Hi! My name is Suhaneil Uzcátegui, and throughout my work as a bilingual accountant in Canada, I’ve seen many Latino entrepreneurs make common mistakes with taxes and bookkeeping that often lead to lost money, wasted time, and even issues with the CRA (Canada’s tax authority).
That’s why, in this informative article, I want to share some practical tips to help you avoid those mistakes and start your business on the right foot.
Whether you’re just getting started or already running your own business, reading this guide could save you major headaches down the road. Keep reading and get ready to make smarter financial decisions!
Mistake 1: Incorporating Too Soon
Thinking about incorporating your business? It can be a powerful step but timing is everything. Many entrepreneurs believe that having a corporation makes them look more professional or automatically protects them from legal risks, but that’s not always true.
📌 What happens in real life?
If your net income is still under $80,000 a year, or you’re still testing your business idea, incorporating might just add unnecessary complexity:
More paperwork: T1 and T2 tax returns, corporate records, T4/T5 slips.
More costs: Accounting and admin fees can easily exceed $2,000–$3,000 annually.
And if you’re withdrawing profits to cover personal expenses, you lose any tax advantages.
✅ Recommendation: Consider incorporating only when your business generates stable income, you’re reinvesting profits, or you work in an industry with higher legal risk. Don’t do it just to “look more official.
Tip 2: Understanding GST/HST Even If You Sell Outside Canada
Do you think you don’t need to register for GST/HST because your clients are in the U.S.? Be careful! Once your total global revenue exceeds $30,000 within four consecutive calendar quarters, you must register with the CRA, even if none of your clients are in Canada.
📍 What many don’t realize:
Sales to U.S. clients are usually zero-rated (0%), meaning you don’t charge tax, but you still must report those sales.
You’re legally required to file GST/HST returns once registered.
📦 For products, tax depends on where the goods are delivered.
💻 For services or digital products, it depends on where the customer is located.
📝 Extra tip: If you’re under the $30K threshold, you can voluntarily register and claim Input Tax Credits on business expenses from the past 4 years (if related to commercial activity). But remember you must file returns even if you had no sales.
Mistake 3: Transferring Money Without Classifying It Correctly
One of the most common mistakes I see is business owners treating their corporate bank account like a personal wallet. If you’re incorporated, every transfer to your personal account must be classified correctly for tax purposes.
You can only pay yourself in three legal ways:
Salary (requires a payroll account, deductions, and T4 slips).
Dividend (requires formal board approval and T5 slips).
Shareholder Loan (must be repaid within one fiscal year or gets taxed as personal income).
❗ Consequences: If you don’t handle this properly, you could face unexpected taxes or accounting issues at year-end.
✅ Recommendation: Before moving money from your business, talk to your accountant and make sure you’re using the correct method.
✔ Salary
- Payroll registration
- Source deductions
- CRA T4 slip required
- Remittances monthly
💸 Dividend
- Requires board approval
- Must have retained earnings
- CRA T5 slip required
🔁 Shareholder Loan
- Must be repaid within 1 year
- If not repaid, taxed as income
- Needs careful tracking
Tip 4: Not Taking Advantage of Health Spending Accounts (HSAs)
Did you know that, if you’re incorporated, you can cover medical expenses tax-free through your business? Many entrepreneurs don’t know about this powerful tool: the Health Spending Account (HSA).
🩺 How it works:
Your business reimburses you (or your family) for medical, dental, vision, therapy, etc.
These reimbursements are tax-free for you and 100% deductible for your corporation.
📊 Example: Paying $2,000 for braces personally? You’d need to earn $3,500 in salary (before tax) to cover that. With an HSA, your corporation pays it directly—no tax for you.
✅ You can use affordable third-party providers to manage this, or set it up yourself if you’re the only employee.
Mistake 5: Not Having Written Contracts with Your Clients
Many entrepreneurs start working with verbal agreements, text messages, or casual emails especially when working with friends or other small businesses. But this can be a risky move.
📌 Why is this a problem?
You have no legal backup if a client doesn’t pay you.
There’s no clarity on revisions, taxes, or project changes.
You’re left exposed in case of disputes or even CRA audits.
✅ Recommendation: Always use a basic written contract even if it’s just a simple PDF or Google Docs template. Be sure to include:
Deliverables
Payment schedule
Who handles taxes (HST/GST)
Terms for cancellation or changes
Tip 6: Set Clear Pricing With or Without Taxes
One of the biggest hidden mistakes is not being clear about whether your pricing includes GST/HST. This can cause issues later when you need to charge and remit those taxes.
📌 Practical tip:
If you’re not registered for GST/HST yet, let clients know taxes are not being charged “for now.”
If you are registered, separate the HST clearly on invoices.
Use professional templates showing: subtotal + HST + total.
🧾 This prevents client confusion, makes you look more established, and keeps your accounting clean and compliant.
Final Thoughts
Starting and growing a business in Canada is an exciting journey but it’s also filled with financial decisions that can either save you money or create unnecessary stress.
By avoiding these common mistakes and understanding how to legally and efficiently manage your taxes and payments, you’re setting your business up for long-term success.
As a bilingual accountant who works closely with Latino entrepreneurs across Ontario, my goal is to help you understand your numbers and build a solid financial foundation without the headaches.
🎁 Want to talk about your specific situation?
I offer a free 15-minute consultation for new entrepreneurs who want clarity on taxes, bookkeeping, or incorporation in Canada. No pressure just answers tailored to your goals.
