What Are a Business’s Legal Obligations?
Whether you’ve got a start-up company or are well established, running your own business is not always smooth sailing. In addition to the daily challenges, understanding and managing the administrative side is not easy and can discourage many people. Fortunately, Operio is there to help!
We’ve identified some of the obligations a business needs to meet to satisfy various legal requirements. In addition to the numerous documents to be filed, some documents must be updated annually. Here’s a hint: add a reminder in your calendar so you don’t miss deadlines.
Overview of the main documents to be filed:
Registration in the business register
When a business is created, it must complete a declaration of registration to register with the Registraire des entreprises. The declaration serves to record all of a business’s information in an official register which can be accessed by citizens, business partners and government organizations wishing to deal with the organization. The registrar then assigns a business number (numéro d’entreprise du Québec (NEQ). The business must comply with the resulting legal obligations as long as it exists. An updated declaration must be filed annually, regardless of whether the information on file has changed.
A business must maintain a record of everything related to its corporate life: governing statutes, bylaws, minutes of meetings, resolutions, name of shareholders and directors, share certificates issued, etc. The Business Corporations Act (Quebec) and the Canada Business Corporations Act both require a business to maintain records. Additionally, missing or incomplete records can cause significant embarrassment to the company’s directors, as they will be required for the year-end audit. Additionally, without corporate records, it is difficult to follow the business’s history. Written resolutions provide evidence that important corporate decisions were made in accordance with legal requirements and authorized by the appropriate individuals. You should also be aware that in the course of a financing exercise, the financial institution or a potential investor may request access to the corporate records. It’s therefore important to update them annually.
Corporate tax return (T2)
A business must file corporate tax returns each tax year. This requires determining a fiscal year-end, which is done at the time of creating the start up. Tax is payable within two months of the fiscal year-end and the corporation’s T2 return must be filed within six months of the fiscal year-end. All Canadian businesses are required to file a T2 return.
Deductions at source (DAS)
Under Canadian and Quebec legislation, a business’s directors and officers are required to collect various payroll taxes, i.e. federal tax, Quebec tax and social costs and remit the amounts to the tax authorities. These are known as source deductions or deductions at source (DAS). The requirement to collect and remit DAS applies to all Quebec businesses. The directors should ensure that they have an appropriate process in place for the DAS process, since by law, they could be held personally liable for the remittances if the business fails to meet its obligations.
To assist you, the Canada Revenue Agency (CRA) proposes a six-step process to better understand the DAS process:
- Step 1: Find out if you need to make payroll deductions;
- Step 2: Open a payroll program account;
- Step 3: Set up a new employee;
- Step 4: Calculate deductions and contributions;
- Step 5: Pay (remit) source deductions;
- Step 6: Complete and send your payroll information return.
Note that failure to meet the DAS requirements is an infraction that could lead to material penalties and fines. For example, an entrepreneur who forgets to deduct or remit an amount is liable to a penalty equal to 15% of the amount in Quebec and 10% for federal purposes.
Don’t hesitate to call on an accountant to help you, it could save you time and money. Whether it’s to take charge of your accounting or provide advice on your legal obligations, our team of experts can support your business’s success. Benefit from a free consultation by one of our dedicated advisors, click here to fill out the form.