Tech startup accountant in Toronto

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.

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 technological uncertainty and the systematic work done to resolve it. It also has to put a number on the salaries, contractor costs and materials behind that work. That second half is where Toronto startups lose money.

If developers log time against features and experiments during the year, the eligible wages can be traced. If nobody does, the claim is rebuilt from memory eighteen months later and trimmed to what can be defended. 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

Toronto founders often stack funding: a government grant, an accelerator 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. Neither mistake is rare, and both 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 it 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 every 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 Toronto startup competes for engineers before it can compete on salary. For a Canadian-controlled private corporation, the tax on an employee stock option benefit is generally deferred until the shares are sold, not 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 collide 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 acquirer or investor will ask for both.

HST on software sold from Toronto

Ontario charges a single 13% HST. For a startup, the harder question is who the customer is. Subscriptions sold to Ontario businesses carry 13%. Sales to customers in other provinces follow their rate. Services and intangibles supplied to non-residents are often zero-rated. A company selling through a payment platform to customers in a dozen countries needs its billing system set up to show where each customer is. 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 Toronto 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 and cost tracking set up in the books
• Grant and assistance tracking by project
• Founder salary, dividend and shareholder loan planning
• Stock option records and T4 reporting on sale
• HST registration, place-of-supply and filings
• Board and investor reporting from the monthly close

Fixed fees, fully online

EverStone is an Abbotsford CPA firm serving Toronto founders entirely online: video calls, a secure upload link and e-signature. We are three hours behind Toronto, so something sent at the end of your day is usually answered before your next stand-up. 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 a free consultation. See what it costs.

Remote startup accounting from Abbotsford

EverStone is a sole practitioner CPA firm based in Abbotsford, serving Toronto owners entirely online. There is no Toronto office and no local staff. Meetings are held by video or phone, 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.