Tech startup accountant in Markham

For a one-owner Markham tech startup, monthly bookkeeping, payroll and the year-end T2 with statements usually cost from $450 to $650 a month all-in.

If you are still deciding whether to incorporate, start with should I incorporate. If the company exists and has a first year-end coming, the just-incorporated checklist lists what to set up before the first return.

Markham’s technology ecosystem, and what it means for the books

The City of Markham’s economic development office describes a technology ecosystem that runs from established multinationals to startups and scale-ups, with semiconductors, autotech, cleantech and life sciences listed as key sectors alongside software. It names ventureLAB, YSpace and Seneca Helix as innovation partners, and points to ventureLAB’s hardware lab for prototyping and testing devices. Many founders here therefore build physical products as well as code: chips and boards, sensors, devices, test equipment and embedded software.

That changes the accounting. A pure software company mostly spends on people and cloud services. A hardware startup also buys components, pays for prototypes and test runs, carries inventory before it has customers, and may import parts and export finished units. Its SR&ED claim includes materials as well as wages, its balance sheet carries stock that has to be counted and costed, and its HST returns often show refunds because exports are zero-rated. We set up the chart of accounts for the company you are actually building.

SR&ED starts in the bookkeeping, not the claim

The Scientific Research and Experimental Development program is claimed on Form T661 with the corporate return. The claim describes the technological uncertainty and the systematic work done to resolve it, and it has to put a number on the salaries, contractor costs and materials behind that work. That second half is where startups lose money.

If engineers log time against projects and experiments during the year, the eligible wages can be traced. If nobody does, the claim is rebuilt from memory long after the fact and trimmed to what can be defended. Materials consumed or transformed in prototyping need their own tracking, separate from inventory held for sale. A CCPC can earn an enhanced refundable credit, which means cash back even in a year with no taxable profit; for a company burning runway, that refund is often the most valuable line on the T2. Ontario layers its own research credits on the same work, so one clean set of records supports both. See the SR&ED expenditure limit update.

Grants, the SR&ED base and the order of operations

Markham founders often stack funding: a government grant, an accelerator or incubator award, a research partnership and then SR&ED on top. The rule to know is simple. Government and non-government assistance for the same work generally reduces the expenditures the SR&ED credit is calculated on. A grant does not disqualify the project, but it shrinks the base.

So each grant needs its own tag in the books, tied to the project and period it paid for. Record it as general revenue and the claim overstates the base. Leave it off entirely and the reviewer finds it. Both mistakes are avoided by coding assistance when the money arrives.

Founders’ pay while the company has no profit

Early on, founders often pay themselves nothing and lend the company money instead. Later they draw salary, dividends or a mix. The choice matters more in a research company than elsewhere. Salary paid to a founder who works on qualifying development can count as an SR&ED wage; a dividend cannot. Salary also creates RRSP room and CPP, and runs through payroll with remittances and a T4 due by the last day of February.

Money moving the other way needs care too. A shareholder loan that is not repaid within one year after the corporation’s year-end is generally taxed as the owner’s income. Track every advance and reimbursement on a shareholder loan schedule. The salary-versus-dividends calculator is a useful first pass.

Stock options in a CCPC

Equity is how a startup competes for engineers before it can compete on salary, and Markham founders hire in a market alongside large technology employers. For a Canadian-controlled private corporation, the tax on an employee stock option benefit is generally deferred until the shares are sold rather than triggered at exercise. That is friendlier than the public-company rule, but it still needs paperwork: grants, vesting, exercises and the price paid have to be recorded, and the benefit reported on the T4 in the year of sale.

Option plans also interact with the SR&ED claim. The option benefit is not a cash wage and is not treated as one in the claim. Keep the cap table and the payroll records reconciled, because an investor or acquirer will ask for both.

HST on software and hardware sold from Markham

Ontario charges a single 13% HST. For a startup, the harder question is where the customer is. Subscriptions and devices sold to Ontario customers carry 13%. Sales to customers in other provinces follow their rate. Exported goods and many services and intangibles supplied to non-residents are zero-rated, so a company selling mainly to the United States or overseas often files for refunds. Registration is mandatory once taxable sales pass $30,000 in four consecutive quarters; many startups register earlier, because recovering HST on development spend helps cash while revenue is small. Ontario also has an Employer Health Tax once payroll passes the exemption; the Markham payroll page covers it.

What EverStone handles for you

One CPA, one fixed fee agreed up front:

• T2 corporate return with the SR&ED schedules and Form T661
• Development time, materials and cost tracking set up in the books
• Grant and assistance tracking by project
• Inventory and prototype costing for hardware companies
• Founder salary, dividend and shareholder loan planning
• Stock option records and T4 reporting on sale
• HST registration, place-of-supply, zero-rated exports and filings
• Board and investor reporting from the monthly close

Fixed fees, fully online

EverStone is a CPA firm serving Markham founders entirely online: video calls, a secure upload link and e-signature. Monthly bookkeeping starts from $300 a month with HST filing included, and a fractional CFO engagement starts from $2,500 a month once the company is raising. The T2 and SR&ED work are quoted after we review your enquiry. See what it costs, or our Toronto accountant page for the nearest large-city practice.

Remote startup accounting

EverStone is a fully virtual CPA firm, serving Markham founders entirely online. There is no office in Markham and no local staff. Meetings are held by video, documents come in through a secure upload link and are signed by e-signature, and no visit is required at any point. Development time, grant records and cap-table changes are kept in the same monthly file, because the SR&ED claim depends on all three.