Credits: Wikipedia

How to lower administrative costs of my business and how to use provincial rules and regulations efficiently for my Ontario business?

Remitting your business taxes is different from a sole proprietorship to a general partnership and to a corporation.

For a Sole Proprietorship simply all business revenue is declared on the personal tax return.

For a General Partnership, each partner calculates their share of business income and reports it on the personal tax return.

For a corporation, the provincial and federal government offers numerous incentives. By charging the businesses less to pay the tax, more money stays in the business to help it grow.

Businesses can take advantage for the write-offs for expenses incurred in business operations, for example: Capital property, business vehicles, equipment or tools, product costs – for example packaging, inventory, research and design – office expenses, if you have a dedicated office space at home, marketing expenses, online tools and services, travel costs or office supplies. Contact your accountant for more expenses your business can write-off.

Tax rates for small business corporation

Most small businesses in Canada receive a much lower tax rate if they qualify as a Canadian controlled private corporation which is eligible if the:

company is incorporated in Canada
owned by Canadian residents
not publicly traded

leading to 9% federal tax, 3.2% Ontario tax. To qualify for these tax rates, the business must not exceed $500,000 in annual income and the income should be from active business – earned from active operations, for example not an income from investments.

Possible reductions in tax rate

One option is shareholders dividend pay-out – shareholders can earn a dividend refund, or gain tax refunds. You will be taxed at a lower rate on personal returns since you receive dividend tax credits.

Another option is to pay yourself a salary which is taxed at the normal personal income tax rate. You can select any of these options or a combination and you could get the best advice from your accountant.