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For franchises that sell products online and ship them...
When you become a franchisee, you also become a business owner, and that opens you up to tax liabilities and financial accounting responsibilities, particularly if you are employing staff. For your business to be successful, you need to keep a firm hold on your finances, develop an in-depth understanding of your expenses, and make a profit.
Although many franchisees manage their finances themselves, there are many good reasons to hire a dedicated accountant to manage the money side of your business.
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Account for unique fees and expenses
Franchises have some different fees and expenses that aren't typically seen in non-franchised businesses. These include the initial fees for using the franchise name, branding and assets, plus royalties and marketing fees.
There are various ways in which these fees can be accounted for, and a professional accountant will help you account for them in the most tax-efficient manner.
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Tracking expenses and revenue
All businesses need to record and report their expenses and revenue. These costs include overheads such as premises rental, heating and electricity, along with employee salaries and raw material costs. It is essential that these expenses are balanced against the income that the business makes to ensure that it remains in a profitable position.
An accountant will be able to quickly identify areas to target for improvement and suggest the best way of reaching a profitable position.
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Expert advice and support
Some accountants specialize in franchise accounting, and this experience can be immensely valuable to get your business started on the right foot and stay on track. Their advice and experience can make a significant difference in the success of your enterprise.
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Tax reporting
You will be required to pay income tax on your end-of-year position, and corporate tax rates can vary from 10% to 31% based on the province in which you operate and the definition of your business. You may be required to pay a provincial state tax.
The initial franchise fee is considered a depreciation for tax purposes and must be accounted for in a straight line basis, and there may be withholding tax obligations to fund depending on where the franchise is headquartered.
An accountant will ensure that your tax return is correct and submit it on your behalf, minimizing the likelihood of costly mistakes and keeping your business above board and legally compliant.
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Peace of mind
By hiring an accountant to handle the business' finances, you can focus on the day-to-day running of the business, marketing it, handling your staffing, and ensuring that your customers enjoy their experience and return.
With the peace of mind that the finances are under control, you can concentrate on establishing and growing your business.
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In conclusion
It is possible to handle your financial accounting yourself, but there are some very good reasons hiring an accountant makes sound business sense.
