Most new chiropractors setting up their own practice have many daunting tasks ahead of them when they try to learn all aspects of running a business. One of the most common errors is forgetting to set up a tax account – GST, HST and income taxes.
Most people who work for an employer have their taxes taken off at
source before they are paid. As a business owner your pay cheques do not
have any taxes taken off, and at the end of your fiscal year, you could
owe the government between $12,000 and $20,000 or higher in taxes. If
you did not plan for this, could you come up with that amount of cash
when most of your money have been invested into your business? If you
can’t pay the full amount owing, the government may want you to go on
quarterly installments to pay for back taxes, and by the end of year
two, you either were able to swim out of this tax problem with increased
sales or you have sunk this ship.
How much do you need to collect?
There
is no easy answer to this question, but if you are on track to make
$80,000 per year, you can look at the marginal tax rates and get a
pretty good idea of how much to take off at source each month. It is a
good idea to put this into a separate interest bearing account for
year-end.
It is always advisable to consult an accountant prior
to opening your practice. An accountant can help you determine how much
you should set aside for taxes. Getting accounting advice could also
help you decide whether you can do your own bookkeeping or pay someone
else to do this.
Seeking the expertise of an accounting experts
could also help you decide what kind of structure you will have for your
business: sole proprietorship, professional corporation or maybe even a
partnership.
If you decide to do your own bookkeeping, consider
using off-the-shelf software programs such as QuickBooks or Simply
Accounting. These programs can help you create a template to input your
daily numbers into, therefore allowing you to keep a tab on your own
bookkeeping until the time where you are busy enough to hire someone to
do this for you.
Also, do not forget to set up an account to
hold your GST funds. Take caution, as many people dip into this account
to fund payroll or general operating expenses at the beginning, leading
to a cash crunch.
Remember that you wear all hats in your business, and finance is just one of them.
——
Neville
Kidd is a senior account manager for business services with
FirstOntario Credit Union in Hamilton, Ont. You can reach him at
Neville.kidd@firstontario.com.
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