Bookkeeping and Compliance Guide for Québec Startups

Starting a business in Québec requires careful planning, from choosing the legal structure to keeping accurate books and meeting tax obligations. In this guide, we’ll walk you through each step – including registering your enterprise, understanding federal and provincial tax rules (GST/HST and QST), bookkeeping essentials, payroll requirements, and key compliance tips. Follow these guidelines to stay organized, avoid penalties, and grow your business with confidence.

Choose Your Legal Structure

New entrepreneurs in Québec can generally operate as a sole proprietorship, partnership, or corporation. Each structure has different setup steps, liability implications, and tax rules:

·         Sole Proprietorship (Entreprise individuelle): The simplest and cheapest option. You run the business in your own name and assume full personal liability for debts[1]. No separate corporate filings are needed, but you may still need to register the business name (see below). Best for freelancers, contractors or very small ventures[1].

·         Partnership (Société de personnes): When two or more people co-own a business. Partners share profits, decision-making, and liability for debts[2]. Like sole proprietorships, partnerships generally don’t pay corporate tax (profits flow to the partners), but you’ll need a formal partnership agreement and must register the partnership.

·         Corporation (Société par actions): A separate legal entity owned by shareholders[3]. It offers limited liability (personal assets are protected) and may enjoy lower corporate tax rates. Incorporating involves more paperwork and fees, plus annual filings, but can be advantageous for growth or attracting investors[3].

Helpful tip: Québec’s Charter of the French Language requires business names to include a French word (you can add English words if they’re descriptive and after the French generic term). For example, “Boulangerie Thompson” instead of just “Thompson Bakery”[4]. Always check name availability (e.g. via the CIDREQ portal) and ensure the name complies with Québec’s language laws[5].

Registering Your Business (Federal and Provincial)

Once you’ve decided on structure and name, the next step is registration:

·         Registraire des entreprises du Québec (REQ): Most businesses in Québec must register with the REQ to obtain a Quebec Enterprise Number (NEQ)[6][7]. The NEQ is a 10-digit ID used on contracts, invoices and government forms. It is assigned when you file a declaration of registration online (via Quebec’s “clicSÉQUR” portal) and pay a fee. (Sole proprietors operating under their exact legal name alone are exempt from REQ registration[6][8].) Even if you incorporate federally, you must still register in Québec to get an NEQ[7].

·         Business Number (BN) at CRA: Separately, Canadian businesses use a federal Business Number (BN) for tax purposes. When you register for taxes with the Canada Revenue Agency, you’ll get a BN with program accounts. For example, one account each for GST/HST, payroll (RP), corporate tax, etc. A company operating in both Québec and Canada typically has two key identifiers: the CRA Business Number (for federal taxes) and the Québec NEQ (for provincial taxes and filings)[9].

·         Tax Registration: After getting your NEQ and BN, register for applicable tax accounts. In Québec you generally need accounts for:

·         GST/HST: Federal Goods and Services Tax (5%) applies nationwide (no HST in QC).

·         QST: Québec Sales Tax (~9.975%) on most Quebec sales.

·         Payroll source deductions: If you hire employees, register for an RP (remittance) account with CRA and for Revenue Québec source deduction accounts (for Québec income tax, QPP and QPIP contributions)[10].

·         Corporate Income Tax: If you incorporate, both the federal and provincial governments require corporate tax registration. Incorporated businesses get a T2 corporate tax account with CRA and a Revenue Québec account (CO-17 or CO-17-SP).

These registrations are typically done online: use the Québec government portal for QST and Revenue Québec accounts, and the CRA “Business Registration Online” for GST/HST and payroll accounts. The mandatory threshold to register for GST/QST is when your worldwide taxable supplies exceed $30,000 in a single quarter or four-quarter period[11]. (If you remain below $30k, you are a small supplier and may choose not to register, though you can voluntarily register to claim input credits.)

• Permits and Licences: Depending on your industry and location, you may need municipal or provincial permits (e.g. a liquor licence for restaurants, or a permit for childcare, construction, etc.). Use Québec’s online “Permits and licences” finder to see any special requirements for your business.

• Business Bank Account: As soon as you have your NEQ and BN, open a dedicated business checking account. This keeps your business income and expenses separate from personal finances (essential for clear bookkeeping).

Bookkeeping and Record-Keeping Basics

Maintaining accurate records is not just good practice – it’s a legal requirement. You must keep books and supporting documents for all business transactions to justify your income, expenses and tax claims[12]. Key points include:

·        
Keep a daily record of income and expenses. Record sales (even cash sales) and purchases in journals or accounting software. Support each entry with the original document – for sales, use invoices or sales receipts; for purchases, collect itemized receipts or bills.

·         Receipts and Invoices: Every purchase receipt should show: the date, vendor’s name and address, buyer’s name/address, description of goods/services, and the amount paid[13]. For large purchases (over $100 before tax), it should also show the vendor’s GST/HST registration number. If a receipt lacks detail (e.g. a credit card slip), write a note on it describing what was bought.

·         Retention Period: Federal and Québec tax laws require you to keep records for at least six years after the end of the tax year they relate to[14][15]. (Québec explicitly says six years for GST/QST records unless otherwise advised[15].) Store paper records at your business or home (in Canada) – you generally need special permission to keep them outside Canada[14]. Electronic records are allowed, but ensure backups and easy readability (e.g. PDF or accounting software backups)[16][15].

·         Organize by Category: Use folders or software to separate categories (sales revenue, cost of goods, operating expenses, etc.). Reconcile your bank and credit card statements with your books every month to catch errors early. The Canada Revenue Agency notes there’s no prescribed bookkeeping system – you can choose any format (paper ledgers, Excel, QuickBooks, etc.) as long as it’s clear and consistent[17].

·         Language Note: Québec law requires invoices, receipts and other business documents to be available in French (an English translation may be added but the French version must be present)[18]. This means your contracts, order forms, and receipts should either be in French or bilingual with equally prominent French text.

Keeping thorough records will make tax time much easier and protect you in case of an audit by CRA or Revenue Québec.

Sales Taxes (GST/HST and QST)

Selling goods or services triggers sales tax rules:

·         When to register: If your taxable sales exceed $30,000 in four consecutive calendar quarters (or in a single quarter), you must register for GST/HST and QST[11]. Once registered, you charge GST (5%) to customers and QST (~9.975%) on taxable sales in Québec. Exempt supplies (like most health, education, financial services) do not require tax. Note: there are special rules forcing QST registration even under $30k (e.g. retail tobacco, fuel, alcohol sales)[19].

·         Filing Period: After registration, the CRA/Revenue Quebec will assign a reporting period. In general, businesses with larger sales file more often. CRA guidelines say registrants with annual sales over $6 million file monthly, those between $0.5–$6 million file quarterly, and very small registrants (usually under $0.5 million) can file annually[20][21]. QST remittances are typically due on the same schedule. Each filing period’s return and payment (if any tax is owing) is due within one month of the period end (e.g. a quarter ending June 30 is due July 31).

·         Filing Returns: Even if you have no tax to remit, you must file nil returns on time. Late or incorrect GST/HST returns incur penalties (1% of tax owing plus 0.25% per month of delay)[22]. Québec imposes similar penalties (e.g. $25 per day late, up to $2,500, for missing QST/GST return filings)[23].

·         GST/HST vs QST: There is no HST rate in Québec; you collect GST (5%) federally and QST provincially. However, Québec coordinates with federal GST: if you are registered for GST, you are automatically considered registered for federal HST. When doing business outside Québec, you may owe HST instead of QST depending on the province. Keep separate tracking for each tax in your bookkeeping.

Invoicing, Receipts, and Other Records

Good invoice and billing practices help maintain compliance and cash flow:

·         Mandatory Billing: When you sell to a customer, provide an invoice or receipt showing all details (business name and number, customer name, date, items/services, amounts, tax collected). Keep a copy of every bill or credit note issued[16]. Québec law requires these records to be kept at your business location or home[16].

·         Electronic Records: Digital invoicing and record-keeping are allowed. If you use software (like QuickBooks, Wave, etc.) or scan paper documents, ensure the digital copies are legible and backed up. Revenue Québec permits electronic records, but they must remain accessible and readable for audits[16].

·         Receipts and Expense Tracking: Collect receipts for every business purchase (meals, supplies, travel, equipment, etc.). As noted, each receipt should detail the who, what, when, and cost[13]. For any cash payments without a receipt (like tips or small purchases), write a journal entry noting date, amount, purpose, and recipient.

·         Safe Storage: Store original documents in an organized way (file folders by month or category). Back them up digitally (e.g. PDF scans). Keep both paper and digital copies for the retention period (at least 6 years)[14].

·         Examples of Records: Income journals, expense journals, asset purchase ledgers, bank statements, cancelled cheques, deposit slips, contracts, and financial statements. All help support your tax filings and financial statements.

Maintaining a reliable bookkeeping routine from the start makes tax compliance straightforward and gives you a clear picture of your business’s financial health.

Hiring Employees: Payroll Obligations

When you hire staff, you take on new compliance responsibilities:

·         Payroll Registrations: Register as an employer with CRA (CRA RP account) and Revenue Québec. You must collect and remit:

·         Federal deductions: Income tax and Employment Insurance (EI) from each employee’s pay (remit to CRA).

·         Provincial deductions: Québec income tax (RQ, via your Revenue Québec remittances), Québec Pension Plan (QPP) contributions, and Québec Parental Insurance Plan (QPIP) premiums from employees[10].

·         Employer Contributions: On top of employee deductions, you must pay your share of QPP, QPIP, the Québec Health Services Fund, and contributions to the Workforce Skills Development and Recognition Fund and Labour Standards Fund[10].

·         Wages and Records: Keep detailed payroll records: hours worked, wages paid, and all deductions. Issue pay stubs in French (including required statutory information). Submit source deduction returns regularly (remittances are typically due monthly or quarterly, depending on your remitter type).

·         T4 and RL Slips: By end of February each year, file T4 (federal) and RL-1 (Québec) summaries of employment for each worker, reporting salaries and withholdings for the past year.

·         CNESST (Workers’ Compensation): Québec requires all employers with ≥1 employee to register with the CNESST. This provides workplace accident insurance. Register within 60 days of hiring your first worker[24]. You’ll be assigned a classification and a contribution rate (insurance premium). File an annual Statement of Wages by March 14 each year and ensure your contributions are paid on time[25][26].

·         Penalties for Payroll Non-Compliance: If you don’t remit deductions or fail to register, CRA and Revenue Québec will charge interest and penalties. Québec law makes certain individuals (e.g. directors) personally liable for unremitted source deductions[10]. CNESST can also impose retroactive premiums, fines, and interest if you neglect registration[27].

Overall, payroll requires setting up systems (often a payroll service or software) to track gross pay, deductions, and remittances. Revenue Québec’s Employer’s Guide and CRA’s payroll guides are valuable references.

Penalties for Non-Compliance

Failing to meet bookkeeping or tax rules can be costly:

·         Fines and Interest: CRA charges 1% of the unpaid tax plus 0.25% for each full month late (up to 12 months) for late GST/HST returns[22]. Revenue Québec generally applies a $25-per-day penalty (up to $2,500) for late or missing filings (income tax, QST, payroll)[23]. Interest accrues on any overdue tax from the payment due date.

·         Other Penalties: Incorrect filings (missing information or false statements) can incur additional penalties (e.g. 5–10% of the error amount)[28]. Repeated failures or not filing on demand can bring steeper penalties[29]. Payroll penalties (CRA) can start around 3% of payroll remittances (higher for repeat offenses)[30].

·         Audits and Legal Consequences: Poor records or suspicious claims may trigger a tax audit. If the CRA or Revenue Québec finds fraud or gross negligence, there can be even heavier fines or criminal charges.

·         CNESST Fines: Not registering with CNESST can lead to back-payment of all premiums plus penalties and interest[27].

In short, it’s cheaper to comply than to pay penalties later. Timely filings and remittances avoid fees and keep the taxman happy.

Staying Organized and Compliant (Tips)

Here are some best practices to keep on top of bookkeeping and compliance:

Separate business and personal finances: Open a business bank account and use it only for company transactions. This makes tracking income/expenses much easier and avoids confusion at tax time.

·         Use Accounting Software: Cloud-based tools (e.g. QuickBooks, Xero, Wave) automate invoicing, expense entry, and reporting. They can link to your bank to import transactions and even categorize them. Whatever system you choose, keep it consistent.

·         Regular Reconciliation: Set a monthly schedule to reconcile your bank and credit card statements with your books. This catches errors or missed transactions early.

·         Digitize Records: Scan receipts and bills as soon as you get them. Many apps allow photographing receipts to upload directly into your accounting. Keep backups (e.g. cloud storage) so nothing is lost.

·         Stay on Top of Deadlines: Mark your calendar with key dates: GST/QST filing due dates, payroll remittance dates, tax return deadlines (e.g. annual T1/T2 and Revenue Québec returns), and CNESST deadlines (Statement of Wages by Mar 14). Missing dates is an easy way to incur penalties.

·         Keep Copies of Filings: Save PDFs or printouts of any tax returns or remittance forms you file. That way, if a payment is mis-applied or a filing is questioned, you have proof.

·         Seek Advice Early: Consider consulting an accountant or bookkeeper before problems arise. They can help set up your chart of accounts, advise on deductible expenses, and ensure you’re using the right tax codes. Even a one-time setup session can save hours down the road.

·         Understand Tax Rates and Credits: Familiarize yourself with relevant tax rates (e.g. QST at 9.975%) and available business tax credits or deductions (like the small business deduction for corporations). Knowing these can influence how you structure spending and pricing.

Consistent bookkeeping not only ensures compliance but also gives you insight into your business’s performance. Organized records will help you make informed decisions and plan for growth.

Ready to Get Started?

Keeping compliant books and taxes may seem daunting at first, but with clear procedures and reliable support, you can focus on building your business. By choosing the right structure, registering properly (with both Québec and CRA), and maintaining detailed records, you’ll set a solid foundation. Avoid last-minute scrambling by implementing good habits from day one.

Need expert bookkeeping help? Our team specializes in Québec small businesses. We can handle your bookkeeping, GST/QST filings, payroll remittances, and more – so you can concentrate on what you do best. Contact us today to ensure your startup stays organized, compliant, and ready for success!

Why Choose Mackisen CPA & Auditor?

When it comes to bookkeeping and compliance in Québec, experience, precision, and local expertise matter. That’s why startups and growing businesses across Québec choose Mackisen CPA & Auditor as their trusted financial partner.

What Sets Mackisen CPA & Auditor Apart?

Québec-Specific Expertise

We specialize in Québec bookkeeping, GST/QST compliance, Revenue Québec regulations, CRA requirements, payroll, and CNESST obligations. We understand the unique legal, tax, and language requirements of doing business in Québec, so you don’t have to worry about missing critical details.

Complete Business Support – From Start to Growth

Whether you are just starting a business or already operating, we provide end-to-end bookkeeping and accounting solutions, including:

• Business setup and registration guidance

• Day-to-day bookkeeping

• GST/QST filings

• Payroll and source deductions

• Financial reporting and compliance support

Accuracy, Compliance, and Peace of Mind

Our professional CPAs ensure your books are accurate, up to date, and fully compliant, helping you avoid penalties, audits, and costly mistakes.

Tailored Solutions for Every Business

No two businesses are the same. We customize our services based on your business type, including retail stores, grocery businesses, restaurants, service providers, self-employed professionals, and corporations.

Trusted by Québec Business Owners

Clients choose Mackisen CPA & Auditor for our professionalism, responsiveness, transparency, and reliability. We don’t just manage numbers—we help businesses succeed.

Strategic Advice Beyond Bookkeeping

We go beyond data entry. We help you understand your numbers, improve cash flow, and plan confidently for long-term growth.

Ready to Simplify Your Bookkeeping and Stay Fully Compliant?

Starting or running a business in Québec doesn’t have to be stressful. With the right accounting partner, you can focus on growing your business while we handle the numbers.

Mackisen CPA & Auditor proudly serves Montréal and businesses across Québec, providing bookkeeping, GST/QST, payroll, and tax compliance services for startups, small businesses, and growing companies.

Contact Mackisen CPA & Auditor today for professional bookkeeping and compliance support tailored to your business needs.

Let Mackisen CPA & Auditor take care of your accounting so you can run your business with confidence.