The economic impact of COVID-19 will continue to erode near-term certainty. The road to recovery is challenging but these are extraordinary times. We truly are ‘all in it together’ within the global economy. The Business Development Bank of Canada (BDC.ca) examines how other countries are moving forward in a measured, yet complicated to restart their economies from a hard stop.
Enjoy the “Great Reboot” from BDC which aligns each Canadian province with various countries that are in the midst of similar COVID-19 conditions.
What does the COVID-19 recovery mean for Entrepreneurs?
Our partners at National Bank Financial examine a recent report from the Bank of Canada Financial System Review (FSR). The report provides a data driven perspective on how financial services have been impacted ” to identify the main vulnerabilities and risks to financial stability in Canada and explain how they have evolved over the past year.”
We are here to help
Whether you are considering retirement or how to reboot your own business, we are here to help. Please feel free to reach out to us.
Let’s face it, Canadian Entrepreneurs avoid succession planning. It is like Estate Planning for your business, yet similar to a will, it is often human nature to avoid planning for transitions. If not addressed, your legacy is in jeopardy. Once of the most effective ways to build a succession plan is through an advisory board. A family business adds an additional layer of interpersonal dynamics to succession. The Business Development Bank of Canada (BDC) offers a rich set of tools and tips.
Where do you begin your succession plan?
Roles and responsibilities is a good place to start. Your business is likely successful because you and your team are working full out to ensure its sustainability. As the business environment evolves, your roles may change and the future skills for leadership may need to match. Beyond the functional roles you will likely need to determine how much is your business worth? To establish a realistic value for your business and discover the most common method used to determine a fair sale price often requires professionals and advisors. How will the transition be financed? What constitutes a good financing package depends upon your business structure and needs. There are typically 5 main sources of financing. Enjoy the Global Family Office that offers a detailed perspective on family business transition.
As an entrepreneurial firm, our Hampton Advisors regularly assist entrepreneurs in this process. Let us know how we can help?
As late as December 15th, private business owners (referred to as Canadian-controlled Private Corporations or CPCC) will have major Canadian personal tax changes effective January 2018.
This process began in July 2017 and engaged over 20,000 responses primarily from small business owners. The push back included the Canadian Chamber of Commerce President, Perrin Beatty who thundered that small businesses “will need to prepare to be challenged by the government’s auditors for how they invest their profits, employ members of their family and more.”
WHAT’S NEW FOR BUSINESS OWNERS?
Further concessions were made to modify the definitions of family members who work and run businesses in order to draw income. This was due in part to the continuing ‘negotiations’ of the 2017 impacts of the new tax structure for entrepreneurs. If you have not talked to a tax advisor, we suggest you ‘make haste’ to manage the impact of the changes.
Here’s a recap of the December 15th tax change update
Clients who are incorporated small business owners and hold significant retained earnings in their private corporations should consider whether it makes sense to pay out additional dividends before the end of 2017 rather than wait until the new year to do so, several tax experts suggest.
This article from Executive Investment may offer some tactics to prepare for in 2018.
Entrepreneurs and those business owners who operate through a private corporation, known in tax lingo formally as a “Canadian-controlled private corporation” (CCPC), often do so for a variety of tax reasons. While the recent Federal Budget in March 2017 did not change the corporate tax rates or the tax treatment of CCPCs, the various tax strategies these structures rely upon may need to be re-examined proactively.
Tax Planning for Business Owners
Recent federal budgets introduced new legislation aimed at preventing the inappropriate multiplication of the small business deduction among multiple corporations. To date, no changes were made to the ability for a CCPC, including a professional corporation, to continue to be able to claim the deduction on active business income.
Often the decision for business owners is to determine how much income is left within the private corporation when compared to other tax strategies as income splitting. Make sure to refresh your approach with the new focus in recent budgets. The EY budget summary may also assist: EY Tax Alert 2017
What does a private corporation mean?
For those that need a reminder of what the use of a Private Corporation can provide please consult a tax professional. Often CCPCs over a significant tax deferral advantage by leaving the after-tax corporate income inside the corporation as opposed to paying it out immediately. This deferral advantage ranges from a low of 35 per cent in Alberta, B.C. and Quebec to a high of just over 40 per cent in Nova Scotia.
Time to have the “Money Talk”. Financial and Tax Planning are common catalysts in the first quarter of each year, regardless of when you file your taxes. Our Advisors at Hampton Securities would recommend entrepreneurs take it a step further. It is an ideal time to have the “Money Talk” with family and partners to safeguard your Estate Plans and confirm they are up-to-date. While it begins with a Will, it is not a ‘one and done’ process.
Your Estate and Business Succession Plan is Dynamic
There have been significant changes to Estate Law in the last Federal Budget. Implications of an aging population and prevalent challenges around the legal treatment of mental competency create a common sense need for succession planning. We suggest it is an opportune time to take a fresh look at your Estate Plans. The upcoming Federal Budget on March 22, 2017 will offer another strong incentive to review your business Succession and Estate Planning needs.
Your Will and the Estate Plan that surrounds it, is like you and your family – it is dynamic. In addition, there is new legislation that may impact your Estate Plan, such as the treatment and record keeping requirements for your principle residence. Also consider your health care directives, formerly living wills, need to be updated to be effective with recent changes. In both cases, there are new requirements that business owners and their families need to be aware of. Ensure your business is anchored to a proactive estate plan. We encourage you to contact your Hampton Securities Advisor or call us at 1-877-225-0229 to help you have the “Money Talk”.
Key considerations for any business size