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How to Minimize the Tax Burden on Your Business Estate

Estate planning for a business owner is complicated as it needs to address intricate personal and business relationships, complex tax issues and business succession. Planning can help you reduce your tax liability, minimize the difficulties faced by your executors and maximize the wealth passed to your heirs. Follow these guidelines to help you minimize the tax burden on your business estate.

  • Start early: Don’t wait for a crisis (illness/death) before consulting with your CPA regarding estate planning.
  • Incorporate your company in order to take advantage of a lower tax rate.
  • Minimize capital gains tax by taking advantage of exemptions.
  • Consider an estate freeze: a strategy in which a business owner transfers assets to their beneficiaries, without triggering tax consequences.
  • Contemplate an early inheritance/gift for your children/grandchildren, providing them with tax-free monies.
  • Consider establishing a trust: a legal arrangement that will help you take advantage of certain tax-planning opportunities/asset protection by transferring shares to family members without losing control.
  • Give loans to family members; interest-free funds to help pay down a mortgage, cover tuition, buy a car or fund a vacation with arrangements for the loan to be forgiven at the time of your death.
  • Set up bequests/donations:  Gifting monies to a charity in your will can shave thousands of dollars off the tax bill for your estate.
  • Purchase life insurance to provide your heirs with a tax-free income for paying taxes on capital gains and other liabilities.
  • Pay dividends to your spouse: As long as your spouse’s income is less than yours, dividends will reduce your family’s overall tax burden.
  • Invest in RRSPs and /or RRIFs to provide immediate access to cash upon your death, helping fund any tax liabilities.

Consult your chartered professional accountant for help in planning your business estate. They will have the credentials, knowledge and experience to help you reduce tax liability and maximize a successful business transfer.

Cook & Company offer specialized skills in business accounting and asset management, provide expertise in tax planning strategies and can assist you in retaining the value of your company’s estate. Our team of chartered professional accountants are dedicated, knowledgeable and experienced and will provide a personal touch. Contact us for a complimentary consultation.

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It’s Never Too Early to Start Preparing for Tax Season

Tax season is a stressful time for most business owners. Preparing to file your business taxes can involve a deep dive for information and a whirlwind of paperwork. A survey by the National Small Business Association discovered that one third of small business owners spend more than 80 hours preparing for federal taxes. Reduce the pressure of tax season by planning ahead, getting organized, developing helpful habits and starting early. Following are tips for reducing the confusion, worry and mayhem of tax season.

 

  • Use accounting software to track income and expenses. Software makes daily data input easy saving time and providing accurate, up-to-date information. Consider using expense categories (i.e. office supplies, restaurant expenses, gasoline, etc.) to improve tracking information.
  • Go paperless by creating electronic copies of all financial documents. Scan receipts or ask for PDF receipts. Download bills from vendors, bank statements and credit card statements. This makes it quick and easy to locate information.
  • Be aware of tax deadlines and mark them on your calendar. Set a reminder of when you need to begin final preparation.
  • Reconcile your bank accounts monthly. Compare each transaction in your bank account to your business records. If errors are detected, deal with them immediately.
  • Take advantage of deductions by carefully recording charitable contributions, staff bonuses, holiday party costs, depreciation of business equipment (vehicles, computers, machinery) capital cost allowance, RRSPs, travel-related expenses and scientific research and experimental development costs. Use the Canadian Business Expense Index to determine what expenses qualify.
  • Seek the help of an experienced CPA and provide them with all necessary information. A CPA will have the knowledge, experience and skill to deal with your tax challenges. They will understand the latest tax reforms, tax preparation and filing procedures and will inform you of what records to keep, how long to keep them and how best to record you business’s transactions. A CPA can answer all your tax questions.

 

Tax time can be simple. Start with good accounting software and use it consistently through the year. Keep clear records of eligible deductions. Reconcile your bank accounts. Employ a CPA and don’t be afraid to ask questions. With good records and professional help, filing your taxes can be an easy and efficient process.

For all your tax needs, contact Cook & Company. Whether you operate a sole proprietorship or a sizable corporation with multiple subsidiaries, Cook and Company use their experience and expertise to make tax time a breeze. Contact us for a consultation.

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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!