Corporate tax accountant for White Rock corporations

Corporate tax (T2) on its own is quoted after a free consultation, fixed in writing before work starts. Where we also keep the books, monthly bookkeeping starts from $300 a month, and the year-end is prepared from a ledger that is already reconciled. A 45-minute Advice Call is a flat $200 + GST for a single question.

British Columbia’s two corporate rates

Active business income up to the business limit is taxed at the 2% BC small business rate plus the federal rate, for 11% combined. Income above the limit, and income that does not qualify, is taxed at the 12% BC general rate plus the federal rate, for 27% combined. Nothing about the business has to change for a dollar to move from one rate to the other. A second company owned by the same family, or a growing investment portfolio, is enough. The current rates are on the BC tax facts page.

Retained earnings that start to cost you the limit

A profitable company that leaves cash in the bank for years ends up investing it. Interest, dividends from public shares and taxable capital gains earned inside a corporation are passive income. Once that income passes a threshold, the business limit is ground down, and part of the active income moves to the higher rate. For an owner on the peninsula who has been building a retirement fund inside the company, this is often the first sign that the structure needs a review. Passive income and the small business deduction explains the grind.

Associated companies on the peninsula

Families here often own more than one company: a trades business and a property company, a realtor’s PREC and a spouse’s consulting corporation, or a holding company above an operating one. Corporations controlled by the same people, or by related people with cross-ownership, are generally associated. Associated corporations share one $500,000 limit between them. The allocation is a filing on the T2, Schedule 23, and it should be agreed before the returns are prepared. Associated corporations covers the tests.

The allocation is not fixed. A family can give more of the limit to whichever company earns active income that year, and less to one that mostly holds property or investments. We prepare all the related returns together, so the schedule on each T2 agrees with the others.

Holding companies, freezes and the eventual sale

A holding company can take surplus cash out of an operating company, with tax-free intercorporate dividends in many cases, and protect it from business risk. It can also complicate a sale. Shares of a qualifying small business corporation can use the lifetime capital gains exemption, but only if the company passes the asset tests when it is sold. Too much investment cash sitting in the operating company can fail them. An estate freeze can fix today’s value in the owner’s hands and pass future growth to the next generation. The estate freeze and the capital gains exemption explain both.

Shareholder loans and the one-year rule

An owner who takes money from the company without running it through payroll or a dividend creates a shareholder loan. If it is not repaid within one year after the corporation’s year-end, it is generally taxed as the owner’s income, without any deduction to the company. Personal expenses paid on the company card do the same thing quietly. We track the shareholder account monthly and settle it with salary or a dividend before the deadline. Shareholder loans sets out the rule.

US accounts and US customers

With the border at the edge of South Surrey, plenty of peninsula corporations hold a US dollar account, a US brokerage account or receivables from American customers. Foreign exchange gains and losses go into the T2 on their own line. A corporation whose specified foreign property passes the reporting threshold files form T1135 with its return, and the penalties for missing it run by the day. US sales may also raise questions about where the income is taxed, which are worth asking before the first large contract.

Keeping the US dollar account in its own ledger, translated at the right rates each month, is far easier than rebuilding a year of transactions in April. It also makes the T1135 a matter of reading a balance rather than reconstructing one.

The dates a White Rock corporation works to

The T2 is due six months after year-end. The balance owing is due two months after year-end, or three months for a CCPC claiming the small business deduction that meets the conditions. Corporate instalments apply once the tax for the year passes the threshold. BC also expects an annual report to the corporate registry within two months of the anniversary date, which is not a tax return and is easy to forget. The T2 deadline calculator works out the dates from your year-end.

Fully virtual, based in Abbotsford

EverStone is a one-CPA firm based in Abbotsford, serving White Rock and South Surrey corporations remotely. There is no White Rock office and no local staff. After CRA authorization, balances and notices are read directly. If you are moving firms, the prior file is requested that week.

Books are closed, any late years are filed, and the instalment and T2 dates are set out for the year. The CPA who prepares the return is the one who answers your email in March.