“Though no one can go back and make a brand-new start, anyone can start from now and make a brand-new ending.”

Carl Bard

“It's better to look ahead and prepare than to look back and regret”

Jackie Joyner-Kersee

“Nothing is impossible, the word itself says 'I'm possible'! ”

Audrey Hepburn

Business Advisory, Personal and Corporate Taxes, Business Start-Up, Bookkeeping

News You Need to Know

Dividends Versus Wages For Business Owners

Posted June 5, 2018

One of the more complicated questions for incorporated business owners is the wages versus dividends question. The best advice here is, “Talk to your accountant!” 

Your accountant can examine different scenarios with you and help you decide which plan results in your best results, for what you are trying to accomplish. You might want to maximize your CPP and RRSP contributions for this year, or you might be trying to maximize dividends to re-invest in the company or give you more flexible income—these would be two different ways of handling wages versus dividends.

Paying salaries can be more complicated than paying dividends, since you will need to set up payroll accounts with Canada Revenue Agency and keep them current. On the other hand, paying dividends can make your income hard to prove for things like mortgages and loans. Paying wages will give you RRSP room; if you pay yourself dividends, you can use that money for investment for the future in any way you choose.

For some extra info on this subject, have a look at this article from Advisor.ca. But remember that each situation is unique and should include some discussion with your accountant.

As a spouse of a business owner, you would also probably want to talk to an accountant to decide how to handle any potential income from the company. If the spouse is made a shareholder of the company, the spouse can receive a reasonable amount of dividends from the company with some newly introduced requirements that need to be met.

Alternatively, a spouse can be employed by the company and have benefits like CPP paid into, but there are requirements for the spouse to do necessary work for the company and be paid a reasonable salary for work performed. This is an area where Canada Revenue Agency is likely to take a close look at spouses employed by companies, to make sure they aren’t just employees on paper for tax savings.

Bottom line—this is a multi-faceted question, that can be answered best by an expert in tax planning.

Contact Shaw & Associates Chartered Accountants to help you out with your financial needs and tax planning and to give you the advice and services that will take you from where you are to where you want to be with your business. One complimentary meeting with them will put you and your business on a more profitable and positive path.


Wills and Your Accountant

Posted May 23, 2018

No one wants to think about death, and no one wants to talk about death, either their own death, or the death of a loved one. The best gift you can give to all of your loved ones, though, is a clear and legal will. While your lawyer will be drafting the legal will, it is also a very good idea to involve your accountants in every step of your estate planning.

Your accountant is just as helpful as your lawyer when planning your will—discussing accounts, debts and assets, bequeathals, who you would like to have as executor of your estate, and joint bank accounts and/or a Power of Attorney for someone you trust to look after your affairs if you become incapacitated. Both professions can help guide you to making the best decisions for you and those you leave behind.

The executor of your estate is likely to be working with your accountants if your estate is complicated at all. Per Estate Law Canada, your executor and your accountants will be working together on:

  • The inventory of your estate at the time of your death.
  • A record and statement of receipts and disbursements after your death.
  • Paying expenses and disbursements—either paying them, or advising the executor on what needs to be looked after.
  • A reconciliation of everything into the estate and everything that has been paid out.
  • Compensation for the executor, including repayment for out-of-pocket expenses paid by the executor.
  • Final income taxes prepared by accountants.
  • Preparing statements for final release to beneficiaries.

The death of a loved one is a difficult time, and unfortunately there are legal and accounting issues that need to be handled. Having professional accountants guiding you through estate settlements can help make a difficult time a little less painful.

Contact Shaw & Associates Chartered Accountants to help you out with your financial needs and tax planning and to give you the advice and services that will take you from where you are to where you want to be with your business. One complimentary meeting with them will put you and your business on a more profitable and positive path.


Sole Proprietorships, Partnerships and Corporations: Which One Suits You?

Posted May 2, 2018

There is a lot of hard work involved in starting a small business, with tons of difficult decisions. And right at the top of the list is deciding what kind of management structure you’ll have.

The simplest, easiest, least expensive form your company can take is a sole proprietorship. One of the biggest downfalls of sole proprietorships is that the business owner takes on all the risks and debts of the company personally. This might not be a concern for you at all; your business may have very limited risk and debt, which could be taken care of with a comprehensive insurance policy. Additionally, as a sole proprietor you will be paying tax at the personal rate that your total income falls into. This could be anywhere from 25% to 40%!

The second least complicated form for a company to take is a partnership. This is virtually the same as a sole proprietorship, except there are two or more people who have ownership of the company. Anyone who feels that a partnership is the company structure that works best for them needs to make sure that their accountants and lawyers are consulted every step of the way.

The reason for this is that each partner of the business is legally responsible for decisions made by every other partner; this situation exposes each partner to the outcome of decisions that they may not have had any input in making. Starting the partnership with feedback from your accountants and lawyers is the safest way to proceed with a partnership; keeping them in the loop as your business progresses is also essential to make sure your partnership remains beneficial to all concerned.

The tax implications of a partnership are similar to that of a sole proprietor. Each partner is taxed at the personal tax rates on their portion of the income.

The most complicated form for a company to take is a corporation. Corporations are more difficult to set up and continue to run, as well as more expensive, but they have the big advantage of separating the shareholders/owners of the company from the risks and debts of the company. 

As well, a corporation is likely to provide you with more options for tax planning—and a lower tax rate. An active business corporation has a small business tax rate of 14% on all income under $500,000. A corporation also gives the shareholders the ability to take dividends as personal income, rather than wages, which again has tax-saving potential.

If you are in a position where a sole proprietorship is not right for your business, you would probably do well to consider incorporating your company rather than forming a partnership—your peace of mind is worth a lot. Determining the best time to incorporate is another common concern. There is no perfect time, but if you are a sole proprietor and your income from business is getting so high that you are paying over 30% in personal taxes, incorporation would be the best idea to bring this tax rate down and save substantially.

 

Contact Shaw & Associates Chartered Accountants to help you out with your financial needs and tax planning and to give you the advice and services that will take you from where you are to where you want to be with your business. One complimentary meeting with them will put you and your business on a more profitable and positive path.


Are Your Accounting Bills Too High?

Posted April 17, 2018

You might find a really good deal on an accountant, but it would probably be a good idea to keep in mind the old saying: “You get what you pay for.”

As with most industries, there are a range of fees that accountants normally charge; someone falling outside of this range is likely to be outside of this range for a reason. If they charge more than the average, this might be great—they might offer services that other accountants don’t offer, or they might be extremely experienced and well-qualified. 

On the other end of the scale, if they are charging significantly less than the average, that could raise a number of questions before hiring them.

Extra fees can add up quickly and turn a low fee into a huge one. A quality accountant might charge a bit more up front, but won’t typically add other hidden costs. If you want to avoid a “bait and switch” situation on pricing, look to the higher priced firm.

At Shaw & Associates Chartered Accountants, you have the option of signing up for one of our accounting packages. These packages vary in price and include all accounting services that will help your business grow and meet the targets you have set. The best part is the fees are paid monthly and include everything—unlimited phone calls and emails, in addition to the work, and there are never hidden costs. You will know what you are paying month by month in order to budget.

A good accountant will also do their best to work in as efficient and cost-effective a manner as possibly for you, saving you money in the long run.

Along the lines of “you get what you pay for,” a more expensive accountant will usually be more experienced and qualified. They will be more knowledgeable about their field of expertise, and that is why they are charging more than the competition. They will make every effort to keep up to date, which is critical for accounting since legislation changes every year. They will go above and beyond to ensure they have met and exceeded the requirements to retain their accreditations.

A good accountant will catch things that might otherwise end up costing you money. Ensuring that you claim all eligible deductions, meet deadlines, and receive good advice will save you money in the long run. This quality work will also help you avoid owing extra taxes, penalties, and interest to the Canada Revenue Agency (CRA). It could also help you avoid being audited, spending your time and money on the audit instead of running your business.

A good accountant is concerned with their reputation and yours—they will never advise you to do illegal things. Having received bad advice from your accountant is not an excuse with CRA—business owners are still responsible for the returns that they file, regardless of who prepared them.

Per the Financial Post, CRA has been known to impose punitive gross negligence fines on business owners found guilty of not being as knowledgeable about their tax returns as they should have been: “… [If] you fail to disclose income on your return, not only will you be liable for the tax owing on this undisclosed income, plus arrears interest, but you could be hit with a “gross negligence” penalty.” 

As the 2017 winners of the Lethbridge Chamber of Commerce Award for Business Ethics, you can rest assured that Shaw & Associates Chartered Accountants will never steer you in the wrong direction.

Contact Shaw & Associates Chartered Accountants to help you out with your financial needs and tax planning and to give you the advice and services that will take you from where you are to where you want to be with your business. One complimentary meeting with them will put you and your business on a more profitable and positive path.


The Top 5 Questions You MUST Ask Before You Hire an Accountant

Posted March 30, 2018

When looking for an accountant for your business, there are a few important questions to ask of the company you are thinking of using. Here are the top five topics to ask of a prospective accounting firm, and some follow-up questions to give you good detail you can use to make your decision:

1. General questions about the accounting company.

  • How long have you been in business?
  • How many on your staff, and what licenses do they have?
  • What services do you provide?
  • Do you have some references I can contact?
  • What is your fee structure, and how do you bill clients?

2. Communication with clients.

  • How do you communicate with clients? Do you use email?
  • How long does it typically take to respond to a client question?
  • How accessible are you?
  • What is the complaint resolution process?

3. The exact form of how my work will be handled within the company.

  • Who will be doing the work for my account?
  • How often should we meet to discuss my business?
  • What happens if my assigned worker is not available?

4. Tax questions.

  • How do you handle taxes and deductions?
  • Can you represent me if I get audited?
  • What are your tax philosophies and tax planning priorities?
  • How does your company keep track of what I need to file and when, so I don’t miss any deadlines?
  • How does your taxation staff keep current with tax law changes? 

5. Why should I hire you?

  • How will you add value to my business?
  • How will you improve my company’s bottom line?
  • What value will you add to my business beyond compliance?
  • How can you help me grow my business?
  • How do I recognize a good accountant?

If you can get this information prior to deciding on an accountant, you should have everything you need to make a good choice.

Contact Shaw & Associates Chartered Accountants to help you out with your financial needs and tax planning and to give you the advice and services that will take you from where you are to where you want to be with your business. One complimentary meeting with them will put you and your business on a more profitable and positive path.


Page 1 of 3