Area of Law: Business Law
Answer # 210
Government regulations, accounting and taxesRegion: Ontario Answer # 210
Every sole proprietorship must comply with federal, provincial and municipal government business regulations. These laws concern business licences, tax collection, keeping records of your business transactions, and regulations about employees.
Regardless of whether you conduct business from a commercial office or from your home, you may be required to obtain a business licence. Business licences are issued by your municipal licensing board and are usually inexpensive. Specialty licences or provincial or federal licences can also be required. For example, if you sell liquor, you will need a provincial liquor licence. If you own a restaurant, you will need a licence to sell food. A lawyer can help you determine what type of licence you will need for your business.
Most businesses will also need to register to collect the Harmonized Sales Tax (HST), a joint provincial and federal sales tax. Ontario businesses must collect 13% HST on most goods and services they sell. You can register for the HST through Canada Revenue Agency (CRA). The CRA will issue you a Business Number that you will use when submitting HST remittances. Businesses with total sales of less than $30,000 in a moving 12-month period, known as a “small supplier” by CRA, are not required to register for the HST.
Business profits of a sole proprietorship are not taxed separately, rather, they are included in the business owner’s tax return, and taxed at the sole proprietor’s personal tax rate.
The business may also be responsible for other types of taxes, depending on the nature of the business. For example, if the business imports goods, it will be responsible to pay duties on the items imported.
Business accounting records
You will need to maintain records of your business transactions including sales records, bank statements, expenses and cancelled cheques. It is a good idea to hire an accountant or bookkeeper to help you with this. Further, business records must be kept separate from the owner’s personal finances.
Regulations about employees
If you have employees, you are required to deduct Employment Insurance premiums, Canada Pension Plan contributions, and income tax from employee salaries. Generally, these deductions, along with your employer’s contribution to Employment Insurance and the Canada Pension Plan, must be submitted to CRA by the 15th day of every month. The deduction amounts are set by the federal government.
To properly make and submit employee deductions, your business must register with CRA. You will then be issued a Business Number. This Business Number is the same as the one you are issued for HST purposes, except that it ends with the letters PR. More information is available from Canada Revenue Agency.
If your business has employees, you may also need to register with the Workplace Safety and Insurance Board (WSIB). The Board provides funds for people who are injured at work. Not all types of work require that the employee be registered. The WSIB encourages and prefers online registration, but they will still help businesses register by telephone, in person, by mail or fax. Contact the WSIB for more information.
Rights for employees with disabilities
In its effort to make the province accessible to all individuals by 2025, the Government of Ontario has created accessibility standard laws.
Ontario’s Accessibility for Ontarians with Disabilities Act (AODA) sets out a process for developing accessibility standards in the workplace. Employers are now legally required to make their employment practices accessible to meet the needs of both current employees and job applicants with disabilities. Employers must comply in six main areas:
- Workplace information,
- Talent and performance management,
- Communicate accessibility policies,
- Accommodation plans, and
- Return to work processes.
Which rules a business must follow depend on the size and type of the organization, and there are deadlines for when they must be met. Generally, however, the standards apply to all businesses, including non-profits (except where stipulated), which employ full-time, part-time, seasonal and contract workers. For more information, go to ‘Basic employment rights and obligations for all employees‘. You can also visit Ontario.ca.
In addition to these general regulations, there are many specific government regulations that may apply to your business. It is important to make sure that you comply with all applicable laws.
There are different tax and government filing rules for individuals who are self-employed and for those who are employees. The CRA has its own criteria for determining if someone is self-employed. If you are not sure whether you are an employee or are self-employed, speak with a lawyer and refer to the CRA guide, Employee or Self-employed?
In deciding if an individual is self-employed, CRA will determine if the worker entered into an employment contract of service or into a contract for services (business relationship).
CRA will consider several factors, including:
- the degree of autonomy the individual has in the business relationship, or the degree of control the other party who pays the individual has,
- whether the individual owns and provides their own equipment and tools to do the work,
- how many people the individual provides services for, and
- who is responsible for any additional costs for a job, such as travel and operating expenses.
Further, whether you are an employee or self-employed will affect:
- your ability to deduct work related expenses,
- your ability to contribute to the Canada Pension Plan (CPP) and eventually collect CPP benefits,
- your right to Employment Insurance benefits,
- what registrations and filings you must make, and so on.
For more information about becoming self-employed, refer to CRA’s business section on Small businesses and self-employed individuals. Visit ServiceOntario’s Regulatory Registry for information on new and recently approved regulations that affect doing business in Ontario.
Is your business protected?
Whether you’re a start-up or well-established business, life insurance can help protect your business so that you can still achieve your business goals in the event of the unexpected. It’s important to get professional advice for your unique situation, and it is more affordable than you think. For a free consultation and quote, contact an Empire Life Insurance advisor today.
You now haveoptions: