Ontario startup accounting and tax guidance
Starting a business?
Make the numbers part of the plan.
Your first sale is a milestone. Build the financial habits that support the next one: a suitable business structure, clear records and a plan for taxes and cash flow.
Bhundhoo Tax Professional Corporation · London, Ontario · Online service across Canada
You know the work. Give the business behind it a solid start.
The short answer
How do I set up the financial side of a new Ontario business?
Choose a business structure that fits your circumstances, check the registrations and licences that apply, separate your business transactions and keep supporting records. Monitor GST/HST registration requirements, set up a filing calendar and estimate your tax obligations before deciding what you can withdraw. Incorporation is a decision to assess, rather than an automatic first step.
The right structure should fit how you work and where you want to go.
01 · Business structure
Do I need to incorporate straight away?
No. A sole proprietorship can be a suitable starting point for some owners. Incorporation creates a separate legal entity and adds ongoing administration. The decision depends on risk, ownership, expected profit, personal cash needs and plans to retain money in the business.
- Sole proprietor: One owner reports the business results through their personal tax return and generally carries personal responsibility for business obligations.
- Partnership: Co-owners need clear agreements about responsibilities, contributions and profit sharing. Liability depends on the legal form.
- Corporation: A separate entity with its own filings. Limited liability has exceptions, including personal guarantees and certain director obligations.
There is no universal profit threshold for incorporation. Compare the expected benefits with setup costs, annual costs and the tax consequences of taking money out.
02 · Registration
Which registrations does my business actually need?
Business-name registration, incorporation, a CRA business number and tax program accounts serve different purposes. Identify the requirements for your activity rather than opening every available account.
Business name and permissions
An Ontario sole proprietor generally needs to register a business name when using a name other than their own legal name. Also check municipal permits, industry licences, professional rules and insurance.
GST/HST
For most ordinary businesses, mandatory registration depends on exceeding $30,000 of worldwide taxable supplies, including relevant associates, in one calendar quarter or over four consecutive calendar quarters. This is a revenue test, not a profit test. Exceptions apply.
Crossing in one quarter can require charging tax on the crossing sale. Crossing over multiple quarters has different timing. Voluntary registration brings filing and collection obligations as well as potential input tax credits.
Payroll
If you hire employees or your corporation pays you a salary, assess payroll registration, deductions, remittances and information-return requirements before processing pay.
Importing and exporting
Businesses moving commercial goods across borders should check CBSA requirements. Import-export RM accounts are managed through the CARM Client Portal. Your shipping arrangements and role determine the requirements.
Selling exempt services, operating across borders or working in a special industry can change the analysis. Confirm your applicable registration date before adding GST/HST to invoices.
03 · Business expenses
What can I claim as a business expense?
Start with the purpose, evidence and correct classification. An expense must meet the applicable tax rules. Paying from a business account does not make a personal purchase deductible, and a deduction does not refund the entire purchase price.
| Cost | Question to resolve | Records to keep |
|---|---|---|
| Advertising, software and professional fees | Does the cost relate to earning business income, and is it current, capital or subject to another rule? | Invoice, agreement and business-purpose explanation. |
| Computers, equipment and setup costs | Is the item a capital asset? When did the business begin? Some costs need different treatment from an immediate expense. | Purchase documents, start date and date the item became available for use. |
| Working from home | Does the workspace meet an eligibility test? If it is not the principal place of business, exclusive use and regular client-meeting requirements matter. | Eligible bills, area calculation and time allocation where relevant. |
| Vehicle costs | For a sole proprietor, calculate the eligible business share of actual costs using business and total kilometres. Passenger-vehicle limits may apply. | Receipts, odometer readings and trip log with date, purpose, destination and distance. |
| Meals and travel | Is there a genuine income-earning purpose? Meals and entertainment generally face a 50% limit, subject to exceptions. | Itemised receipts, business purpose and relevant meeting or trip details. |
Startup spending is not automatically deductible because it happened before your first sale. The business commencement date and the type of expenditure matter.
A few repeatable habits can keep a year of records from becoming a last-minute project.
04 · Recordkeeping
Give every transaction a clear explanation.
Your records should show what happened, why it relates to the business and where to find the evidence. A bank feed helps collect activity; it does not replace reviewing it.
- Separate transactions. Use banking arrangements suited to the business and label owner contributions and withdrawals.
- Capture the evidence. Keep readable invoices, receipts, contracts and supporting electronic records.
- Match the activity. Connect customer payments to invoices and avoid recording a credit-card settlement as a second expense.
- Close each month. Reconcile accounts, review unpaid invoices and follow up missing information.
The general CRA retention period is six years from the end of the last tax year the records relate to. Some records and circumstances require longer retention.
05 · Filing and payment dates
Filing later can still mean paying earlier.
Build a calendar for each account you actually have. Income tax, GST/HST, payroll and instalments can follow different schedules.
| Business type | Return filing | Balance payment |
|---|---|---|
| Self-employed individual | Generally June 15 of the following year. | Generally April 30 of the following year. |
| Corporation | Generally six months after its tax year-end. | Generally two months after year-end. Certain qualifying CCPCs have three months. |
Exceptions and weekend/public-holiday rules apply. GST/HST and payroll have their own deadlines, and instalments may be due before the final balance. Confirm the calendar for your accounts.
06 · Paying yourself
A transfer to yourself needs the right treatment.
For a sole proprietor, personal drawings generally do not reduce business profit. An incorporated owner needs to identify whether a payment is salary, a dividend, reimbursement, repayment of an amount owed or another transaction.
Salary and dividends have different effects on payroll, CPP, RRSP room and combined corporate-personal tax. Neither is automatically best, and a blend is not automatically the right answer. Compare the numbers with your personal cash needs and longer-term plans.
Planning a mortgage or a major purchase? Discuss the evidence a lender needs and the cash the business must retain before changing your compensation or making a large withdrawal.
Plan the business cash and the household cash together.
07 · Cash and tax reserves
Your bank balance already has commitments.
Before taking money out, allow for supplier payments, operating costs, tax obligations and a cash buffer. Estimate income tax and CPP using your circumstances. Track GST/HST separately rather than assuming one reserve percentage covers everything.
Illustration: $8,000 cash less $2,000 upcoming bills, $1,500 assumed tax obligations and a $1,000 operating buffer leaves $3,500 before other commitments.
These are fictional planning amounts, not a tax calculation or a recommended withdrawal. Replace them with your obligations and expected collection dates.
08 · Work with a CPA early
Bring the questions.
Build a workable next step.
Amit Bhundhoo is a CPA, former CRA auditor and founder of Bhundhoo Tax Professional Corporation. The firm helps business owners with bookkeeping, year-end accounting and tax planning from London, Ontario and online across Canada.
For an initial conversation, bring your business activity, ownership plans, expected revenue and costs, personal cash needs and any registrations already completed. That gives the discussion a useful starting point.
Startup questions, answered
What new business owners ask us
Can I start as a sole proprietor and incorporate later?
Yes. Many businesses begin as sole proprietorships and reassess as their circumstances change. Review legal risk, ownership, cash needs and ongoing costs. Transferring an existing business into a corporation can have tax consequences and may require additional planning.
Do I need a CRA business number immediately?
Not every sole proprietor needs a CRA business number on day one. The requirement depends on the business and the program accounts it needs. Provincial registration, a CRA business number and municipal or professional permissions are separate considerations.
Does the $30,000 GST/HST test use revenue or profit?
For most ordinary businesses, it uses worldwide taxable supplies before expenses, including relevant associates, rather than profit. Both the single-calendar-quarter and four-consecutive-calendar-quarter tests matter. Special rules can apply.
Can I claim all of my startup spending straight away?
No. The start date of the business and the nature of the spending affect its tax treatment. Some costs may be current expenses, some capital expenditures and some ineligible. Keep the evidence and have uncertain items classified before filing.
Do I need accounting software from the first day?
You need reliable records from the beginning. A well-maintained spreadsheet may suit a simple business, while software can help with invoicing, reconciliation and growing transaction volume. The process still needs review and supporting documents.
How much should I put aside for business taxes?
Use an estimate based on expected profit, other income, province, business structure and applicable CPP or payroll obligations. Monitor GST/HST separately. Review the estimate as results change rather than relying on one percentage of every deposit.
Can I work with Bhundhoo Tax if I am outside London?
Yes. Bhundhoo Tax Professional Corporation is based in London, Ontario and works with clients online across Canada. Use the booking page or email to discuss your business and the support you need.
Your first year deserves a clear plan
Start with the next decision.
Build from there.
Whether you are testing a side business, preparing to incorporate or organising your first year-end, start with a conversation about your circumstances.
Email: amit@bhundhootax.ca
Telephone: 1 (519) 953-5844
Official references and further reading
General Canadian business education. Your facts, province and changes in tax rules can affect the result. Examples are illustrative. An introductory call does not replace a completed tax analysis or an agreed engagement.