Tony has been working for years large construction company performing diverse tasks, but lately has been specializing in plumbing. Being good at it with up certifications profession and having network of friends his involvement baseball landscape of the region, experiencing and increase demand for his services to perform small jobs on top of his activities as employee. After some potential jobs be performed his inability to issue official receipts, he decided his own company small plumbing services be completed over one weekend (Saturday and Sunday).
Tony has accumulated savings but not be enough expenses. None of the banks he approached offered him answer; therefore he made of using his and accumulates debt there. However, his wife offered Tony short term loans at of 1% per month, which is significantly cheaper than accumulating debts with the . Both were the proposed solution and agreed . Tony would let his wife know via e-mail needed. done a clean record to calculate the interest due.
Tony Thoron asked his cousin for advice about incorporating; his cousin lawyer that works for legal firm region. Tony had heard stories from friends about plumbing repairs going wrong and customers trying to sue the contractors and him certainly want him risk. The legal firm The 6 Law provided legal advice and did all paper work as a Canada Business Corporation. Initial capitalization allowed for 100 no shares. Tony and his wife were named Directors of the Corporation which was called Tonys Plumbing Services Inc. The lawyers also checked that the name already registered and register his Internet domain.
Tony contributed his money in exchange for 50% of the shares. The , commercial chequing account that gave cheques returned with monthly statements for a monthly fee. This account bank overdrafts returned cheque very high processing cost.
Tony’s interest was as he can during the week for his employer and on weekends for his own company, therefore he hired you to be his accountant. explained your fee and Tony has agreed to retain you for year. prepared a document with the terms of engagement and payment .
Tony needed around with equipment; therefore he needed to use his SUV. You, the accountant, informed Tony that if his company would use his SUV to conduct business, rent to Tony for its use. Similarly if he uses his house to storage material, supplies and equipment, his company rent for of that portion of the house. The rent be reasonable for the Canada Revenue Agency.
From the very beginning Tony realized his company needed some third party just went wrong and damages to property caused by his action or inactions. Tony reached out his who suggested a product that was his needs, not expensive so Tony signed off on an annual contract.
His job optimized with some equipment that normally lasts two years when not used intensively as his case. Although he uses equipment as an employee, for his company jobs he performs for Tony and use his own equipment. He estimates than the equipment will last months with 20% of residual value.
Materials pipe insulation, cements, connectors, sealants, couplings, tape, adhesives and acetylene gas are needed for his job. The inventory of faucets, fixtures and other parts and accessories is zero because purchased for job and when completed the customer would keep what was left. Tony was a the supplier where he would make one payment at month covering all the supplies purchased during the month. the deal was to secure a deposit at of operations. On April 1st Tony opens an account with the supplier by making a deposit. At month Tony would pay the supplies taken during the month (the deposit will remain with the supplier be returned Tony closes the account).
Seeing how well his activity was going, Tony decided his presence more noticeable by printing cards and flyers to be distributed at various baseball events. He also decided a series of ads in local magazines.
Under name, Tony signed a 25 months contract for phone. His use very intensive but you the accountant explained that a proportion claimed as a .
When a customer requires a fixture not carried by Tonys regular supplier, Tony would ask the customer it. If the customer prefers , Tony would ask the customer for details (specifications, features, brand, etc.) and would hire his wife the search and store that has the fixture it.
At of the month , the accountant, had of Tonys business size, you estimated the liability of the month. things simple Tonys received an e-mail with .
Tony knew most of but he had of collecting all supplies needed for . He knew would pay eventually so he was comfortable in collecting some portion of his service fees latter. He accepted cheque or cash and kept record for tax purposes because his services included HST at 13%.
Tony decided to declare dividends for an amount reasonable not drain the remaining cash from . You explained to Tony that only that accumulates in Retained Earnings distributed as dividends. Tony understood and decided to distribute 25% of income if possible while would be maintained within .
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