Commentary Archives - Page 13 of 13

A plan for handover of your business can pay for itself many times over

When entrepreneurs are building their businesses, they do not usually think about their end game. Especially at the beginning, you’re usually in a good place with your business partner. Nevertheless, over time disputes and disagreements can happen, and that’s when an agreement for the planned transfer of ownership for a business is necessary. While you may not want to focus on how it will end at the beginning, if you are an owner of a small to medium business, then preparing for the worst is in your best interest. And, having an agreement in place beforehand, will help protect you and your investment.

Key Takeaways:

An agreement allows the business to continue to be successful, and for as seamless a transition as possible.
A well-drafted agreement will cover what will happen after events like death, disability, divorce and retirement, and a poorly drafted one can be worse than not having one at all.
Buy-sell agreements are crucial for any privately owned business with more than one owner or shareholder.

“Having a buy-sell agreement becomes even more critical as the value of the business, and the wealth of the owners, increases.”

Private corporation tax proposals unquestionably harm “middle-class” business owners

While the stated intention of recent tax cuts proposed by the Government is to close loopholes that benefit high-income earners, these proposals are actually an attack on all entrepreneurs. In the example of a small business owned by a family and wife, the new tax proposals would not only force them to enact expensive tracking procedures, but would also hamper the growth of their business. Essentially, they and many other Candadian small business owners would be forced to shut down.

Key Takeaways:

The effects of the Liberal Government’s tax proposal will harm middle-class businesses maybe more than high-income individuals.
Tax planning will be overly complicated and expensive, so all business will need to restructure to comply with the new rules, and companies without access to third-party financing are disadvantaged.
After complying with the new rules, businesses will be less protected for business-cycle downturns and less able to expand in the future.

“The new rules, if enacted, will also require complex tracking systems in order to properly account for the new passive income rules.”

Trudeau’s Proposed Tax Changes Devastating for Small Businesses: A letter to the Department of Finance

The latest proposed Canadian tax laws could be devastating to small businesses. These laws paint these quaint businesses in the same light as larger, more shady business. In addition to treating businesses that were following the rules as if they were blatantly evading their taxes. If they become law, these kinds of regulations will be costly to businesses in terms of time and money as well as, in some extreme cases, the businesses altogether.

Key Takeaways:

The Canadian Finance proposals, while designed to make Canada more competitive in the global economy, will hinder Canada’s competitiveness.
The Finance Minister’s proposal will force small and large business to restructure to avoid a 73% tax, which will in turn reduce the revenue flowing to the government.
While the tax proposals are aimed at large corporations, the consequences will force all companies to claim more passive income, which will remove active income from the overall economy.

If you’re a small business, we highly recommend contacting your MP and share your concerns with them. If you follow the link to the original article below, there is a sample letter that you can use to address the issue or send to Bill Morneau at the Finance Department.

“The Finance department and the Federal Liberals are incorrectly casting small business owners as wealthy tax cheats.”

After Tax Proposals, Investors Need to Be Making the Most of Their TFSAs

In July, the Department of Finance proposed changes to the tax policy for small businesses. These changes are in part due to the increased number of temporary, part-time, and contract work, who operate as private corporations, in comparison to the traditional salaried worker. As a result, Canadians, especially non-salaried, should be taking advantage of their Tax-Free Savings Account (TFSA).

Key Takeaways:

Independent contractors, on-demand workers, remote workers, and other areas, make up 20-30% of the workforce today.
In light of these trends, it is no accident that the Canadian government is looking to close loopholes for small businesses.
Investing in stocks can provide growth and income for investors to boost tax-free capital growth.

“All Canadians should be taking advantage of the room in their Tax-Free Savings Accounts (TFSA), but for those in the gig economy, getting the most out of their TFSAs is crucial.”

Ready to buy a house? Here’s what it means for your taxes

If you’re ready to buy a house, then it’s important to know how home ownership will affect your taxes. The good news is that your home is potentially a tax break, through credits or exemptions on profits from selling your family home. First-time home buyers are eligible for a tax credit from the Canadian Revenue Authority (CRA), and you can also use some of your RRSP if needed, to purchase, although the money must be refunded to the account.

Key Takeaways:

If you’re a first-time homebuyer you’re eligible for the First-time home buyers’ tax credit. It is a $5,000 credit, which works out to a $750 tax saving. You can even split the credit with your significant other if you’re both first-time homebuyers.
Current homeowners, who are selling their house, will need to report this on Schedule 3, Capital gains when you file your income tax return. For one property per year and provided it is your primary residence, then you do not have to pay tax on the capital gain, thanks to the principal residence exemption.
While standard renovations don’t apply, you can claim up to $10,000 in expenses for renovations to your principal residence to add accessible for seniors or disabled persons.

“Before you make one of the largest and most important purchases in your life, here are some tax implications you should know.”

Everything you need to know about income tax brackets

Taxpayers are assigned brackets for taxation purposes, which depends almost solely on income. Those in the lowest bracket will pay 15% but those in higher brackets actually pay based on tiers. The portion of their income that is in the lower bracket gets taxed at that lower rate of 15%. The balance of the yearly income is taxed at a higher rate of 20.5% if total income falls within the second bracket. If income is higher than that, an additional tax is assessed for the balance that falls within a third bracket, and so on.

Key Takeaways:

Changes to your salary, such as a raise or termination pay, will add to your income and may potentially move you into a higher tax bracket.
Taxable employee benefits can also affect your income. In general, taxable benefits like trips, bonuses and personal use of an employer’s automobile, won’t be substantial enough to move you into a new bracket. But, one that might is an employee stock option.
Most taxable benefits will be included in your statement of employment.

“Knowing what contributes to your income and your income tax bracket is important, so there are no surprises when your T4 arrives in the mail.”