Small Business Tax & Accounting in Canada: Self-Employed, Contractors & Bookkeeping

Jun 12, 2026 | Small Business & Self-Employed, Tax Law & Compliance

Small Business Tax & Accounting in Canada: Self-Employed, Contractors & Bookkeeping

A hub for sole proprietors, contractors, small business owners, and bookkeeping in Canada and BC.

What this guide covers

If you run a sole proprietorship, hire contractors in BC, or pay yourself from a small corporation, you’re in the right place. This guide covers sole proprietor tax, contractor tax in BC, record-keeping, payroll, bookkeeping, and the employee-vs-contractor questions that come up most often for business owners.

In this guide:

  • Contractor vs. employee and sole proprietors
  • Record-keeping and tax deadlines
  • Bookkeeping and payroll
  • Salary vs. dividends and tax planning

Contractor vs. employee and sole proprietors

Am I an employee or a contractor? The CRA decides based on the working relationship, not the label on the contract. Whether someone is an employee or a contractor affects CPP, EI, withholding, and your legal obligations. The CRA looks at control, who owns the tools, chance of profit and risk of loss, and how integrated the worker is in your business. Get it wrong and you can face reassessments, penalties, or disputes.

As a sole proprietor, you report business income and expenses on your personal return. You’re responsible for your own records and filing deadlines. When you hire, you need to know whether to bring someone on as an employee or a sub-contractor and how to handle deductions and remittances. If you’re unsure how to classify a worker, get advice before you file.

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Record-keeping and tax deadlines

The CRA expects you to keep records that support the income and expenses on your return. You don’t need fancy software, but you do need receipts, invoices, bank statements, and a mileage or expense log where relevant. Keep everything for at least six years.

Self-employed filers have different deadlines than employees. If you or your spouse had self-employment income, your return is generally due June 15 (or the next business day). Any tax owing is still due April 30. Missing the payment deadline triggers interest even if you file later. For a full deadline list, see our Canadian Tax & Compliance hub and Tax Filing Deadline Canada: Key Dates and Checklist for 2026 (Personal and Corporate).

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Bookkeeping and payroll

Good bookkeeping means you can track income and expenses, close your year-end without a scramble, and file on time. Tools like QuickBooks help, but the underlying habit matters more than the software. When you have employees, payroll compliance is not optional: CPP, EI, tax withholdings, and remittances must be calculated and paid on schedule. Mistakes add up in penalties and CRA interest.

If payroll or books are eating your time, our articles below cover practical QuickBooks tips and common payroll pitfalls. When things get complex, that’s usually when a small business accountant earns their keep.

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Salary vs. dividends and tax planning

If you own a corporation, how you pay yourself matters. Salary creates CPP contributions and RRSP room and is deductible by the corporation. Dividends are not deductible but may be taxed more favourably at the personal level in some situations. The right mix depends on your income, age, and goals. Splitting income with family members in a small business has specific rules and limits under Canada’s tax on split income (TOSI) rules.

These decisions work best with a plan, not a last-minute guess at year-end. For corporate filing deadlines and broader compliance topics, see our Canadian Tax & Compliance hub.

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FAQ

Am I an employee or a contractor in Canada?
The CRA looks at the facts of the relationship: control, tools, chance of profit, risk of loss, and integration into your business. A written contract alone does not decide the answer. See Employee or Contractor? for the tests and what to watch for.

When is the tax deadline if I’m self-employed?
Your T1 return is generally due June 15 if you or your spouse had self-employment income. Any tax owing is still due April 30. See Personal Income Tax Filing Deadline Reminder (Self-Employed) or our 2026 tax deadline guide.

What records do self-employed people need to keep?
Keep receipts, invoices, bank statements, and logs that support your income and deductions. The CRA expects records for at least six years. See Record-Keeping for the Self-Employed.

Should I pay myself salary or dividends?
It depends on your income, CPP and RRSP goals, and corporate tax position. Salary builds CPP and RRSP room; dividends may be more tax-efficient in some cases but don’t create RRSP room. See Salary vs. Dividends in Canada: Pay Yourself.

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