Sole Proprietorship Tax
Tax filing, expense planning, and CRA compliance for unincorporated Calgary businesses, including GST, CPP, and instalments.
A sole proprietorship is the simplest way to run a business in Alberta. There is no separate legal entity, so the business and the owner are the same for tax purposes. Business income and expenses flow onto your personal T1 return through form T2125, and the net profit is taxed at your personal marginal rate. That simplicity is the main advantage, along with the fact that a business loss in an early year can be applied against your other personal income.
The trade-offs are worth understanding. You are personally liable for the debts and obligations of the business, which matters if you carry inventory, sign leases, or work in a trade with real liability exposure. There is also no ability to defer tax by leaving profit in the business, because there is no separate entity to leave it in. Every dollar of profit is taxed to you in the year it is earned, whether you took it out or not.
We handle the annual filing and the planning that goes with it: which expenses genuinely qualify, how to prorate vehicle and home office costs, when equipment should be capitalized rather than expensed, and how much to set aside for tax and CPP. We also watch the point at which incorporating starts to make sense for you, and we will raise it rather than waiting for you to ask.
What's Included
- T1 personal return including the T2125 business statement for your proprietorship
- Business expense review with home office and vehicle proration
- Capital cost allowance schedules for equipment, tools, and vehicles
- GST registration and filing once you pass the thirty thousand dollar threshold
- Annual review of whether incorporating would leave you better off
FAQ
Do I need to register my sole proprietorship in Alberta?
If you operate under your own legal name you generally do not need to register a trade name, though you may still need a municipal business licence. If you use any other business name, you register that trade name with the Alberta corporate registry. You also need a CRA business number once you register for GST or hire employees.
How much should I set aside for taxes?
It varies with your total income, but many Calgary sole proprietors set aside roughly twenty five to thirty percent of net profit to cover income tax plus both halves of CPP. We calculate a figure specific to your situation rather than a rule of thumb, and give you a quarterly instalment schedule.
Can I claim a loss from my business against my employment income?
Yes, if the business is carried on with a genuine expectation of profit. Losses from a sole proprietorship reduce your other income on the same return, which is one real advantage of not incorporating in the early years. The CRA does scrutinize repeated losses from activities that look personal in nature.
Need help with Sole Proprietorship Tax?
Tell A4SB about your accounting needs and we can discuss the support that may be relevant to your situation.