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Payroll Systems and Taxes

Expert: Karen Yull

Daniel asked:

My girlfriend and I have a general partnership business as website designers. I was wondering how our payroll system would work in this situation. Do I remove taxes from my income and pay through the business or is it my responsibility to do this on my personal income tax?

Karen Yull answered:

If you are operating in partnership (not incorporated), you don't really pay yourself a salary. After all income and expenses are accounted for, you get to split what is left (in whatever ratio you have agreed upon, I assume 50:50) as your share of the partnership's income. You then report your share of the income on your personal tax return for the year. If your income is high enough, you may eventually have to make quarterly instalments (but that is generally after a few years).

So, the easy answer is you don't have to set up a payroll system, but if you are profitable, be prepared to pay some income tax next April.

About the author

Karen Yull is the National Tax Services Co-ordinator and Tax Principal with Grant Thronton LLP in Toronto.

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