Cecilia asked:

"We started up a business a yr ago(construction/renovations) but were unsure of what are the legal requirements? It would only be p/t...as jobs come available. We decided to hire employees what do we need to do? How much and what taxes need to be deducted? Payroll deductions? Do we deduct off their wage or is it done on income taxes? Also when drawing up invoices do you charge GST on labour and materials?"

Hari S. Nesathurai answered:

Legal Requirements for Business

Depending on which province your business is operating or planning to operate may require you to register your business and/or your business name if you are not operating under your own name. i.e. Acme Construction. Further, you may be required to be licensed as a contractor depending on the nature of the jobs you undertake. The installation of a electrical service, gas furnace, gas lines, air conditioning is regulated in most provinces and requires that the appropriate licensed professional sign off. Each province has different regulations and I recommend you consult a local lawyer in your area to ascertain the exact requirements in your municipality.

If you have employees, you will most likely have to register for workman's compensation insurance in your respective province.

It also may be advantageous from both a liability point of view and income tax perspective to incorporate your business. Think of the risk you may have if you or your employees undertake a renovation and the building falls or injures someone. Once again, you should contact your accountant and a lawyer to discuss the best way to set up your business.

Employees

If you employ individuals on a hourly basis, you are required to do the following:

1. Obtain TD-1 forms from each and every employee and maintain them on file.
2. Register for a Business Number for Payroll
3. Maintain payroll records in accordance with the government rules. A payroll ledger is available at Staples or the Business Depot.
4. Withhold from each employee for Income Taxes, CPP and EI in accordance with the payroll deduction tables available from the government.
5. Employ individuals who are legally entitled to work in Canada. Always take a copy of the individual's SIN card and government photo ID for your file.
6. Register for workmen's compensation.

GST

1. You have a duty to collect and remit GST if your taxable sales exceed $30,000.00 a year. There are specific guidelines on when you are required to register but the simple rule is if you anticipate exceeding $30,000.00 or have exceeded that amount in the past 12 months, you must register.
2. If you are registered you can also claim the GST back you pay for business expenses.
3. You must also maintain books and records in compliance with the GST regulations.
4. If you are registered, you generally charge GST on both materials and labour.
5. You may also be required to register for provincial sales tax depending on whether you are deemed to provide a retail service and may also benefit from not having to pay sales tax on your purchases. In Ontario if the items are deemed to be fixtures, sales tax is not charged. i.e. a cooktop that is permanently installed.

The above answer is only a brief overview of the issues that need to be reviewed with respect to carrying on a business. You should consult a lawyer and an accountant to discuss in detail your particular situation in order to receive the most accurate and beneficial advice.

About the author

Hari S. Nesathurai is the senior tax counsel at the Toronto law firm of Heydary Hamilton PC where his practice includes domestic and international tax planning and tax litigation for privately held corporations and wealthy individuals. Click here to view Hari's C.V

 
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