Business Owners

The importance of a financial plan. Working with us to create your financial plan helps you identify your long and short term life goals.Talk to us to see how we can help you.

Working with us to create your financial plan helps you identify your long and short term life goals. When you have a plan, it’s easier to make decisions that align with your goals. We outline 8 key areas of financial planning:

  • Income: learn to manage your income effectively through planning
  • Cash Flow: monitoring your cash flow, will help you keep more of your cash
  • Understanding: understanding provides you an effective way to make financial decisions that align with your goals
  • Family Security: having proper coverage will provide peace of mind for your family
  • Investment: proper planning guides you in choosing the investments that fit your goals
  • Assets: learn the true value of your assets. (Assets – Liabilities)
  • Savings: life happens, it’s important to have access to an emergency fund
  • Review: reviewing on a regular basis is important to make sure your plan continues to meet your goal
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Writing an estate plan is important if you own personal assets but is all the more crucial if you also own your own business. This is due to the additional business complexities that need to be addressed, including tax issues, business succession and how to handle bigger and more complex estates. Seeking professional help from an accountant, lawyer or financial advisor is an effective way of dealing with such complexities.

Writing an estate plan is important if you own personal assets but is all the more crucial if you also own your own business. This is due to the additional business complexities that need to be addressed, including tax issues, business succession and how to handle bigger and more complex estates. Seeking professional help from an accountant, lawyer or financial advisor is an effective way of dealing with such complexities. As a starting point, ask yourself these seven key questions and, if you answer “no” to any of them, it may highlight an area that you need to take remedial action towards.

 

  • Have you made a contingency plan for what will happen to your business if you are incapacitated or die unexpectedly?
  • Have you and any co-owners of your business made a buy-sell agreement?
  • If so, is the buy-sell agreement funded by life insurance?
  • If you have decided that a family member will inherit your business when you die, have you provided other family members with assets of an equal value?
  • Have you appointed a successor to your business?
  • Are you making the most of the lifetime capital gains exemption ($835,714 in 2017) on your shares of the business, if you are a qualified small business?
  • Are you taking care to minimize any possible tax liability that may be payable by your estate in the event of your death?

Estate freezes

The process of freezing the value of your business at a particular date is an increasingly common way of protecting your estate from a large capital gains tax bill if your business increases in value. To achieve this, usually the shares in the business that have the highest growth potential are redistributed to others, often your children, meaning that they will be liable for the tax on any increase in their value in the future. In exchange, you will receive new shares allowing you to maintain control of the business with a key difference – the value of the shares is frozen so that your tax liability is lower and that of your estate when you die will also be reduced.

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The biggest changes include: The increase in the amount of income eligible for the small business deduction, The increase in Basic Personal Amount, Carbon tax

Manitoba Finance Minister Cameron Friesen delivered the province’s 2018 budget update on March 12, 2018. The budget anticipates a surplus of $521 million for 2018 to 2019.

Corporate and personal tax rates remain unchanged.

The biggest changes are:

●     The increase in the amount of income eligible for the small business deduction.

●     The increase in Basic Personal Amount

●     Carbon tax

Corporation changes

  • Small Business Deduction Limit Increased – Although there were no announcements about changes to the province’s corporate tax rate, it does increase the small business income limit eligible from $450,000 to $500,0000 effective January 1, 2019.
  • Child Care Centre Development Tax Credit – A new refundable corporation income tax credit to encourage the creation of licensed child care centres in workplaces. The credit will be a total benefit of $10,000 per new infant/preschool space created, claimable over 5 years. (This is for corporations that are not primarily engaged in child care services.)
  • Small Business Venture Capital Tax Credit – The 45% investment tax credit is intended to promote the acquisition of equity capital in emerging enterprises that require larger amount of capital. Effective, March 12, 2018 the minimum investment is lowered to $10,000 (from $20,000) and the elimination off the $15 million revenue cap on the size of an eligible corporation.

Personal tax changes

  • Basic Personal Amount – The Basic Personal Amount will be increased by $1,010 each year for 2019 and 2020 (approximately 10% per year) resulting in additional savings of $109 for 2019 and $218 for 2020 or “$2,020 by 2020”.
  • Primary Caregiver Tax Credit – Effective immediately, the budget implements a flat $1,400 Primary Caregiver Tax Credit available to all eligible caregivers.
  • Education Property Tax Credit – Effective January 1, 2019, the calculation of the education property tax credit will be based on actual school taxes and the $250 deductible will be eliminated.
  • Tobacco Tax – Effective March 12, 2018, there will be an increase to the tobacco tax rate for fine-cut tobacco to 45¢ per gram (from 28.5¢ per gram)
  • Carbon Tax – Effective September 1, 2018, there will be an imposed tax of $25 per tonne of greenhouse gas emissions. This new provincial carbon regime will apply to gas, liquid, solid fuels intended for combustion.

Carbon Tax Rates by Select Fuel Type (2018-2022)

To learn how these changes will affect you, please don’t hesitate to contact us. 

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The government’s 2018 federal budget focuses on a number of tax tightening measures for business owners. It introduces a new regime for holding passive investments inside a Canadian Controlled Private Corporation (CCPC). (Previously proposed in July 2017.)

The government’s 2018 federal budget focuses on a number of tax tightening measures for business owners. It introduces a new regime for holding passive investments inside a Canadian Controlled Private Corporation (CCPC). (Previously proposed in July 2017.)

 Here are the highlights:

Small Business Tax Rate Reduction Confirmed

Lower small business tax rate from 10% (from 10.5%), effective January 1, 2018 and to 9% effective January 1, 2019.

Limiting Access to the Small Business Tax Rate

A key objective of the budget is to decrease the small business limit for CCPCs with a set threshold of income generated from passive investments. This will apply to CCPCs with between $50,000 and $150,000 of investment income. It reduces the small business deduction by $5 for each $1 of investment income which falls over the threshold of $50,000. This new ­regulation will go hand in hand with the current business limit reduction for taxable capital.

Limiting access to refundable taxes

 Another important feature of the budget is to reduce the tax advantages that CCPCs can gain to access refundable taxes on the distribution of dividends. Currently, a corporation can receive a refundable dividend tax on hand (known as a RDTOH) when they pay a particular dividend, whereas the new proposals aim to permit such a refund only where a private corporation pays non-eligible dividends, though exceptions apply regarding RDTOH deriving from eligible portfolio dividends.

The new RDTOH account referred to “eligible RDTOH” will be tracked under Part IV of the Income Tax Act while the current RDTOH account will be redefined as “non-eligible RDTOH” and will be tracked under Part I of the Income Tax Act. This means when a corporation pays non-eligible dividends, it’s required to obtain a refund from its non-eligible RDTOH account before it obtains a refund from its eligible RDTOH account.

Health and welfare trusts

The budget states that it will end the Health and Welfare Trust tax regime and transition it to Employee Life and Health Trusts. The current tax position of Health and Welfare Trusts are linked to the administrative rules as stated by the CRA, but the income Tax Act includes specific rules relating to the Employee Life and Heath Trusts which are similar. The budget will simplify this arrangement to have one set of rules across both arrangements.

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Business owners are increasingly recognizing the key importance of implementing employee benefit plans in their organization

Business owners are increasingly recognizing the key importance of implementing employee benefit plans in their organization and this is an area that has grown considerably in recent decades. Employee benefits comprise all of the additional things that you offer to your employees on top of their regular salary, which could include pension contributions, health cover / insurance policies, training and education programs etc. Employees are more and more interested in the total benefits package that a potential employer can offer them, rather than just being focused on a binary salary figure and recognizing and understanding this cultural shift in the modern working world is crucial to maintain your ability to recruit and retain the right talent for your business.

Many employees value the benefits that their employer offers, considering them an integral part of their take home pay, none more so than health cover. This benefit can provide financial and emotional security to your employees and their families, without the need for them to complete any health requirements to be on the plan. They are likely to benefit from a preferable level of cover and the plan may even provide them with insurance products such as long-term disability cover, which can be harder to gain outside of a group plan. What’s more, group plans often offer out-of-country emergency healthcare for employees which has the potential to save them money on personal travel insurance products.

Not only do these benefits provide a sense of security to your employees, they can also help them to feel valued as part of your organization, which may in turn foster higher morale and increased motivation within their roles. It is therefore worthwhile for business owners to encourage their teams to recognize the fact that the benefits package that you offer should be considered as an integral part of their take home pay, alongside their actual salary.

Talk to us, we can help.

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It has certainly been a busy week in terms of announcements regarding financial policies for small businesses. Following the series of proposed tax reforms that the government announced back in July, various tweaks and changes have subsequently been made, owing, perhaps in part, to confusion and frustration expressed among the small business community. We have provided a brief summary of the changes in this article and infographic.

It has certainly been a busy week in terms of announcements regarding financial policies for small businesses. Following the series of proposed tax reforms that the government announced back in July, various tweaks and changes have subsequently been made, owing, perhaps in part, to confusion and frustration expressed among the small business community. This week Finance Minister, Bill Morneau, has made further clarifications and adjustments to his original set of proposals, aiming to bring more of a sense of balance to the plans. Like all policy changes, the detail can be a little overwhelming, so here is a summary of the key points for your reference: 

  • The government intends to honor a commitment made prior to the election, to reduce the small business tax rate from 10.5% to 9% by the year 2019. 
  • Morneau confirmed that the government has scrapped the proposal to limit access to the Lifetime Capital Gains Exemption. 
  • The plans announced earlier in the year to reduce the value of passive investments made by corporations will continue in principle, but with few key changes. There will be a threshold of $50,000 of income per year, which will be excluded from the newly set higher rate of tax. 
  • The government has agreed to “simplify” the rules related to the new plans, to prevent income splitting for family members, who are not active in a business, but the plan will still move ahead in principle. 
  • Morneau has confirmed that the government will still provide good entrepreneurial incentives for venture capitalists and angel investors. The criteria for which still needs to be established. 
  • The proposed rules to limit the conversion of income to capital gains have been abandoned due to the concerns that many related to intergenerational transfers and insurance policies were held inside corporations. 

Of course, this is one area of government policy which is not only constantly changing, but particularly controversial in the current climate, so keep yourself updated regularly on new announcements and news, to ensure your understanding in this area and its potential impact on your family and business. If you have any questions, please talk to us. 

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Writing an estate plan is important if you own personal assets but is all the more crucial if you also own your own business. This is due to the additional business complexities that need to be addressed, including tax issues, business succession and how to handle bigger and more complex estates. Seeking professional help from an accountant, lawyer or financial advisor is an effective way of dealing with such complexities.

Writing an estate plan is important if you own personal assets but is all the more crucial if you also own your own business. This is due to the additional business complexities that need to be addressed, including tax issues, business succession and how to handle bigger and more complex estates. Seeking professional help from an accountant, lawyer or financial advisor is an effective way of dealing with such complexities. As a starting point, ask yourself these seven key questions and, if you answer “no” to any of them, it may highlight an area that you need to take remedial action towards.

  • Have you made a contingency plan for what will happen to your business if you are incapacitated or die unexpectedly?
  • Have you and any co-owners of your business made a buy-sell agreement?
  • If so, is the buy-sell agreement funded by life insurance?
  • If you have decided that a family member will inherit your business when you die, have you provided other family members with assets of an equal value?
  • Have you appointed a successor to your business?
  • Are you making the most of the lifetime capital gains exemption ($835,714 in 2017) on your shares of the business, if you are a qualified small business?
  • Are you taking care to minimize any possible tax liability that may be payable by your estate in the event of your death?

Estate freezes

The process of freezing the value of your business at a particular date is an increasingly common way of protecting your estate from a large capital gains tax bill if your business increases in value. To achieve this, usually the shares in the business that have the highest growth potential are redistributed to others, often your children, meaning that they will be liable for the tax on any increase in their value in the future. In exchange, you will receive new shares allowing you to maintain control of the business with a key difference – the value of the shares is frozen so that your tax liability is lower and that of your estate when you die will also be reduced.

Continue Reading

You most likely do, but the more important question is, ‘What kind?’ Whether you’re a young professional starting out, a devoted parent or a successful CEO, securing a life insurance policy is probably one of the most important decisions you will have to make in your adult life. Most people would agree that having financial safety nets in place is a good way to make sure that your loved ones will be taken care of when you pass away. Insurance can also help support your financial obligations and even take care of your estate liabilities.

You most likely do, but the more important question is, ‘What kind?’ Whether you’re a young professional starting out, a devoted parent or a successful CEO, securing a life insurance policy is probably one of the most important decisions you will have to make in your adult life. Most people would agree that having financial safety nets in place is a good way to make sure that your loved ones will be taken care of when you pass away. Insurance can also help support your financial obligations and even take care of your estate liabilities. The tricky part, however, is figuring out what kind of life insurance best suits your goals and needs.  This quick guide will help you decide what life insurance policy is best for you, depending on who needs to benefit from it and how long you’ll need it.

Permanent or Term?

Life insurance can be classified into two principal types: permanent or term. Both have different strengths and weaknesses, depending on what you aim to achieve with your life insurance policy.

Term life insurance provides death benefits for a limited amount of time, usually for a fixed number of years. Let’s say you get a 30-year term. This means you’ll only pay for each year of those 30 years. If you die before the 30-year period, then your beneficiaries shall receive the death benefits they are entitled to. After the period, the insurance shall expire. You will no longer need to pay premiums, and your beneficiaries will no longer be entitled to any benefits. Term life insurance is right for you if you are:

  • The family breadwinner. Death benefits will replace your income for the years that you will have been working, in order to support your family’s needs.
  • A stay-at-home parent. You can set your insurance policy term to cover the years that your child will need financial support, especially for things that you would normally provide as a stay-at-home parent, such as childcare services.
  • A divorced parent. Insurance can cover the cost of child support, and the term can be set depending on how long you need to make support payments.
  • A mortgagor. If you are a homeowner with a mortgage, you can set up your term insurance to cover the years that you have to make payments. This way, your family won’t have to worry about losing their home.
  • A debtor with a co-signed debt. If you have credit card debt or student loans, a term life insurance policy can cover your debt payments. The term can be set to run for the duration of the payments.
  • A business owner. If you’re a business owner, you may need either a term or permanent life insurance, depending on your needs. If you’re primarily concerned with paying off business debts, then a term life insurance may be your best option.

Unlike term life insurance, a permanent life insurance does not expire. This means that your beneficiaries can receive death benefits no matter when you die. Aside from death benefits, a permanent life insurance policy can also double as a savings plan. A certain portion of your premiums can build cash value, which you may “withdraw” or borrow for future needs.  You can do well with a permanent life insurance policy if you:

  • …Have a special needs child. As a special needs child will most likely need support for health care and other expenses even as they enter adulthood. Your permanent life insurance can provide them with death benefits any time within their lifetime.
  • …Want to leave something for your loved ones. Regardless of your net worth, permanent life insurance will make sure that your beneficiaries receive what they are entitled to. If you have a high net worth, permanent life insurance can take care of estate taxes. Otherwise, they will still get even a small inheritance through death benefits.
  • …Want to make sure that your funeral expenses are covered. Final expense insurance can provide coverage for funeral expenses for smaller premiums.
  • …Have maximized your retirement plans. As permanent life insurance may also come with a savings component, this can also be used to help you out during retirement.
  • …Own a business. As mentioned earlier, business owners may need either permanent or term, depending on their needs. A permanent insurance policy can help pay off estate taxes, so that the successors can inherit the business worry-free.

Different people have different financial needs, so there is no one-sized-fits-all approach to choosing the right insurance policy for you. Talk to us now, and find out how a permanent or term life insurance can best give you security and peace of mind.

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