Estate and Succession Planning for Businesses

Business Estate and Succession Planning

A stable and growing business is what every serious entrepreneur desires, but what about your company’s long-term future? After devoting much time, money, and effort to the creation and operation of your business, you’ll want to ensure a smooth succession process. Whether you’re selling it, passing it down to the next generation or closing it down, it’s important that you take the necessary steps to shape your business’s future in accordance with your needs. If you’re planning to sell, how can you get the most value for what you’ve built while enabling a successful transition of ownership? If retirement is on the horizon, who is best suited to take the wheel and bring the company to new heights? How can you protect your family, your personal assets and your business should you pass away? Whatever the circumstances, a smart exit strategy will make all the difference for you, your family and your business. The following are some estate and succession planning tips for business owners. 

Separate your Personal and Business Assets:

Without proper estate and succession planning, when you die default directives are applied that essentially lump your business assets in with all other assets you own. Your beneficiaries may be required to pay significantly more tax than necessary and the survival of your business may be threatened. To avoid this scenario, draft essential documents to separate your personal from your business possessions and make your wishes clear. 

    • A buy-sell agreement allows business stakeholders to retain or assume control of the business itself while letting you pass on the value of your stake to your personal beneficiaries. This type of agreement makes for less stressful outcomes for all concerned.
    • Powers of Attorney for your business interests/activities: These may differ from those authorized to administer your personal affairs.
    • A business succession plan: You may transfer your business outright to a beneficiary or set up a trust that can be used to control the assets of the business. 

Establish Estate Planning Asset Protection:

To do this you take nonexempt assets subject to creditors’ claims and reposition them as exempt assets through techniques such as family limited liability companies and irrevocable trusts for your spouse, children and other beneficiaries.

Undertake Estate Tax Planning:

In order to minimize the tax burden of settling your estate, there are estate planning concepts that can be applied to potentially taxable areas including RRSPs, RRIFs, and capital gains on real estate and shares.

Transferring the ownership and management of a company is a personally and professionally delicate process. Without skillful planning, a number of issues and mistakes are prone to arise. Revising and updating your succession and estate plan regularly is crucial. Constantly amend your plan for changes in desire and the current business environment. Everything is more achievable when you’re well-prepared and involve the right help. Talk to your Chartered Professional Accountant. They have the expertise, knowledge and experience to help you create and maintain a successful succession and estate plan for your business. Businesses deserve nothing less than to feel comfortable every step of the way.

 

Need help with business succession and estate planning? Looking for business advice? Contact Cook and Company Chartered Professional Accountants. We are based out of Calgary, Alberta, serving clients across Canada and the United States. We provide high-quality tax, assurance and succession planning services for a wide variety of privately-owned and managed companies. We possess a detailed and tactful understanding of business succession planning and its many moving parts. Contact us for a complimentary consultation.

Tax Deductions for Small Businesses in Canada

Tax season is upon us! It’s time to gather your receipts and organize your documents in preparation for filing your business tax return. Canada Revenue Agency offers a number of tax deductions to small business owners. Are you aware of all of them? Following are some deductions you will want to keep in mind as you file your taxes this year.

Operating Expenses are expenses incurred during your company’s day-to-day activities or normal business operations. Some are deductible at 100% while you may only claim a portion of others.

 

  • Capital cost allowance: When your business purchases items such as buildings, computers, computer equipment, vehicles and/or a franchise, you can depreciate these articles over time providing a tax benefit for several years.

 

  • Bad debts are debts that remain unpaid after you have exhausted all means to collect. The CRA allows you to claim bad debts except those which are for a mortgage or resulting from a conditional sales agreement.

 

  • Start-up costs are costs incurred preceding the start of business operation and can be claimed as an expense.
  • Fees, licenses and dues: You can claim fees for professional licenses, professional service fees and professional association fees (membership in a trade or commercial association).

 

 

 

 

  • Use of home expenses: If you operate your business from home, you can claim a portion of the following: interest on your mortgage, electricity costs, home insurance and heating costs.

 

  • Delivery, freight and express: You can claim fees for services such as mail and delivery.

 

  • Fuel costs: You can deduct the cost of fuel (gasoline, diesel, propane) motor oil and lubricants used in your business. This does not include fuel used in your motor vehicle.
  • Insurance: You can deduct all business insurance policies such as general business liability, business property insurance, business interruption insurance and fire insurance. You cannot deduct the insurance for your motor vehicle or your life insurance premiums.
  • Interest and bank charges: You can write off any interest you have incurred on money borrowed for business purposes or to acquire property for business purposes and bank charges which are given when processing your payments.
  • Maintenance and repairs: You can deduct the cost of labour and materials for any minor repairs or maintenance done to property you use to earn business income.
  • Management and administration fees:  You can deduct any fees you paid to have your assets and investments managed.
  • Meals and entertainment:  When you attend a convention, conference, or similar event you can claim up to 50% of the cost for food, beverages, plane tickets, hotel rooms and gratuities. When you take a client to an entertainment or sporting event, you can claim 50% of the cost of tickets, entrance fees, cover charges, food, beverages, gratuities and room rental for a hospitality suite.
  • Motor vehicle expenses: If you incur expenses through the use of your personal vehicle for business purposes, you can claim those expenses by keeping an accurate log of use. If your business owns a vehicle or a fleet of vehicles, you can claim fuel, insurance, parking, repairs and maintenance.
  • Legal, accounting and other professional fees: You can deduct the fees you incurred for external professional advice and/or services such as accounting and legal fees.
  • Prepaid expenses are expenses you pay ahead of time such as yearly rent and can be claimed.
  • Office expenses can be deducted such as the cost of pens, pencils, paper clips, stationery and stamps.
  • Other business expenses are expenses you incur to earn income that are not included on a previous line of your claim such as disability-related modifications, computer and other equipment leasing costs, property leasing costs, convention expenses, allowable reserves private health services plan (PHSP) premiums and undeducted premiums.

 

 

 

 

  • Property taxes: You can deduct property taxes you incurred for property used in your business such as taxes for the land and bulding where your business is located.

 

  • Rent: You can deduct rent incurred for property used in your business such as rent for the land and building where your business is located.

 

  • Salaries, wages and benefits: You can deduct gross salaries and other benefits you pay to employees but not a salary paid to yourself or your business partner.
  • Supplies: You can deduct the cost of items your business used indirectly to provide goods or services such as drugs and medication used in a veterinary operation, cleaning supplies used by a plumber, supplies used to manufacture a product or software used to supply a service.
  • Telephone and utilities: You can deduct costs for telephone and utilities (gas, oil, electricity, water, and cable) if you incurred the expenses to earn income.

 

 

 

  • Travel: You can deduct up to 50% of travel expenses incurred to earn business and professional income such as public transportation fares, hotel accommodations and meals.

Donations: Don’t forget that you can claim donations made to registered charities, registered Canadian amateur athletic associations, registered national arts service organizations, registered Canadian low-cost housing corporations, government bodies, registered municipal or public bodies, registered universities, certain registered foreign charitable organizations and the United Nations.

Advertising: You can deduct expenses for advertising and promotion, including amounts you paid for business cards and promotional gifts. You can also deduct expenses for advertising in Canadian newspapers, on Canadian television, Canadian radio stations and online or digital advertising.

These are just some of the many deductions available to small businesses in Canada! Allowable tax deductions are constantly changing. If you aren’t aware of or don’t understand all of the deductions possible, don’t despair! Get in touch with your CPA. No matter what type of business you operate, what size your business is or where you operate from, your CPA will ensure that you receive all the deductions you’re entitled to. Let your CPA help you determine how much you can save this year.

For all your tax needs contact Cook and Company Accountants. Whether you operate a sole proprietorship or a sizable corporation with multiple subsidiaries, we can use our experience and expertise to make tax time a breeze. Contact us to request a meeting.

References:

 

 

 

 

 

Common Business Accounting Problems and How to Avoid Them

Running a viable business means being prepared for innumerable obstacles. Even the most experienced entrepreneurs can run into problems that take a toll on their profitability, and many of these problems are related to accounting. Stay sharp by considering these key examples.

Cash Flow Issues

The cash flow of your business is represented by calculating the difference between available funds at the beginning (opening balance) and end (closing balance) of a particular period of time. It’s an important part of determining whether or not you can cover the expenses you incur as a company. 82% of failed businesses experience their failure because of cash flow problems. These can be prevented with thorough and organized bookkeeping, effective credit control that minimizes bad debts, accurate cash flow forecasting, and more. You may be well acquainted with cash flow as a concept, but an experienced CPA can help you truly master it.

Unexpected Costs

Not all expenses involved in the operation of a business can be predicted with total certainty. Economic downturn, equipment breakdown, lawsuits, drastic changes in customer demand or preference, new tax and business regulations, and natural disasters are just a few examples of how unpredictable circumstances can introduce a sudden strain on company finances. It’s therefore wise to have emergency funds in place, be fully aware and up-to-date with regards to legal and tax issues affecting your business, and pursue extensive risk management practices. These and other efforts are best carried out with the help of a skilled corporate accountant.

Tax Problems

A number of tax-related problems can go undetected and lead to unforeseen complications and penalties for the business. Businesses may under-pay what they owe, fail to comply with GST/HST law, misclassify their business or employees, or lack organization and thoroughness in their bookkeeping and recordkeeping practices. By the time they come to realize the degree of these issues (or the issues are discovered by the CRA), business owners will be faced with costly fines, not to mention additional stress on the operations of the company. With the right professional accountants by your side, you can avoid countless unnecessary tax obstacles.

Problem-solving skills are a core part of operating any kind of company, but when it comes to accounting problems, you don’t have to do it alone. Whether you’re a small business or a large corporation, call (403) 768-4377 and our team of chartered accountants will be ready to help.