news brief Archives - Page 16 of 17

How not to blow your Series A funding budget

Obtaining Series A funding for a business venture can be time-consuming and requires determination to navigate and secure. Furthermore, Series A funding often alters the nature of your business in certain ways, like creating obligations to these investors who might not share a personal connection with you in the way of your earliest investors probably do. After accepting some structural changes, next you’ll need to be mindful of the costs associated with hiring the right people and building the right type of team. It’s also common to underestimate or forget to include some operational costs. Founder may be well advised to not do everything themselves, take the time to consider their options and regularly review their plan.

“Because the Series A process is a very significant event in the lifetime of a startup, the euphoria that comes with that can often lead to some poor investment and strategic decisions in the early budgeting stages.”

Ten ideas to increase your after-tax investment returns

When saving for retirement you want to make sure that you get the highest returns possible. One way you can boost your returns by 1.5 to 3 percent is by carefully planning and considering your options to achieve the best after tax investment returns. For instance, if you have investments that you’ve held for a long time, you can minimize portfolio “lock-up” by periodically selling them when you have capital losses to offset the gains against, and then you can even buy back the same investment. Incorporating tax strategies into your investment portfolio while you are saving can significantly increase your returns, and if you’re unsure about what strategies to use or are unclear on tax laws, speak to a tax specialist.

“Wouldn’t it be nice to add a guaranteed additional 1.5 per cent to 3 per cent annually to your after-tax investment returns? This is possible if you take steps to minimize the tax on your portfolio.”

Why you need a plan when withdrawing from an RESP to pay for school

Often, a Registered Education Savings Plan (RESP), is created by parents long before a child has any notion of what a post-secondary education even is. When the time comes to withdraw from the account, advisors recommend proper planning to ensure there is sufficient time to convert those investments into cash. In addition, the type of withdrawal is important. There are two types of withdraws: the refund of contributions, and the educational assistance payments (EAP) portions. Generally, it’s wise to withdraw the investment gains and EAP monies first. The reason is that if a child stops going to a post-secondary institution and there is money still in the EAP portion, then the federal grant money must be repaid to the government. Keep in mind that the refund of contributions are not taxed, but the EAP amount is taxed as the student’s income.

“You want to use up your educational assistance payments first because if there’s any left in the pool and your child is no longer going to school and won’t be going to school those are going to need to be repaid back to the government,”

If you want to keep wealth in the family, be careful how you bequeath it

In Canada, care must be taken in how you pass on an inheritance to your children. Some provinces, like Ontario’s Family Law Act, clearly protects inherited wealth by ensuring that it remains the property of the inheritor, and not be split equally in case of a divorce, after it is bequeathed. However, how the inherited or gifted funds are used can nullify this exclusion. For instance, if the inheritance is used in the matrimonial home, then the courts will decide whether or not the money qualifies for exclusion. This example illustrates why it is important to be aware of how you designate any wealth you will be passing to your children.

“Beneficiaries of an inter-generational transfer of wealth should take notice of the need to properly plan if the intent is to ensure the funds are not shared in the unfortunate event of a divorce.”

Retiring baby boomers will trigger a huge wave of business transfers over next 5 to 10 years: CFIB

According to the Canadian Federation of Independent Business, Canada is facing an impending glut of ownership transfers from its small businesses as baby boomers retire and pass away. As many as 72 percent of small businesses will experience such transfers in the next ten years. The concern is that only eight percent of such businesses have a formal transition plan. This can cause havoc if the owners are incapacitated suddenly and there is no clear succession in place.

“While it is encouraging that a good proportion of business owners intend to pass their business on to a new generation, the lack of formal planning gives rise to significant risks for Canada’s competitiveness and prosperity.”

Tax traps when converting a home to an income property

The Principal Residence Exemption is a Canadian statute meant to protect Canadian tax-payers and families from accruing tax on the capital gains of a sold property, provided it is deemed the primary residence. Basically, a legal family unit can designate one residence as the primary family residence per year. However, the designated property must be used for living in and not for any commercial purpose. There is leeway for homeowners that live in their primary residence, yet rent out a portion. Assuming that the ratio of income-generating space to personal homeowner usage still favors the homeowner and no structural changes were made on the property, nor were Capital Costs Allowance assessed, then the PRE umbrella can still shelter the property. Even homeowners that use there entire property for rental purposes can claim PRE by a special election which more or less nullifies the event and allows the family of residence or the individual homeowner to go on treating the property as a primary residence, provided that the owner(s) sells it in five years and never declares any other residence as a primary residence during that time period.

“When a property changes use from principal residence to income-producing, the PRE should shelter the entire capital gain provided the property is designated the taxpayer’s principal residence for each tax year owned. The concern is that when the converted income property is sold in future, a higher taxable capital gain may result.”

Does Canada really need an inheritance tax?

A new report published by the Canadian Centre for Policy Alternatives (CCPA) discovered that the 87 richest Canadian families have more collective wealth than everyone in New Brunswick, Prince Edward Island, and Newfoundland combined. This wealth is typically concentrated in the same families, and is passed down among many generations leaving very little room for change. In response, David Macdonald, an economist, has proposed a 45% tax on estates larger than $5 million, similar to other countries, to help reduce the gap. However, in Canada, the addition of this type of tax could result in certain assets being taxed two if not three times.

“Canada is the only country in the Group of 7 advanced economies (G7) without an inheritance, gift or estate tax.”

How to build an education plan for your child

If you want to save and invest in your child or grandchild’s future, you may want to make sure that your money will lead to the best outcome for them. One way is to create an education plan to answer important questions, like what opportunities are there for your child in their chosen area of study? A plan should include the goals of education, which schools are best for reaching these goals, determining what the costs will be and where the funding will come from. This will help ensure your money is well spent.

“Investing in a postsecondary education should involve more than just figuring out how to pay for it – as important as that might be. There are other questions to be answered.”

Calgary becomes first Canadian city to allow businesses to start online

As of July 31st, small businesses in Calgary can get started online, thereby forgoing any brick and mortar transactions. New online applications will allow businesses to get licensing and permits entirely in the virtual world. Director of Calgary Business Services explained that greater efficiency and speed was what Calgary start-ups were after. Calgary is the first Canadian city to make this a reality for its small-business owners, with the possibility of more to follow. In the fall, Calgary also has plans to allow businesses to renew or modify their commercial entities online.

“Business owners can now apply for licences and permits in a single online application, the city said in a news release.”

Why you need to understand risk and uncertainty when planning for retirement

When retirement planning, you need to consider that it is not a one size fits all plan, and you often have to make adjustments due to risks. Typically, financial planning will take into consideration investment returns, inflation and retiree spending and assumes a lifespan of 90. However, risks are not limited to this list, and can also include jobs, divorce, disability or death. For better retirement planning, it is advisable not to take a set it and forget it attitude and instead review your plan more often and make adjustments along the way.

“The ‘Risk’ of Ignoring Risks in Retirement Financial Planning” may be of interest to retirees, those approaching retirement, and the advisors who advise them both.”