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Entrepreneurial couples make up a large portion of the small businesses in North America. Spouses can make a potent team, as they share a variety of common goals and interests. But, if you are going into business with your spouse, there are several tax considerations that will directly affect your tax deadlines (and throughout the remainder of the year). Our team urges entrepreneurial couples to do their research and contact a professional accounting agency, so that they can be fully informed and safeguarded when it comes to liabilities and opportunities.
When establishing a business together, couples may be quick to cut corners, relying on verbal agreements and assumptions. However, from the very beginning, entrepreneurial couples need to establish the rules and regulations for operating and managing their business. How you manage your taxes will depend upon what type of organization you and your spouse want to set up. One spouse may set up a sole proprietorship and hire the other spouse as an employee. More popularly, couples going into business together will form a partnership. For couples who understand the importance of separating their personal and work lives, a corporation is a separate legal entity that offers a more comprehensive list of options and opportunities that protect personal finances against risk. It will take time, research, and reflection to determine what strategy will work best for you and your spouse. Be careful to plan for the future, rather than relying on the potential for short-term gains.
Once you and your partner decide what type of business you will leverage, you must educate yourselves on the variations in taxation practices that will affect your record keeping and reporting. The Canadian Revenue Agency will allow a partnership to file their GST/HST returns as one person. However, if you are a sole proprietor that hires her/his spouse, you will have a completely different set of tax deductions to consider. Whatever arrangement you choose to pursue, be warned that the setup that seems to be the simplest at its outset may limit you and your spouse down the road.
Entrepreneurial couples who go into business together can look forward to very rewarding lives full of mutual support and innovation. However, you need to be informed and speak with seasoned professionals to ensure that your bottom line and relationship stays in the positive. Let our team of compassionate accountants help you and your spouse to enhance your business model, avoiding risk and taking advantage of lucrative opportunities and relevant tax savings while minimizing risks. Contact us today and start your exciting business venture tomorrow.