Legal Studies 3050

Section 3: Labour Relations and Record Keeping


Workers' Compensation Payments

Employers must contribute funds on behalf of their employees to the Workers' Compensation Board. The amount a business is charged is dependent on the risk that is associated with the type of industry in which the business is engaged.

Inventory Records

Often when businesses operate a small retail or service business, a large part of capital may be tied to inventory. It is therefore important to monitor these assets. For instance, it would not make a good impression on customers if the Twin Peaks Guest Ranch ran out of the little complimentary packets of soap or small bottles of shampoo and conditioners made available in each room.

Knowing how much inventory a business has available also allows it to make good use of revenue the business generates. Many businesses use a just-in-time approach so that cash is readily available to purchase new stock to replace inventory supplied to customers.

Other Records

There are other records a fiscally responsible business should keep. These would include the following:

  • safety reports

  • machinery and equipment inspections

  • customer complaints and commendations

Taxation Considerations

We will now turn our attention to look at some of the tax implications of owning a business.

The tax implications for individuals operating a sole-proprietorship are quite simple. Any income earned by the business is deemed to be that of the owner and is added to any other income or interest earned by that individual. Similarly, any losses incurred may be deducted against it. The rate the individual is taxed is dependent on the combined total.

A business's income is not recognized separately and this is an important factor that an owner of a small business needs to take into consideration when deciding which form of ownership is the most appropriate. For instance, if the owner feels the business is not expected to generate a profit until some long future date, and the owner is required to work elsewhere to make a living, any losses the business incurs may be offset against the employment income that is being earned.


Comparable to a sole proprietorship, any income generated or losses incurred by the business are considered to be that of the individual partners. Each partner's share of income or loss must be included with any other employment or interest income each individual generates. The amounts in which these are allocated are in proportion to each partner's share as outlined in the partnership agreement.

  • Tax Implications of Corporations
Many small businesses choose to incorporate their business because it is then considered to be a separate entity, distinct from its shareholders. This allows the corporation itself to be taxed. Any losses it incurs cannot be used to offset against the earnings of shareholders, and any income the business generates is taxed at a flat rate.

  • Tax Implications of a Franchise
The initial franchise fee you pay when buying a franchise cannot be claimed as a tax deduction. The ongoing fees payable to the franchisor such as administration fees, royalties, marketing fees and training fees, are generally tax deductible, as are other operating costs of running the franchise business.