GTA Accounting’s Guide to Startups: Understanding Your Obligations with the CRA and Organizing Your Business

Starting a new business is an exciting journey, but it comes with significant responsibilities, especially when dealing with the Canada Revenue Agency (CRA). Understanding your obligations from the outset can help avoid unnecessary surprises and ensure smooth operations. At GTA Accounting, we’ve compiled this guide to help new startups navigate their CRA obligations and establish a solid foundation for success.

Why Understanding Your CRA Obligations is Crucial

As a new business owner, knowing the details of your tax obligations and reporting requirements is essential to avoid fines, penalties, and operational hiccups. Staying compliant also boosts your credibility with stakeholders, including investors, customers, and employees.

Essential CRA Obligations for Startups

1. Registering for a Business Number (BN)

The first step in setting up your business is registering for a Business Number (BN) with the CRA. This nine-digit number is used to identify your business for tax purposes and is required if you plan to register for GST/HST, payroll accounts, or corporate income tax accounts.

To learn more about getting a Business Number, visit the CRA’s Business Number registration page.

2. Understanding GST/HST Registration

Depending on your business's revenue and the type of goods or services you offer, you may need to register for a Goods and Services Tax (GST) or Harmonized Sales Tax (HST) account. If your business earns $30,000 or more in gross revenue within a calendar year, you must register for GST/HST. Failing to register when required can lead to penalties, so staying on top of this obligation is essential.

You can find more details about GST/HST registration requirements here.

3. Corporate Income Tax Filing

Every incorporated business in Canada must file an annual corporate income tax return (T2). Even if your company did not earn income during the year, filing is still required. It’s essential to track your business’s financial activities throughout the year to ensure that your filings are accurate and submitted on time.

Learn more about corporate tax obligations on the CRA's tax filing guide.

4. Payroll Deductions and Employer Responsibilities

If your startup employs staff, you must register for a payroll account with the CRA. Employers must withhold specific amounts from employees’ wages, including income tax, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums. These withholdings must be remitted to the CRA regularly, and employers must also contribute to CPP and EI on behalf of their employees.

Refer to the CRA’s payroll deductions guide for more information on payroll obligations.

5. Record Keeping

Maintaining accurate records is a best practice and a legal requirement. The CRA requires you to keep detailed records of all your income, expenses, and transactions. This includes:

• Sales receipts
• Purchase invoices
• Employee payroll records
• Bank statements

Good record-keeping practices make it easier to file accurate tax returns and defend your deductions in case of an audit.

You can refer to the CRA’s record-keeping guidelines for more details.

6. Filing and Remitting on Time

The CRA has strict deadlines for filing taxes and remitting payments. Missing these deadlines can result in interest charges and penalties, which can be especially burdensome for new businesses.

• Corporate taxes are typically due six months after your fiscal year-end.
• GST/HST filings vary based on your revenue but can be annual, quarterly, or monthly.
• Payroll remittances are due monthly or quarterly, depending on the size of your payroll.

Ensure you know the filing and payment deadlines applicable to your business to avoid late fees.

7. Claiming Deductions and Credits

Startups can use various tax deductions and credits to reduce their tax liability. These might include:

• Business startup costs
• Home office expenses
• Employee wages and benefits
• Scientific Research and Experimental Development (SR&ED) credits for tech-based startups

Work with a tax professional to ensure you claim all the deductions and credits your business is eligible for. GTA Accounting can help you maximize these tax-saving opportunities.

Tips for Organizing Your Business for Smooth Operations

1. Create a Financial Plan

A financial plan helps you project revenues, expenses, and cash flow. It ensures a roadmap for managing resources effectively and preparing for tax obligations.

2. Use Accounting Software

Invest in accounting software to track income, expenses, payroll, and taxes. A sound system will make tax time less stressful and help ensure your CRA filings are accurate and complete. Popular options include QuickBooks, Xero, and Sage.

3. Work with a Professional Accountant

Partnering with a professional accountant ensures that your finances are handled properly and your tax filings comply. At GTA Accounting, we can help you navigate the tax landscape, maximize deductions, and avoid costly mistakes.

Avoiding Surprises from the CRA

The CRA has the authority to audit businesses, which can be stressful and time-consuming. To avoid surprises:

• File all returns on time.
• Keep accurate and up-to-date records.
• Respond promptly to any CRA requests or communications.

By staying proactive, you can minimize the chances of being audited and avoid the financial strain of penalties or interest charges.

Conclusion

Understanding your CRA obligations is crucial for the smooth operation of your startup. From registering for a Business Number to filing corporate taxes and managing payroll, compliance ensures that your business remains in good standing with the CRA. GTA Accounting is here to help you every step of the way, ensuring your business is organized, compliant and set up for success.