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When should you get your Accountant involved in End of Life Planning?

End of life planning for a business owner can be a complex and involved process. You need to address family and company needs, consider business and personal assets, navigate complicated tax issues and ensure business succession. Comprehensive estate planning will ease the strain on your family, provide for their needs, reduce tax liability of the business and heirs, preserve the value of the company, ensure liquidity to cover business related costs, and include a plan for succession.

When should you start estate planning for your business?

Ideally, estate planning should begin when your business venture is launched. The evaluation, planning and implementation process that surrounds the starting of a business is a natural beginning point for planning your estate. However, it is never too late to begin end of life planning. The key is simply to begin. Understand that it’s an on-going process that will likely evolve as your needs and your business change.

When should you get your Chartered Professional Accountant involved in end of life planning?

When it comes to the financial intricacies of your business and its future, your Chartered Professional Accountant offers extensive expertise including skills in business accounting and asset management. Your CPA will review your life insurance adequacy, address shareholder agreements, investigate your will and consider estate freezes. Your accountant will help determine the best course of action for your business and your family and should be involved from the initial steps of estate planning.

If you are ready to create an estate plan that will protect the value of your business and ensure your heirs are cared for, get professional advice and assistance from Cook & Company. They will put their experience and expertise to work for you. Contact us today to find out how we can help your business. Call (403) 768-4383 or contact us at [email protected] for a complimentary consultation.

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The Advantages of Hiring a Chartered Professional Accountant

Chartered Professional Accountants (CPAs) are financial advisors who help individuals, businesses, and other organizations plan and reach their financial goals. There are many benefits to hiring these highly educated and experienced individuals.

  • To relieve your work load: Delegating your company’s financial affairs to a CPA will give you
  • more time to focus on other aspects of your business. A CPA can help file tax returns, generate financial reports, establish a budget, ensure GST and HST compliance, provide auditing services, assess risk management, share expert advice and assist with financial, estate and succession planning.
  • To save you money: By using the services of a CPA you will receive assistance with your financial needs without the expense of a salary, office resources, and benefits required for a full-time internal corporate accountant.
  • To put you in control: The financial reports and advice provided by a CPA will give you the information you need to successfully chart the direction of your company.
  • To give you access to expertise: When you hire a CPA you get access to specialized skills, knowledge of finance and experience in corporate finances, tax law, and tax planning.

A CPA has the financial proficiency, strategic vision, and commitment to help your organization succeed. Look for a Chartered Professional Accountant to ensure you are getting the very best advice and service. It is a decision you will not regret.

Whether you operate a sole proprietorship or a sizable corporation with multiple subsidiaries, Cook & Company will put their experience and expertise to work for you. We offer a distinctive approach to accounting and tax advice, with personalized one-on-one service, creative financial solutions and unique strategies to handle everything from income tax planning to financial statement audits and financial planning. Contact us today to find out how we can help your business. Call (403) 768-4383 or contact us at [email protected] for a complimentary consultation.

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How Your Business Strategy and Accounting Should Work Together

The accounting and financial details of your business represent more than just numbers. They represent the fruits of your labour and the heartbeat of your career as an entrepreneur. As such, they should always help inform the strategy that directs the course of your company, but how?

 

Focusing on Important Metrics

 

Metrics of the performance of your company should be integral to the way you formulate and maintain your business strategy. Financial KPIs like net profit and cash flow should be a key part of determining what initiatives or resources your company can invest in moving forward. Measuring operational efficiency can help you determine what goals need to be set regarding the management of your debtors, your inventory, and other elements. Growth indices can help you set and keep tabs on goals for growth, helping you maintain an upward trajectory. In short, understanding the metrics behind your performance is fundamental to your strategic objectives.

 

Marketing and Accounting

 

There are few things as influential over the success of your business as how you market it. Naturally, marketing is an investment that needs to provide returns to your business in the form of new customers and continued loyalty. This is what you’ll get when your business strategy is supported by effective investment in strong approaches to marketing. Financial KPIs like those listed above can in many cases inform what marketing initiatives you invest in and how. Your customer acquisition ratio, for instance, may be useful in determining whether you need to focus on new business or retention, and inform your marketing expenditures accordingly.

 

Having a Strong Financial Plan

 

Financial planning can be one of the most challenging aspects of running a business, but the challenge is well worth it. The more robust a financial plan you have, the more readily and efficiently you can determine the right goals and objectives for your company. Without strong financial planning, the road ahead can be unclear, unpredictable, and riddled with unnecessary risk. Whether you need to determine your pathway into a new market, reimagine your company’s capabilities, or identify and correct errors in your business strategy, a financial plan structured with the help of an experienced CPA will help you every step of the way.

 

The Calgary CPAs here at Cook and Company aren’t just great accountants, they understand the nuances of financial strategy that define the success of a business. When you work with us, you plan for success. Call us at (403) 768-4377 to learn about our financial planning services.

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4 Ways to Minimize the Chances of an Audit

For any Canadian, the idea of being audited by the CRA is not a pleasant one. The CRA’s compliance program pays a particularly high amount of attention to small and medium enterprises, so here are a few ways to minimize the chances of an audit for your business.

 

Be Careful With Expenses

 

Staying smart about how you claim expenses for your business is one of the most significant measures for minimizing the chances of an audit. Excessive expenses or high number of expenses in certain categories will be more prone to attract attention. The same goes for excessive home office deductions and claiming 100% of a vehicle for business use. A CPA can advise you so that your business can benefit from deductions without setting off alarm bells.

 

Maintain Consistency

 

The CRA’s compliance system likes to see overall consistency in business tax returns, and this is true on multiple levels. Your business tax return must be consistent with, for instance, those of others in your industry. If you’re showing abnormal income when compared to your peers and competitors, this will be cause for additional scrutiny. Discrepancies between sales and the total reported on line 101 your GST/HST return will also be one of the first things they look for.

 

Be Thorough and Organized

 

Each time tax season comes around, it’s a good idea to act as your own auditor. Review your documents several times, work with an experienced business accountant, and be thorough. On top of this, meticulous and organized record keeping will always be your most powerful ally when it comes to business taxes. Not only does it help you and your CPA carry out air-tight tax preparation, it helps you to comply swiftly with requests for information from the CRA.

 

Consider Other Red Flags

 

There are certain details that the CRA may be more prone to register as red flags than others. It’s important to know what they are and speak with your business accountant about how to navigate them. Businesses with a high flow of cash, unusually high charitable donations, and recurring losses are key examples. Additionally, if your business is paying income to family members, it must be a reasonable amount that is justified by their contribution to your company.

 

From audit and assurance consulting to GST/HST compliance services, the Calgary CPAs at Cook & Company are here to keep your business in excellent standing with the CRA. Give our team a call at (403) 768-4377 to learn more about how we can help you avoid common issues.

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Ensuring the Success of a Family Business

There’s a certain kind of pride and gratification in running a family business that no other kind of entrepreneurship can offer. Like any type of enterprise, its success comes with hard work, but there are a number of factors specific to family businesses that are important to bear in mind.

 

Communication & Boundaries

 

The cornerstone of any business is communication, but this plays an especially significant role in the healthy function of a family enterprise. It can be easy to assume that because you’re close as family members, you have unspoken understandings about the nuances of running your business. This isn’t a safe assumption, so it’s crucial to be as clear and structured about communication as you would in any other professional context. It’s also wise to set boundaries between how your family members operate with one another in the arena of your company versus at home, keeping these as distinct from one another as you can.

 

Roles & Agreements

 

When family members work with one another, there can sometimes be a risk that roles will blur into one another and become a bit more tricky to define. This can stem from the same sense of informality that can lead to murky communication habits. Avoid this by making each person’s roles, responsibilities, and level of authority as clear as possible. Professionalism is key. Similarly, many people may find it easy to trust family members based on informal or verbal agreements. Despite this, your company is like any other. Everything must be formalized on paper to ensure structured decision-making and minimize risk of disagreements and litigation.

 

Adaptability & Succession Planning

 

Every business benefits from adaptability. As an entrepreneur, it’s in your best interests to be at the cutting edge of your industry and maintain a forward-thinking state of mind. While the more senior family members certainly have many things to teach the generation that will be taking their place, it’s also important to remain open to their input when it comes to the demands of a modern business. At the same time, the owner of a family business must be prepared for the process of succession. Everything that makes your business strong must contribute to a smooth transition of ownership and management, so the sooner you start planning, the better.

 

The majority of family businesses fail to succeed to the next generation, but yours doesn’t have to be one of them. If you want it to thrive for generations to come, you’ll need a carefully structured succession plan. Call Calgary’s finest team of CPAs at (403) 768-4377 to get started.

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What Is Beneficial Ownership, and What Does It Mean For You?

The nature of business ownership can be legally complex, with different arrangements and configurations coming with their own requirements for compliance. Beneficial ownership, for instance, is should be approached with the right considerations in mind. Let’s take a look.

 

Defining Beneficial Ownership

 

As the term implies, the beneficial owner of a property or asset is the person who receives the material benefits of that property or asset, even if they are not named as the legal owner on the title. While often the legal owner and the beneficial owner are the same individual, there are many situations where this is not the case, such as when owning stocks through a brokerage. More importantly, certain complex strategies make it possible for a person or entity to own a significant percentage of shares in a corporation — and to hold a significant degree of voting power and control over it — whether or not they’re explicitly noted as a legal owner on paper.

 

New Beneficial Ownership Rules in Canada

 

This ability to create anonymity in one’s ownership and control over a corporation has been a cause for concern among authorities for many years, as it enables criminal financial activity such as money laundering, terrorist financing, and corruption. In an effort to address this activity, the federal government has introduced new requirements for disclosure of beneficial ownership to the Canadian Business Corporations Act. In effect as of June 13th this year, these requirements dictate that corporations can provide detailed registers of individuals or entities who control or own 25% or more of voting rights or fair market value of shares in the company.

 

Staying in Compliance

 

The new rules regarding beneficial ownership may be designed to tackle criminal business practices, but they still apply to and must be observed by all Canadian corporations. Depending on the structure and complexity of your incorporated business, maintaining a beneficial ownership registry can be a significant undertaking. Nevertheless, the penalties for noncompliance are considerable. If you want to ensure the accuracy and clarity of your company’s ownership information, as well as smooth transactions with the CRA and other regulators, it’s best to work with an experienced team of corporate accounting specialists.

 

Do you need help developing a fully compliant beneficial ownership registry for your business? A number of provisions must be met to keep your registry in line with federal law, and the team at Cook & Co. can help to make sure you satisfy all of them. Call (403) 768-4377 to learn more.

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Amending a Business Tax Return

The fear of making errors when filing your business tax returns is understandable. Mistakes such as forgetting to claim certain deductions or failing to track or categorize expenses properly are not uncommon. Fortunately, you can amend a business tax return that you’ve already filed.

 

Overview

 

The type of tax return you’re filing will depend on whether your business is incorporated, but for now we’ll focus on T2 tax returns filed by corporations. If you already filed your T2 and have found that adjustments are needed, you must wait to receive your Notice of Assessment from the CRA. Filing an entire second return or requesting amendments before having received the NOA will lead to further complications and delays. In most cases, the time limit for this request is three years after having received your NOA, but this can vary significantly depending on your company’s corporate status at the end of the given tax year and many other factors.

 

Methods for Amendment

 

Once you’ve received a Notice of Assessment, you can request a reassessment electronically or by mail. If you used tax preparation software to file your T2, you can make your reassessment request using that software or by mailing the barcodes corresponding to your amended information to your company’s tax centre. If making the request entirely by mail, you can write a letter to the tax centre. The letter must include the details relevant to your amendments and the necessary supporting documents, along with your corporation’s name, its business number, and the tax year. It’s important not to send your complete return.

 

Other Considerations

 

Some types of amendments to T2 corporate tax returns, such as retroactively claiming a deduction or credit that you weren’t previously aware of, are relatively straightforward and do not involve potential penalties. Others can be trickier and more urgent. Misreporting business expenses on financial statements, for instance, is a common issue that carries the possibility of being flagged for an audit and incurring penalties. Identifying mistakes and judging their impact or magnitude (often known as materiality) is not always easy. It’s one of many areas where a corporate accounting specialist can help you catch the right errors and make the right call.

 

Preventing mistakes with your business tax returns is the best way to avoid the need for amendments. At Cook & Company, we help business owners with tax planning, filing, and much more. Call (403) 768-4377 to speak with some of Calgary’s most experienced and trusted CPAs!

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Reviewing Recent Changes to Small Business Taxation

Anyone who wants to utilize the tax planning options available to them and avoid complications or penalties should always stay updated on tax policy. There are several changes to Canadian tax law going into effect this year, so let’s look at some that are relevant to business owners.

 

Small Business Tax & Capital Cost Allowance

 

In a positive development for many Canadian business owners, the small business tax rate will be reduced to 9%, effective in January of this year. This is down from the 10% rate established in 2018, which was a reduction from the previous 10.5%. Meanwhile, temporary amendments are being introduced to the rules dictating capital cost allowance. These will enable full first-year write-offs for the purchase of certain machinery and equipment, specifically those that are used to manufacture and process goods and for clean energy equipment. A temporary enhanced first-year CCA rate of 100% has also been introduced for eligible zero-emission vehicles.

 

Accelerated Investment Incentive

 

Similarly to the temporary enhancements for CCA deductions mentioned above, the government is also rolling out what it calls the Accelerated Investment Incentive. This is designed to encourage capital property investments made by businesses and applies to businesses across the spectrum, whether small or large. The primary component of this incentive affords businesses an enhanced first-year allowance of CCA deductions on certain capital property. In addition to this, however, its secondary component effectively allows for an enhanced CCA rate that is equal to three times the amount you would normally be able to claim for that first year.

 

New Rules for Passive Income & Split Income

 

While the changes noted above are advantageous for many Canadian businesses, there are of course plenty of adjustments in effect for 2019 that will present challenges. Most prominently, the more passive investment income a business holds above a threshold of $50,000, the more constrained its access to the small business deduction will be. This renders the first $500,000 of your company’s income far more vulnerable to taxation. Additionally, the CRA’s new rules on Tax on Split Income are in effect this year, notably expanding their scope to adults. Speak with your CPA to find out how these developments affect your business and how to adapt to them.

 

You can always count on the team at Cook & Company to keep you updated on the latest developments in tax law. If you have any questions regarding the latest tax changes affecting business owners, our Calgary accountants are here to help. Call us at (403) 768-4377 today!

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Employee vs Contractor: Why Does the Classification Matter?

Everything your company accomplishes depends on both the work of your employees and the services rendered by the contractors you retain. These two types of individuals are treated differently when it comes to taxation, and accurate classification is crucial for several reasons.

Broad Distinctions

Employer-employee relationships and payer-contractor relationships can exhibit some minor similarities, but a wide range of factors make them legally distinct from one another. Typically speaking, an employee follows certain requirements determined by the employer such as reporting location and hours. A contractor, meanwhile, usually dictates when, where, and how they do their work. Employees generally use supplies and tools provided by the employer, while contractors often invest directly in the means of their own work. The risk of incurring losses or the chance of making a profit are also usually factors specific to contractors and not employees.

Taxation and Benefits

Unlike contractors, employees are provided benefits by the employer (such as health insurance and pensions), are more difficult to terminate, and can receive severance pay. They also qualify for employment insurance. Unlike employees, contractors can take advantage of far more tax deductions for work expenses but must also pay both employer and employee Canadian Pension Plan contributions. Considering the costs saved on EI deductions, CPP, and benefits, not to mention various logistical advantages, business owners may seek to hire contractors whenever they can. This is why the CRA is diligent about penalizing worker misclassification.

Why It Matters

Today’s economic landscape is more complex than ever. Countless types of working relationships manifest in different ways. Additionally, the criteria that the CRA uses to define employer-employee and payer-contractor relationships can be quite elaborate. Despite this, it’s crucial for businesses to avoid misclassification at all costs. If you classify a worker as a contractor and they are eventually found to be your employee, you could be liable for unpaid income tax deductions (with interest and penalties) plus unpaid CPP EI, overtime, and vacation. Wrongful termination lawsuits and other forms of litigation are also common consequences of misclassification. If you’re in doubt, consult a professional to be sure!

Are you unsure of whether to classify someone as your employee or an independent contractor? Whatever guidance you and your business may need, our Calgary-based CPAs are always at your service. Give our office a call at (403) 768-4377 to schedule a meeting with us today, we’d love to help!

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How a CPA Can Help You Plan Your Business Succession

Operating a profitable business is no simple task, but ensuring that it will remain viable across generations is a challenge in and of itself. Far too many promising businesses fail to make the transition properly, but with the help of experienced CPAs, you don’t have to be one of them.

 

Planning Ahead

 

Any skilled CPA knows that planning ahead is everything, whether it’s getting the most out of tax planning opportunities or carrying out effective risk management. Business succession is no exception. Depending on the structure and scale of your business, as well as your intentions for succession, the process should begin at least five to ten years in advance. A chartered professional accountant will therefore play the integral role of factoring a future succession into various aspects of your accounting and tax planning. They will help you optimize the company finances to make the transition of ownership and management as effective as possible.

 

Minimizing Tax Liability

 

Business succession can be a taxing process, both figuratively and literally. One of the more important forms of taxation to take note of in this context is capital gains tax. The disposition of company assets (including shares and property) may amount to capital gains that are subject to a significant tax burden. You may be selling personal shares to an outside party, selling company-held shares and/or property to an outside property, or handing assets down to an heir. Whatever the case may be, a skilled CPA can help you maximize the value of your succession by exploring a wide range of tax planning strategies that may apply to your circumstances.

 

Why It’s Crucial

 

Roughly 30% of family-owned businesses make it through a generational transition, and even fewer stay in operation into a third generation. The importance of having all hands on deck when it comes to succession therefore can’t be overstated. CPAs are not the only people you need to work with during this process, but they’re an essential component, especially if you hire corporate accountants and tax specialists who have experience with a broad range of business types. Foster a strong relationship between your company and a dependable CPA and you’ll be all the more prepared to ensure the longevity of the business you’ve worked so hard to build!

 

Our Calgary-based team of chartered professional accountants won’t simply fortify your company’s finances and tax strategy in the short term. They’ll help you turn your successful business into a powerful legacy. Give us a call at (403) 768-4377 for a free consultation today.