Accountant for Quebec City consultants

Early-stage decisions are covered in incorporating versus staying a sole proprietor. The agency and consulting accounting hub gathers the revenue, classification and sales tax material that applies to any professional-services firm.

Whether to incorporate at all

Many consultants start as sole proprietors, reporting business income on the T1 and TP-1, and incorporate once billings are steady. Incorporation separates the business from the person, allows profit to be left in the company at corporate rates, and gives a choice between salary and dividends. It also brings a second set of returns, corporate books, and in Quebec a CO-17 alongside the T2. For a consultant whose income all goes to living costs, the benefit may be small. For one who can leave profit in the company, it is usually real. The answer depends on the numbers and on the risks below, so it is worth running before the paperwork. Incorporation decision sets out the questions.

One public client, and the personal services business test

A consultant incorporated and working full time for one ministry or agency, on its premises, under its direction, can look like an employee with a corporation in between. The test asks whether, without the corporation, you would reasonably be regarded as that client’s employee. It is judged on control, tools and workspace, chance of profit or loss, the ability to send a substitute, and how integrated you are into the client’s organisation. A corporation found to be a personal services business loses the small business deduction and most ordinary expense deductions, and pays additional federal tax on that income. Applied to several past years, the result is usually worse than having been an employee throughout. Personal services business risk covers the detail, and the risk assessment is a quick first check.

The 5,500-hour condition

Even a consultancy with no personal services business problem meets a Quebec-specific hurdle. Quebec’s small business deduction depends on the corporation having 5,500 paid hours in the year, a threshold a one-person consultancy rarely reaches on its own. The federal deduction may still apply while the Quebec one does not, which changes the arithmetic of leaving profit in the company. How the owner is paid, whether there are employees and how any associated corporations are organised all bear on it. It is a question to settle when the corporation is set up and to revisit each year, not one to discover on the first CO-17.

Invoicing a public body

Government clients pay reliably, but on their own terms. Invoices often need a contract or purchase order number, the consultant’s GST and QST registration numbers, and a format the client’s accounts payable system accepts; an invoice missing any of those waits. Many mandates are billed monthly against hours or deliverables, and the tax shown must follow the rules for that client and the service supplied. A clean receivables list, reviewed monthly, shows which invoices are stuck in approval rather than disputed. At the year end, work done but not yet invoiced is still income of the year, which matters when a mandate runs across the fiscal year-end.

GST and QST registration

Registration becomes mandatory once taxable billings pass $30,000 in four consecutive calendar quarters, and most full-time consultants cross that in their first year. For most Quebec businesses, Revenu Québec administers both the 5% GST and the 9.975% QST, so both returns are filed with the province. Registering also recovers the tax paid on equipment, software and professional fees, which is why many consultants register from the first invoice. Clients outside Quebec may attract a different rate under the place-of-supply rules, so a consultant who also bills customers located in another province needs the invoice template set up for each. Ottawa-Gatineau work is the common case. Place-of-supply rules explains how the rate is chosen.

Paying yourself, and the shareholder loan

An incorporated consultant chooses between salary and dividends. Salary is deductible to the corporation, brings QPP contributions and an RL-1 and T4, and adds employer costs such as the Health Services Fund. Dividends avoid payroll but are paid from after-tax profit. The right mix depends on personal needs, the corporate rate that actually applies after the 5,500-hour test, and whether personal services business risk is live. That risk matters because salary to the incorporated employee is one of the few deductions that survives a personal services business finding. Money taken out without a decision sits in the shareholder loan account, and an amount not repaid within one year after the corporation’s year end is generally taxed as income. The salary and dividends calculator runs the federal comparison.

What EverStone handles for you

One CPA, one fixed fee agreed up front:

• T2 and CO-17 corporate returns and year-end financial statements
• Personal services business exposure reviewed against your contracts
• The 5,500-hour question considered in planning
• GST and QST registration and returns filed with Revenu Québec
• Salary and dividend mix recalculated each year
• Your T1 and TP-1 coordinated with the corporate returns

Remote accounting for consultants from Abbotsford

EverStone is a sole practitioner CPA firm at 32615 South Fraser Way in Abbotsford, working with Quebec City clients entirely online. There is no Quebec City office and no local staff. EverStone works in English. Meetings are held by video or phone, documents come in through a secure upload link, and no visit is required at any point. The personal services business question, the 5,500-hour condition and the salary and dividend decision are handled together, because they interact.