Area of Law: Business & Corporate 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.
NEW Ontario Business Registry
Businesses can now complete over 90 transactions online through the new Ontario Business Registry. This includes:
- register a new business name
- renew an existing business name
- dissolving an existing business
- incorporate, dissolve and change a corporation or not-for-profit or charity
- search for a business or not-for-profit corporation
- file notices and other documents under other business law statutes
Currently, mailing or emailing documents is also still available.
Registering existing business: Existing businesses and not-for-profits who wish to access their profile or file documents using the Registry will require a Company Key. Businesses can submit a request for their company key at Ontario.ca/BusinessRegistry.
New businesses and not-for-profits should visit the Ontario Business Registry: all services page for instructions on how to create and register their new business.
Anyone can do a free search of the Ontario Business Registry to get basic information about a business or not-for-profit corporation.
Some offices closed
As a result of the launch of the new Registry, six service counters across Ontario will no longer endorse articles submitted under the Business Corporations Act. As well, the ServiceOntario counter at 375 University Avenue in Toronto has closed. Visit ServiceOntario for information on what offices are still open and what transactions can be completed in-person.
If you are not sure whether you are an employee or are self-employed, speak with a lawyer and refer to CRA’s business section on Small businesses and self-employed individuals.
You can also refer to the Government of Canada, Business and Industry services for more information on government regulations, accounting and taxes. Visit ServiceOntario’s Regulatory Registry for information on new and recently approved regulations that affect doing business in Ontario.
Get legal help
For legal advice and assistance with forming a sole proprietorship and the tax implications, and for other business issues, contact our preferred experts at Kalfa Law, or call them now at 1-800-631-7923.
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