Self Employment Income Tax

Do you own or manage a small business? Need some help when it comes to completing your tax forms? The team at AACT Financial Solutions is always here to help! We specialize in all types of income tax returns. We will work directly with you to ensure that we include all deductions and credits that you are entitled to.

Sole Proprietorships

A sole proprietorship allows an individual to own and manage the business and its transactions. Sole proprietors will pay taxes on their income from the business as part of their personal taxes. The business owner of a sole proprietorship is responsible for debts and liabilities and can sell the enterprise – or pass it on to family members – whenever he or she feels inclined. This option is a smart choice for entrepreneurs looking to start a business quickly, as a sole proprietorship is often less costly and includes less paperwork and formalities than corporations or partnerships.

Owners will have to abide by the regulations of the municipality where the sole proprietor is located, to obtain a license. Sole proprietorships don’t require any formal or legal steps at the federal, provincial or municipal level. Sole proprietorships will have to register their name; however, if the enterprise is known by anything other than the entrepreneur’s name.

Partnerships

A general partnership is created when two or more people agree to operate a business as co-owners. Entrepreneurs in this kind of an agreement share responsibility of profits and losses, have joint ownership of the company and have an equal right to management (assuming equal 50/50 ownership). Partnerships do not require any formal or legal paperwork, however, they must meet registration obligations; however it is recommended that you have a legal agreement.

Limited partnerships include one general partner and one or more limited partners. The limited partners have no management role in the business and only contribute assets, while the general partner assumes all management responsibility. Only the general partner will be held personally liable for business debts and obligations, whereas the limited partners can lose no more than their stake in the partnership.

Advantages and Disadvantages of a General Partnership

– Increased knowledge and contracts among multiple partners

– Partners file profits and losses on personal income tax returns

– Improved management with more than one owner

– Easy to establish

– Partners cannot transfer interest of the business without approval of the other partners

– Joint liability for debts and obligations

– Potential for instability if one partner decides to withdraw from the business or dies

Advantages and Disadvantages of a Limited Partnership

– Attractive to investors since they can come on as limited partners

– Partners are taxed on their personal income tax returns

– Limited partners get to share in the profits without having to manage the business

– General partner is fully liable for company debts

Contact our professional and experienced team at AACT Financial Solutions and let us help with any of your tax related issues or questions. We are always happy to hear from you.