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TOP TEN TIPS FOR SMALL BUSINESS OWNERS

10. Maximize your tax deductions:

Many companies throw away tax savings by not tracking all expenses and by not structuring their affairs to be tax-efficient.

  • Example: If you know how to make things you would otherwise personally spend money on deductible in your corporation, you save money by not having to declare the income personally.

9. Get incorporated:

– but only when it makes sense. Many startups and micro-companies are better off run as partnerships or proprietorships – but corporations are eligible for lots of things that individuals aren’t. Knowing what’s best when is what we do.

  • Example: Corporations are eligible for a very favorable rate of tax in Canada, so if you need lots of capital to start your business, you’re probably better off getting incorporated straight away.

8. Split income:

For individuals, the more you make, the higher your tax rate. By utilizing legal, acceptable methods of splitting your income with family members you can realize substantial tax savings.

  • Example: Loan funds to a related individual, charge interest at the CRA prescribed rate, which allows the individual to declare the net income at their marginal rate

7. Don’t miss filing deadlines:

The taxation authorities can and will fine you and charge you interest if you are late in filing any of your returns, elections, forms etc. Paying penalties and interest is like burning your money.

  • Example: Set up an automated system to remind you of up-coming deadlines, and give yourself time to get the paper-work done.

6. Get a corporate Health Plan:

Setting up a qualified health plan within your corporation means employees get a benefit they don’t have to pay for. And, best of all, they don’t have to pay tax on the benefit either.

  • Example: A Private Health Services Plan (PHSP) can pay for qualified medical expenses that are too expensive to be covered on group plans, and can be customized to favor certain persons or groups of corporations. (This type of plan may be available, even if you’re not incorporated).

5. Use the Capital Gains Exemption:

When it comes time to sell your business each shareholder of a Canadian Controlled Private Corporation can realize a tax-free sale of approximately $850,000. But in order to do this, you have to structure your holdings correctly before hand.

  • Example: You can multiply the Small Business Capital Gains Exemption by adding shareholders through a Family Trust.

4. “Freeze” your estate:

If your enterprise has grown to the point that you’re worried about the taxes to your estate when you die, it might be time to “freeze” the value of your estate, and pass the future growth on to the next generation.

  • Example: Create a holding company to transfer the shares of your small business corporation, and sell low-value shares to younger family members.

3. Get corporate insurance:

It may be possible to have your corporation buy life and/or disability insurance – so you don’t have to.

  • Example: Have your corporation buy, and be the beneficiary of life insurance on the principal owner, then use the proceeds to pay the surviving shareholders to buy out the deceased’s shares from his estate.

2. Explore off-shore:

Even though the tax authorities don’t take kindly to people ‘hiding’ their money off-shore, there are still legal, acceptable methods of saving tax by utilizing off-shore structures.

  • Example: Goods manufactured in another country by a company controlled by you can be imported, using proper transfer-pricing methodology, to shift some of your profit to a lower rate (or no-rate) jurisdiction.

1. Hire the right advisor:

That means, or course, becoming part of our business family at Van Wensem & Vukets. Twenty-five years of experience means getting the best advice possible for you and your business.

  • Example: Call George van Wensem or Carol Vukets today to arrange a consultation.

Disclaimer:

The information contained on these pages is for general use only. As it is not possible to include all situations and circumstances in a short information piece, all situations should be reviewed with a qualified professional. While all reasonable efforts have been made to ensure the information provided is accurate, no individual or organization involved in preparation or distribution of this material accepts any responsibility or liability for its content. If you have any questions, please give us a call.

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