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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!