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What Advantages Does a Chartered Professional Accountant Offer?

Every business owner wants to fortify the financial integrity of their enterprise, but not all of them take the necessary measures to make it happen. Company growth and longevity are always intertwined with skillful accounting, but what specific advantages can an external CPA provide?

Greater Efficiency

One of the foremost advantages of working with a CPA for your corporate taxes and accounting is increased efficiency, both with regards to time and cost. Your need for a CPA will fluctuate and change in nature throughout the fiscal year. Working with an external firm therefore carries the benefit of producing excellent results in a timely manner without the need for investing in the salary, office resources, and benefits required for a full-time internal corporate accountant.

Specialized Expertise

As long as you’ve chosen the right firm, external corporate CPAs typically bring a range and depth of experience to your company tax planning and accounting that is quite difficult to beat. In the best cases, this experience amounts to a highly specialized skill set and a greater degree of fluency in corporate finances, tax law, and tax planning in the context of multiple industries and enterprise types. The power of this versatility can be considerable for any business owner.

Objectivity

When it comes to corporate accounting and taxes, depending too heavily on an internal perspective can introduce a number of issues. Errors can potentially be glossed over and the company finances won’t be able to benefit from a second opinion. This is an important yet often underestimated advantage of bringing an external CPA into the mix. It makes for a collaborative process that may reveal certain solutions and strategies that haven’t already been considered.

Peace of Mind

If there’s one advantage that encompasses all others, it’s knowing that you’ve taken the right measures to secure the prosperity of your business. Whether you operate a sole proprietorship or a sizable corporation with multiple subsidiaries, one thing that all entrepreneurs have in common is a desire for long-term financial strength and tax-efficiency. With the support and services of a respected CPA, you’ll have this and the enduring peace of mind that comes with it.

When you experience the quality of service and level of expertise offered by our CPAs, you’ll see why Cook & Company has become one of the most esteemed business accounting firms in Canada. To ensure prosperity for your company, call (403) 398-2486 and we’ll be by your side.

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5 Signs You Should Reconsider Your Company’s Accounting Practices

Accounting isn’t an aspect of your business that you can set and forget. It requires diligent, attentive, ongoing oversight and assessment. Working with a great external accountant is highly rewarding in many circumstances, but if you see any of these signs, it may be especially urgent.

Low Profitability

It’s not uncommon for businesses to fall short of their profitability goals even when sales seem healthy. Despite getting the revenue that you’re aiming for, you may not be seeing an adequate increase in profit. Bringing in an objective business accountant could give you critical insights into your overhead costs, employee productivity, gross and net profit margins, and more. With the right help, you can take home more at the end of the day.

Poor Management of Financial Records

If the management of your financial records is not adequately thorough, consistent, or organized, you won’t maximize the vitality of your business. This is essential for solving tricky fiscal issues or overcoming inevitable accounting challenges. From routine cash flow forecasts to monthly profit and loss statements, accounting paperwork isn’t always easy to stay on top of, and that’s OK. It’s exactly what a skilled external CPA is for.

Your Business Is Growing

Every business owner wants to achieve growth, but what happens when you get there? Expansion means changes in company structure, a larger team of employees, and other factors that add up to an increased and diversified array of accounting paperwork. A significant change in the size of your company is fantastic news, but it’s also the perfect time to bring in a business accountant to help you facilitate this growth as smoothly as possible.

Tax Burden Is Unexpectedly High

If you haven’t sought the right external assistance, tax bills could be draining more of your revenue than they should. You may not be up to speed on new tax rules and regulations affecting your business, there may be credits and deductions that you’re not taking advantage of, or you could even be getting hit with fines and penalties. Whatever the cause, if your tax burden feels to high, an entrepreneurial accountant can help relieve the strain.

Lack of Time or Manpower

Sometimes the business accounting challenges you face are as much a matter of losing time as they are a matter of losing money. Strengthening your company finances can be highly intensive work, and it’s best not to spread yourself or your internal staff too thin. If you really want to employ smart, airtight strategies that will add value to your business, the undivided attention of a dedicated chartered accountant will take the pressure off and get you real results.

What aspects of your company’s financial health need improvement? Whatever they may be, our entrepreneurial accounting team is eager to help you secure the stability and growth that you need. Send us a message to arrange a consultation with our accountants, free of charge!

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Key Performance Indicators in Your Company Finances

Operating a successful business requires that you keep a finger consistently on the pulse of your company finances. In order to do this properly, you’ll need to recognize key indicators that give you a concrete and actionable picture of how you’re doing. Let’s look at some examples.

Revenue & Expenses

First and foremost, it’s critical to know what performance indicators are illustrative of your revenue and its relationship with your expenses. Calculating gross profit margin, for instance, will guide you in pricing so that you can make enough to pay expenses and end up with the profit you’re looking for. You’ll also need to monitor your net profit margin — which determines what amount of your revenue is profit — and of course, your net profit itself. Meanwhile, what do you have immediately onhand to cover expenses and fund operations? By subtracting existing liabilities from existing assets, you can determine this, your working capital.

What You Owe

A business has an obligation to pay employees, vendors, the CRA, and other creditors on time and without straining the assets of the company. There are a few KPIs to keep an eye on in this department. Your current ratio, for example, is calculated by dividing your current assets by your current liabilities, revealing how comfortably you can pay who needs to be paid. Additionally, accounts payable turnover is a useful metric for observing how promptly and reliably you meet these obligations, particularly when examined over time. This is calculated by selecting a time period and dividing its total costs by its average accounts payable.

What You’re Owed

Not only does your business have creditors to pay, it is also a creditor itself. Several indicators are designed to monitor the rate and consistency at which you’re paid what you’re owed. Try carrying out an accounts receivable aging report in order to ascertain the amount of time that each debtor takes to make good on their account. You could use this to determine the interest you should charge for outstanding bills. Accounts receivable turnover, which is calculated much the same way as accounts payable turnover, can also give you a broader look at this aspect of your cash flow and guide any corrections you make in managing receivables.

There are many more financial performance indicators that every Calgary business owner should be aware of. At Cook & Company, it’s our job to provide the knowledge and resources your company needs to perform at its absolute best. Call us at (403) 398-2486 to learn more!

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What Do You Need for a Successful Audit?

Business accounting and tax planning can be challenging, and if you’re selected for an audit by the CRA, it may seem as though things are only going to get more difficult. However, auditing is a fairly misunderstood process, so there are a few things to know if you want it to go smoothly.

Don’t Panic

First things first: Audits are not cause for panic in and of themselves. You may be inclined to think that the way you’ve prepared your business taxes has raised a red flag with the CRA, but this may or may not be true. Whether or not an audit is taking place to investigate a serious issue or discrepancy, the nature of this can vary widely and will result in different types of audits. Sometimes it’s because your business is showing financial activity that is atypical relative to other similar companies, and sometimes it’s simply random selection. A smart first step is therefore to find out and take note of why you’re being audited so that you can better prepare.

Be Organized and Prepared

Speaking of preparation, this is one of the most important pieces advice you can ever follow if you want an audit to go smoothly. Regardless of the nature of the audit, smart organization of your company’s financial records is everything. From bank statements to income records and balance sheets, it’s essential to have everything in good order. In fact, even when there isn’t an audit on the horizon, you should proactively keep records as thorough and well-systematized as possible. Anything pertaining to expenses and deductions is particularly important. This is the key to fully cooperating and being able to answer inquiries promptly, clearly, and accurately.

Get Help From a Professional

Running a company involves an often overwhelming amount of financial paperwork and records keeping, and preparing for an audit is liable to introduce extra stress into your day-to-day operations. This is why it can be a game-changer to seek out external help from a CPA who is experienced with business audit preparation and assurance. Not only should you work with a professional if there’s an impending audit, but also on a continuous basis in order to minimize the likelihood of an audit in the first place. There’s no better way to prepare than working with a great business accounting team to take all the right preventative measures.

The chartered professional accountants at Cook & Company are driven to provide the most approachable and dependable corporate accounting services in Calgary. If you want to better prepare for the possibility of an audit, we can help. Call (403) 398-2486 to learn more today.

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Tax Considerations for E-Commerce Business Owners

E-commerce retail revenue is expected to reach almost 29 billion Canadian dollars by 2021. This is a considerable portion of the Canadian economy, and the same is also true on a global scale. So what tax implications should you bear in mind if you’re an e-commerce entrepreneur?

Sales Tax & Customs Duty

Because e-commerce businesses are particularly likely to deal across provinces, it’s critical that you know when and how to charge GST, HST, PST, and QST. If you sell taxable goods to clients in other provinces, you will typically need to collect sales tax in accordance with the province to which the goods are being delivered. Many e-commerce platforms, as well as the advice of an experienced business accountant, can help you execute this the right way. Meanwhile, if you deal with clients internationally, it’s a good idea to make sure that they are aware of any customs duty that will be charged upon import of your goods.

Your E-Commerce Website

Building and operating an e-commerce website is a process that incurs expenses, and you’ll naturally want to know which ones you can deduct. The CRA will deem different aspects of the site to be either a current deductible expense or a capital expense claimable under the capital cost allowance system (something you may remember from this article). Many software, hardware, labour, and consulting expenses will be considered capital expenses, while others may be deductible for the year that you paid them. It’s often a case-by-case issue, and the right CPA can help you secure your deductions properly.

Taking Responsibility

Whether it’s big or small, an e-commerce business is just as obligated to abide by applicable tax laws as a company with a brick-and-mortar presence. The CRA is diligent in taking measures to keep online enterprises in compliance, so hoping for special exceptions or loopholes isn’t wise. As with any company, it’s of the utmost importance to keep consistent, detailed, and accurate records. Consider using a well-respected e-commerce platform like Shopify or Magento, which will help to ensure proper calculation of sales tax and other factors. Speak with a business tax expert who can advise you based on your needs and circumstances.

Whether you run an online retail shop or you own a franchise of restaurants, a skilled and attentive CPA is one of your greatest assets for financial success. Cook & Company is the Calgary business accounting firm you can always depend on, so call (403) 398-2486 today.

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Managing Taxes as a Sole Proprietor

There are countless sole proprietorships operating all across Canada and the United States. While being your own boss offers many professional, logistical, and tax-related conveniences, it also comes with a number of important responsibilities. We’re here to help you stay prepared.

Defining Sole Proprietorship

Some professionals who are considering a pivot towards working independently may be unsure as to what exactly the CRA or the IRS consider to be a sole proprietorship. Whatever your circumstances, it’s an important definition to understand. In short, if you are the only owner of an unincorporated business, whether or not you have employees, you’re operating a sole proprietorship. Because this is by definition not a corporation, it is not its own legal entity and you are personally responsible for its debts. In the US, if you’re the sole owner of an LLC, you are only technically a sole proprietor if you do not choose to treat your LLC as a corporation.

Advantages and Freedoms

In addition to a high degree of professional independence and autonomy, there are plenty of tax planning benefits of being a sole proprietor to be aware of. One of the most important examples is the range of deductions and credits that may be available to you. Depending on a number of stipulations and eligibility factors, sole proprietors are able to deduct the cost of certain living expenses, health insurance premiums, internet and supplies, transportation, and countless other expenditures. The capital cost allowance deduction, which we’ve touched upon in this article, is also particularly relevant and beneficial to sole proprietorships.

Obligations and Responsibilities

As a sole proprietor, your personal income and business income are not separate in the way that they would be if you were employed by someone else. This means that you’ll be paying taxes both as an employer and an employee, such as the full 9.9% contribution to CPP in Canada or the self-employment tax for social security and Medicare in the US. You also may be subject to a more scrutiny when it comes to auditing, as the CRA and IRS often see sole proprietorships as being particularly conducive to conflation between business and personal spending. Always keep thorough and well-organized records of your expenses.

Are you a self-employed Canadian looking for an experienced chartered accountant for your business? Cook & Company can offer you the expertise of a big firm with a level of personalized service and dedication that you can’t get elsewhere. Call (403) 398-2486 for a free consultation!

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Business Succession: How to Minimize Your Tax Burden

Whether it’s due to retirement or death, the succession of a business is a challenging process. One of the major elements of succession that will be on your mind is your potential tax burden, not to mention that of your children or other future owners. Here are a few key tips to consider.

Understand Capital Gains Tax

The act of gifting, bequeathing, or selling your shares (a “deemed disposition”) will usually be subject to capital gains tax based on the appreciation or depreciation of their fair market value. The lifetime capital gains exemption is designed to allow qualifying businesses to reduce their capital gains tax burden. An estate freeze, meanwhile, allows business owners to exchange their common shares for fixed-value preferred shares and issue new common shares to their successors without being subject to capital gains tax. The applicability and details of these and other strategies will vary depending on your business and its circumstances.

Utilize Life Insurance

Another useful tax strategy among many business owners planning for succession is to leverage the advantages of a good life insurance plan. This is, of course, only applicable in the event that your business is passed down due to your death. Tax expenses can cut significantly into the value of your company shares as a disposed asset, but if you’ve taken out a strong and well-structured life insurance plan, its proceeds can significantly offset the tax burden of business succession for your family. The policy itself can be owned either by you or by the company itself, which is another decision that an accountant can help you with.

Think Ahead

It is of the utmost importance to remember that succession planning is not an event, it’s a process. An effective succession plan will take quite a bit of time to fully form, so the more you plan ahead, the better. Consider your circumstances. Are you intending to retire from the business soon? Do you have a plan in place in case of your death or sudden health problems? There are countless ways to maximize the tax-efficiency for your business now that will enhance the benefits of succession strategies later. This, in addition to ongoing changes in tax law, is why it’s so critical to explore the options available to you. Don’t wait too long to speak with a CPA.

When you’ve worked hard to build a business, it’s only right that you have the tools you need to ensure its longevity within and beyond your lifetime. It’s our objective at Cook & Company to help you accomplish this and more. Call us at (403) 398-2486 for a complimentary consultation!

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Is It Time for Your Business to Work with an Accountant?

Many business owners have a good grasp on managing the finances of their company. That being said, there are countless reasons why you will need the help of a CPA specializing in accounting and tax planning for businesses. Let’s take a quick look at a few key examples.

Business Structure & Planning

There’s no aspect of a company’s structure that does not in some way require tax planning and accounting strategy. Even if you’ve been operating your company for many years, it’s wise to seek advice from a CPA on a routine basis. However, it’s especially important when undergoing significant developments. Are you in the early stages of founding your company or a subsidiary? Do you need to prepare detailed reports for investors? Are you changing legal status, such as from a partnership to a corporation? Speaking with a CPA specializing in entrepreneurial accounting and tax planning is essential to keeping your operations in good order.

Tax Law Changes

A major part of any CPA’s job is to be as informed as possible as to ongoing developments in tax policy. When you build a strong relationship with a business tax accountant, they will be able to optimize your tax planning strategies accordingly. Just like any type of legislation, tax law is subject to change, and the last thing that any business owner wants is to be left out of the loop. This can lead to missed opportunities for tax savings, issues with compliance, and other unpleasant consequences. The Department of Finance’s recent tax law changes pertaining to entrepreneurs, which we’ve discussed here and here, are perfect examples.

Audits & Compliance

The advent of an audit can create stress for any business owner, and the same can be said for potential mistakes in GST and HST compliance. When it comes to audits, it’s important to remember that companies are selected based on a complex set of factors. While it’s not possible to usefully predict the likelihood that you will be audited, you can plan for it and navigate it most effectively by working closely with an experienced business accountant. They can also help you to ensure that you are aboveboard when it comes to GST and HST compliance. This is your best bet for avoiding penalties and fines.

Cook & Company is Calgary’s finest team of corporate and entrepreneurial tax accountants. If you’re a hard-working business owner hoping to minimize the strain of tax expenses on your company, we can help. Contact us at [email protected] or 403.398.2486 to schedule a free consultation today.

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Making Business Taxes Work for You

Keeping business taxes in order while maximizing the viability of your company is one of the most important challenges of the business world. As you know, a key part of maintaining this balance is simply knowing what deductions to take advantage of. Here are a few to think about.

Capital Cost Allowance

If your business acquires and uses a piece of property, the CRA may allow you to claim a capital cost allowance and recalculate your taxable income. This can help you contend with the expenses involved in maintaining that property, including legal, accounting, and maintenance fees. It may be furniture, buildings, equipment, or other eligible items, often known as depreciable capital assets. How it’s calculated depends on the type of property and several other factors. It’s important to note that deductions are calculated annually in the long term. You cannot claim the deduction all at once for the tax year in which the property was purchased.

SR&ED Tax Incentives

Through the SR&ED Tax Incentive Program, corporations have access to federal and provincial tax benefits that are designed to encourage scientific research and experimental development in Canada. These incentives allows a corporation to claim both tax deductions based on expenditures on SR&ED and investment tax credits, which can reduce the amount of Part I taxes owed. In order to qualify, the corporation must fall under various categories of basic scientific research, applied research, experimental development, and other types of work as designated by the program. Be aware that certain provincial considerations may apply.

Employee Gifts

Employers can claim tax deductions on certain gifts given to employees. Not only this, but the eligible gift will not be considered taxable income for the recipient. It must, of course, fall under the CRA’s criteria to qualify. For instance, the value of the gift must not exceed $500 in fair market value, although there is no limit to the number of qualifying deductible gifts that the employee can receive per year. Be aware that cash bonuses, performance-related awards, or anything easily converted into cash are not deductible. Gifted stocks are also not deductible, but within a corporation these will only be taxed when they are sold.

Navigating corporate taxes doesn’t have to be overwhelming or nerve-racking. You also don’t have to work with an unaffordable firm to get results. Our team offers the expertise of a big firm with the personal touch of a small one. Call 403.398.2486 to get the value you deserve today!

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Revisions to the New Income Sprinkling Rules

For many Canadian businesses owners, income sprinkling has been an important topic in recent news regarding tax law. Our previous article on the recent tax changes briefly mentioned the revisions to rules regarding income sprinkling, but this week we’d like to give you a closer look.

Initial Changes

As mentioned in our recent article, income sprinkling is a method used by business owners to distribute company dividends or income to family members in a way that secures a lower personal tax rate. This practice is already regulated by the Tax on Split Income (TSOI), often referred to as “kiddie tax”, which applies the highest marginal tax rate of 33% to split income gained by family members under 18. The changes proposed in July of 2017 aimed to extend the scope of the TSOI to family members aged 18 to 24, also requiring assessment of their contribution of labour or capital to determine the legitimacy of the earned income.

The Revisions

In response to mounting concerns, the Department of Finance has made several revisions to the proposed changes that simplify their contents, offer exemptions, and loosen criteria for reasonable involvement in the business. Family members over 24, for instance, may be exempt if they own at least 10% of the corporation. Income received by the spouses of certain shareholders above 64 may also be exempt. The Department has also modified proposed restrictions to the Lifetime Capital Gains Exemption that could have applied the income sprinkling taxes to capital gains earned by family members after the death of the shareholder.

What It Means for You

It’s key to note that the new revisions have been drafted to accommodate the circumstances and concerns of certain small businesses and their related families. For owners of high-income businesses and corporations, however, the new income sprinkling rules will have a particularly pronounced effect. In addition to this, certain aspects of the new rules retain a complicated nature that may be disorienting for some high-earning business owners. It’s as important as ever to consult with your corporate accountant to find the best adjustments for you. An extensive CIBC pamphlet on the revisions can be found here.

Remember that the new tax changes are proposed to go into effect for taxation years starting after 2018. Have you teamed up with the right corporate CPA to maximize the strength of your company? Don’t hesitate to get in touch with Cook & Company by calling 403.398.2486 today.