Tech startup accountant in Toronto

For a one-owner Toronto tech startup, monthly bookkeeping, payroll and the year-end T2 with statements usually cost from $500 to $700 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.

SR&ED starts in the bookkeeping, not the claim

SR&ED is claimed on Form T661 with the corporate return, describing the technological uncertainty, the work to resolve it, and the salaries, contractor costs and materials involved. Toronto startups lose money on that cost side.

Time logged against features during the year makes eligible wages traceable; otherwise the claim is rebuilt from memory eighteen months later and trimmed. A CCPC’s enhanced refundable credit pays cash even without taxable profit, often the T2’s most valuable line. Ontario research credits use the same records. See the SR&ED expenditure limit update.

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

Founders often stack grants, accelerator awards, research partnerships and SR&ED. Government and non-government assistance generally reduces the SR&ED expenditure base. It does not disqualify the project.

Tag each grant to its project and period when it arrives. Booked as revenue, it inflates the base; omitted, a reviewer finds it.

Founders’ pay while the company has no profit

Founders often start by lending the company money, then take salary, dividends or both. Salary for qualifying development work can count as an SR&ED wage; dividends cannot. Salary also builds RRSP room and CPP, with payroll remittances and a T4 due by the last day of February.

A shareholder loan unpaid one year after the corporation’s year-end is generally taxed as income. Track advances on a shareholder loan schedule; try the salary-versus-dividends calculator.

Stock options in a CCPC

Equity helps startups hire engineers. For a Canadian-controlled private corporation, tax on an employee stock option benefit is generally deferred until the shares are sold. Still record grants, vesting, exercises and prices, and report the benefit 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, but startups must know where customers are. Ontario business subscriptions carry 13%, other provinces their own rate, and many supplies to non-residents are zero-rated, so billing must record location. Registration is mandatory above $30,000 in four consecutive quarters, though early registration recovers HST on development costs. Ontario Employer Health Tax applies above the exemption; see the Toronto payroll page.

What EverStone handles for you

One firm, 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 serves Toronto founders online. Bookkeeping starts at $325 a month with HST filing, fractional CFO work at $2,750 a month once raising, and T2 and SR&ED work is quoted. See what it costs.

Remote startup accounting

EverStone is a CPA firm working online. There is no Toronto office and no local staff. Meetings are by video or phone and documents by secure upload and e-signature. Development time, grants and cap-table changes share one monthly file for SR&ED.