• Last Updated:
  • Sep 1st, 2014 12:08 pm
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[OP]
Newbie
May 3, 2012
13 posts
4 upvotes
VANCOUVER

First time IT contractor

My husband has just got his first contractor job after being laid off. We are very pleased obviously but also starting to panic as we have no idea what need to be done to run an incorporation. Please help us with our questions.

1. Do we need an accountant ? What does an accountant do for us ? How much he/she would charge ? Where to find one ? How about looking on craigslist ? How do we know whether one is good ? We are Vancouver-based. If you can recommend someone, please PM me.

2. Do we need to open a business bank account ? a credit card ? or can we just use our personal credit card for business expenses ?

3. When you tell a potential client your rate, should the rate include GST ? My husband got surprised when he first saw the contract where it states that the contractor is responsible for all the taxes including GST. Is that normal ?

Thanks.
9 replies
Jr. Member
Nov 10, 2009
112 posts
30 upvotes
This is a really good resource for independent contractors: https://brockconsultants.com/books
The author is a RFD'er and this ebook covers a lot of ground for a pretty small price. It is also a business write off for your husband as a legit business expense.

My answers/opinions to your questions:
1. An accountant is important as they will save you more money in taxes (legally of course) than they will charge you. Properly structuring even a simple business is important and requires expert help. The rates will vary greatly, and generally you get what you pay for. Ask friends and other business owners for referrals, head to a small business meetup in your area, etc to get recommendations and talk to several before deciding on someone. It is a long-term business relationship you are forging, so take your time. Craigslist is not a good place to find an accountant (nor Kijiji, nor the guy in the stripmall near your house, nor just picking from the yellowpages. Get referrals from people you trust).
2. An accountant will help with this structure, but in short, you should keep separate accounts. Get a travel points card for the business and pay for everything you can. Using the points for business travel is great and often billable. Using points for personal travel is okay, but it is a taxable on your personal taxes.
3. Rates depend on industry and client and a million other things, but yes you are responsible for GST. If your husband is going to make >$30,000 this year, he needs to register (and should register anyways). I generally don't quote with included, but show any taxes separated out in the contract. Negotiating price with the client does not include taxes unless explicitly noted.

Good Luck.
Sr. Member
Jul 10, 2005
754 posts
121 upvotes
Toronto
I suggest registering for GST, and always put "$XXX + GST" in all quotes, or "+ taxes".

If his client is a company, they will probably be registered for GST already, and that means that paying GST to your husband is not an expense at all for them, so they won't mind paying for it.
[OP]
Newbie
May 3, 2012
13 posts
4 upvotes
VANCOUVER
Thanks. So even if our revenues do not exceed 30k for the first quarter, we should still register for GST ?
Sr. Member
Jul 10, 2005
754 posts
121 upvotes
Toronto
emiliespam wrote:
Aug 16th, 2014 2:35 am
Thanks. So even if our revenues do not exceed 30k for the first quarter, we should still register for GST ?
Yes. Once you register you can deduct the GST you pay on business expenses (equipment, supplies, etc). Things become 13% cheaper :D

Basically you add all the taxes you paid, and all the taxes you collected. If you collected more than you paid, you send the difference to the govt. If you paid more, the govt sends you the $.
Deal Addict
Aug 28, 2007
1851 posts
245 upvotes
Calgary
The GST/HST thing is a minor issue. Pretty much every service or goods vendor has it. No one is surprised when your invoice arrives and has GST on top of your rate. You should register for it, as the others have suggested. You always discuss rate to you; never with GST included. Your invoice fine print has your GST number on it but it is customary to talk rates and never mention GST.

Your accountant will look after your GST as part of his service to you. FYI He'll be charging you about $1000 to $1500 /year as a ballpark.
Jr. Member
Jun 7, 2010
187 posts
16 upvotes
Most of your questions have been answered, but knowing multiple "IT Consultants" who have gone bankrupt via recent PSB crackdown by CRA (immoral in my opinion but a risk nevertheless). When picking an accountant, it will be in your best interest to find one who has experience dealing PSB audits (if you can find one who actually knows about it that will be a start!). Without knowing your situation, I will give the worse case scenario. When you are working as a contractor, CRA essentially does not see you as a small business, instead it sees you as a "Contracted Employee". And in doing so they take away the small business deduction, ability to issue dividend and salary combo for better tax planning, and writing off expenses (such as home office etc.). So what this means is that you basically have to issue all monies earned via your corp via salary.

YMMV. Good luck!
Deal Addict
Feb 5, 2010
2764 posts
176 upvotes
deadsea wrote:
Aug 28th, 2014 9:53 am
Most of your questions have been answered, but knowing multiple "IT Consultants" who have gone bankrupt via recent PSB crackdown by CRA (immoral in my opinion but a risk nevertheless). When picking an accountant, it will be in your best interest to find one who has experience dealing PSB audits (if you can find one who actually knows about it that will be a start!). Without knowing your situation, I will give the worse case scenario. When you are working as a contractor, CRA essentially does not see you as a small business, instead it sees you as a "Contracted Employee". And in doing so they take away the small business deduction, ability to issue dividend and salary combo for better tax planning, and writing off expenses (such as home office etc.). So what this means is that you basically have to issue all monies earned via your corp via salary.

YMMV. Good luck!
Alternative is to go the Self-Employed/Sole Prop route. Yes you don't get the benefits of a corporation but you avoid PSB and still benefit from business deductions.
Newbie
Jul 23, 2009
12 posts
1 upvote
toronto
I have used M A Consuling for a number of years now. Their rates are quite reasonable and services amazing. Have refered a few friends and all have good report. Talk to them if you are satisfied then proceed.
cheers
Pius
Deal Addict
Oct 29, 2010
4243 posts
609 upvotes
piuspatel wrote:
Sep 1st, 2014 11:23 am
I have used M A Consuling for a number of years now. Their rates are quite reasonable and services amazing. Have refered a few friends and all have good report. Talk to them if you are satisfied then proceed.
cheers
Pius
The OP is in BC...

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