growth that requires a more formal corporate structure and separate legal entity to accommodate the additional complexities of growth.
Need
You may need a loan that a bank/financial institution requires you to set up. Alternatively, a customer or client may do business with only one company.
Tax optimization
If your business is doing well, you may want to keep money in the company or have some flexibility in how you pay yourself, such as salary versus dividends, to better optimize your taxes through tax deferral options. Talk to a renowned accounting firm or a tax consultant near me for more clarity.
Adding a partner
You may decide that you want to add a partner to your firm for whom you need to create a new business structure.
Employment separate from staff
A sole proprietorship is an extension of an individual, while a corporation is a separate entity. You may decide that as your business grows, you would like to separate your business from your business.
Take advantage of loans, incentives, tax credits
It is usually easier for companies to get certain types of grants, loans, incentives, and tax breaks.
Limited liability
One of the main advantages of a corporation is limited liability, which means that you are only liable for debts or liabilities up to the amount of the company’s assets. With a sole proprietorship, everything you own is available to someone to sue you.
Value creation
You may want to set up a company to survive and also take advantage of the lifetime capital gains exemption if you decide to sell it.
Steps to be taken in case of transition from a sole company to a company:
Register your new company
The first step, once you decide to start a company, is to register your new company. Many incorporation services can help you, or you can do it yourself with guidance from Industry Canada and the province where your business is located. An important aspect of incorporation is deciding whether you want to do it at the federal or provincial level. The advantage of incorporating at the federal level is that it allows more flexibility if you want to expand into other provinces or even internationally. It also gives you some name protection. Provincial registration is slightly cheaper and suitable if you are not looking to build a brand or expand.
Register for new tax codes and valid numbers
when you set up a new company for your business, you need to register for new sales tax (gst/hst) numbers and also register for payroll accounts depending on whether you charge sales tax and whether you have employees or not.
Drop your sole proprietorship and tax number
Decide whether you want to liquidate your existing sole proprietorship or keep it in business as a dormant business for a while. However, you should clean up your sales tax and payroll numbers to avoid filing a $0 return and potential penalties if not filed on time.
Close your individual bank account and open a new company bank account
Cancel your sole proprietorship business bank account and create a new company bank account. You can still use a business credit card, although it’s best to get a business credit card if possible.
Consider section 85 rollover
When transferring your existing unincorporated business to a corporation, you should consider whether you need to make a section 85 rollover, which is one way to transfer assets from an SP to a corporation. This is especially important if you have built a brand or customer list and your current business has intangible value beyond assets such as inventory and equipment. The purpose of a section 85 rollover is to determine the value of the assets of the existing business, including intangible assets, and transfer them at their original cost so that you do not have to pay capital gains tax. Many small business owners don’t do this, which can be problematic if Revenue Canada determines that your business has value and assesses your taxes accordingly. This article explains section 85 rollover in more detail.
Changes to contract, billing, etc. for the new company
If you have client/customer agreements that you will be moving to a new company, ensure that they are updated to reflect the new entity and any other related changes.
Transitioning your accounting
Since the company is a separate legal entity, it is advisable to create a new accounting file. Some business owners continue to use the same accounting file, which can be confusing, especially for tax purposes, since filing income for an individual is different from a corporation. Company reporting begins with the date of incorporation, but you may have overlapping sole proprietorship transactions as you transition. Talk to a renowned accounting firm or a tax consultant near me for more clarity.
Ideally, you should shut down the existing accounting software for your company. Before closing your account, make sure you export all relevant reports and data from the start of your business, including:
Look for an accountant
The company has more complexity when it comes to tax returns and preparation. That’s why it’s a good idea to find an accountant as soon as possible to walk you through your responsibilities and tell you right from the start what you need to do to ensure a smooth transition. Talk to a renowned accounting firm or a tax consultant near me for more clarity.
For further information about company incorporation in Canada, we invite you to contact our team of experts. The requirements for starting a business in Canada can be explained by our team of Canadian company formation specialists who can also help you when drafting the documents with the authorities in charge. You can contact us for details about the procedures for company incorporation in Canada. Filing Taxes is an accounting firm that has its own physical offices, but we also provide accounting & bookkeeping services on a virtual platform. Feel free to contact us through our website filingtaxes.ca or reach out at 416-479-8532. Schedule your tax preparation appointment with us and take the first step towards proper management of your finances. Our professional personal tax accountants will make sure to get you the maximum tax refund on your personal tax return.
Disclaimer: The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.
Congratulations—you’ve incorporated your business! Certain things must be done now to keep your company up-to-date and CRA compliant.
Remember, you’re no longer your company
You’ve heard it before… a corporation is a “separate entity”.
But what does this mean?
It’s like another person. It has the power to enter into contracts, pay and receive money, sue, and be sued. Once you have a corporation, you should not be doing business in your personal name anymore. Any contracts, agreements, or other documents you draft should be in the company name. This way, should things go wrong, you’ll not be personally liable (Note: there are certain instances where directors can be personally liable. Talk to your small business lawyer if you have any concerns).
Here are some of the steps that you need to take after incorporating and a few important things you should remember.
1. Register your new corporation with the CRA
Obtaining your CRA Business Number will depend on the type of incorporation you choose. For federal corporations, the process is instant; for provincial corporations, the process can take longer and may require additional registrations.
2. Open a Corporate Bank Account
Your business is now incorporated and you are ready for business. Your corporation is a distinct legal entity, separate and apart from you. It can sue and be sued; it can own assets and transact business; and it, therefore, needs a bank account, separate from your personal account. To open your corporate bank account, banks may request the corporation’s certificate and articles of incorporation, and you may need to fill out some bank forms.
Organize Your Corporation
Organizing your corporation means putting a structure around it and assigning responsibilities within the corporation. After incorporation, the incorporators or first directors need to call the first meeting of directors to organize the corporation or sign organizing resolutions approving and adopting organizational resolutions. At the first meeting of directors or through corporate resolutions, the corporation will:
a) Issue shares from the authorized share capital of the corporation. SMEs may start with the incorporator being the sole shareholder. As legal proof of share ownership, the corporation will create and issue share certificates for each of the shareholders of the corporation. Share certificates show the class and number of shares held by shareholders. If you have more than one shareholder within the corporation, prepare a Shareholders Agreement.
b) Appoint Directors: The shareholders appoint directors to oversee the activities of the corporation. Again, the sole shareholder may be appointed as the sole director.
c) Appoint Officers: The directors of your corporation appoint the officers—President, Secretary, and Treasurer.
d) Create Registers and Ledgers: The corporate register is a list of your corporation’s shareholders, directors, and officers. The shareholders’ ledgers show the class and number of shares held by each shareholder of the corporation.
e) Appoint an Accountant for your corporation
f) Minute Book: Keep all corporate records in a minute book. You will keep records of corporate documents such as your corporation’s:
You are required to keep your corporate records up-to-date and in compliance with the law. Your minute book should be well organized and kept by a professional.
4. Find out if you need to charge GST and/or PST
Determine whether you will register for a GST/HST number. When you incorporate, you’ll be assigned a business number. You should check with the Canada Revenue Agency to determine if you’re required to register for a GST/PST account and you can use your business number to register.
If you operated a business before incorporating, you will need to close your old GST/HST number, if you had one, and open a new one under the name of the corporation.
5. Annual Return And Resolutions
The law requires each corporation to file annual returns with the government and prepare shareholder and director resolutions yearly. These documents are mandatory for your business to be compliant with the provisions of the Ontario Business Corporations Act (OBCA) and the Canada Business Corporations Act (CBCA).
6. Plan Your Business Expenses
With the establishment of your business account post-incorporation, you can make cheques payable to your corporation. Funds generated after incorporation can be deposited directly into your corporate bank account.
Payments for business expenses should be made through the corporate bank account, and business expenses paid by cash should be tracked and reimbursed by the corporation. The corporation should reimburse business vehicles and home office expenses.
7. Plan Salaries, Dividends, And Income Splitting
Salaries: After incorporation, the former sole proprietor who personally operated the business becomes an employee of the corporation and should start receiving a monthly salary from the corporation for the services provided.
Dividends: If the corporation makes a profit, the shareholders of the corporation may be paid dividends.
Income Splitting: The corporation may pay salaries to family members, including parents, spouses, or children.
Issuing dividends is a tax planning tool used by corporations.
Conclusion
Upon incorporation, your corporation becomes a legal entity, separate from you, and should own its own corporate bank account. The first directors are required to have a meeting where they organize the corporation and assign responsibilities. The corporation is required to maintain updated corporate records in a corporate minute book, file annual returns, and prepare annual resolutions. The corporation may pay dividends to its shareholders when a profit is made.
This list is by no means exhaustive, but it includes some of the initial considerations following incorporation. You should also contact an accountant or tax lawyer to get advice on tax issues related to your corporation.
Accountants at Filing Taxes can help answer all of your incorporation questions. Feel free to reach out to Filing Taxes at 416-479-8532. Schedule your tax preparation appointment with us and take the first step towards proper management of your finances. Our professional personal tax accountants will make sure to get you the maximum tax refund on your personal tax return.
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Disclaimer: The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.
As long as we earn, there will always be an obligation to pay taxes, regardless of profession. As a medical professional, medical doctor, physician assistant, or nurse either working on a part-time or full-time basis, you will also have to file for an annual tax return on your earnings.
While you look after your patients, we’ve got our eye on all the top tax deductions for nurses and healthcare professionals.
In Canada, nurses can carry on the practice of their profession under a corporation’s name. Nurses who operate as a professional nursing corporation may have several distinct advantages over nurses working as sole proprietors or partnerships.
Nurses can legally organize into a professional service corporation and contract with one or more other individuals or business entities.
A nursing corporation is a type of professional corporation that is formally registered and is engaged in providing services that are within the scope of the nursing profession.
Only registered nurses can be shareholders in the corporation. Also, shares in the Professional Nursing Corporation may only be transferred to those who are licensed to practice registered nursing.
Nurses are uniquely qualified to start their own businesses in areas such as legal consulting, coaching, and home healthcare. If you are looking to start a business as a nursing service or buy into an existing business, there are numerous issues to consider. It can be a maze of issues but as accountants and business advisors we can assist you in all these areas plus provide advice on the preparation of a business plan, marketing plan, and cash flow budget.
Forming a nursing corporation is a great idea for nurses in Canada looking to save on self-employment taxes and receive additional liability protection. Incorporating a Professional Nursing Corporation will limit your personal liability against creditors and lawsuits, minimize the self-employment taxes of the shareholders, allow you to build corporate business credit, and much more.
If you are a self-employed nurse in independent practice, you have options for incorporating your own business. These include incorporating with the Ontario or federal government. As a nurse, you also have the option of setting up a Health Professional Corporation with the College of Nurses of Ontario (CNO).
Regardless of which option you choose, we recommend you discuss your situation with expert accountants at Filing Taxes. We have a team of accountants well conversant with healthcare entities and healthcare incorporation issues to determine the best choice for you.
Attempting a "do-it-yourself" business entity as a health professional is not wise. Not only is legal advice required, but the entity should be modified to fit the health care business and the health care professionals for whom it is being created. There are many pitfalls that should be avoided. We can help you navigate the accounting and tax responsibilities that come with running a nursing corporation.
Healthcare accounting for the nursing corporation is complex. Nursing professionals need to invest a significant amount of time taking care of their finances and records. Coupled with increasing demands for accountability, consistently changing regulations, and intense public scrutiny, managing a company in the healthcare industry is challenging.
The Nursing Corporation’s utmost priority is to satisfy the patient it is treating. It has to do so by keeping the whole treatment cost-effective. This is where it becomes painful. For a medical facility to work effectively at its full potential, it has to provide cost-efficient treatment that is effective too. In simpler terms, the nurses and finance department have to work hand in hand to ease up the pain of the patient, both financially and physically.
Forming a nursing corporation is challenging but can be very rewarding. Running a busy medical practice requires tackling accounting and tax compliance issues that most doctors and nurses never anticipated before opening their doors. The health industry is drastically changing by the minute due to intensive ongoing research. Moreover, to accommodate patients, there are always new laws and discoveries coming out. In such a changing industry, financial managers are faced with significant challenges that they have to tackle. Since they handle the funds, all changes have to go through them.
All business owners need to budget, plan, and monitor their business performance. It is clear by now that medical offices work on the same structure as business organizations. Therefore, the need for a robust accounting department is a basic need. We know the pitfalls of the nursing industry and look forward to working with you to build your business and grow your wealth.
Our skilled accountants have decades of experience in providing tax, accounting, and payroll services to healthcare practitioners. We can take over bookkeeping, accounting and other time-consuming but necessary tasks so you have more time to spend with your patients. And our proactive tax planning strategies will keep your practice in compliance with the latest Canadian Federal and State tax laws while minimizing your tax burden.
The first step to hassle-free incorporation, accounting, tax returns, and tax planning starts by reaching out to one of the representatives at Filing Taxes. Our accounting firm specializes in medical practice accounting and tax services. We're uniquely positioned to provide the accounting services, tax strategies, and practice management solutions your nursing corporation needs to survive and thrive. Our experienced and professional team at Filing Taxes is here to set you on the right path considering your personal business situation. Feel free to reach out to Filing Taxes at 416-479-8532. Schedule an NTR engagement appointment with us and take the first step towards proper management of your finances.
Disclaimer: The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.
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