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FREQUENTLY ASKED QUESTIONS
4-A conducts regular presentations on these topics. Please contact us if you’re interested.
Incorporating a business should be considered when you need a tax plan (when you are not using all the cash) and to limit your exposure to risk and liabilities.
Legal Fees
• One-time setup costs
• Annual filing fees
Accounting Fees
• Annual Corporate Tax Return and Financials (not just a personal tax return)
• Having your business separate from your personal financial situation is important for tax, income and liability purposes.
• Incorporating means your business will have a separate bank account, credit cards and set of records.
Incorporation of your business allows you to:
• Properly plan to maximize profits and reduce risks
• Tax savings
• Possible elimination of CPP contribution
• Income splitting (dividends versus salary for tax savings)
INCORPORATION
• Consider Alternatives to having shareholders paying the bills
• Use leverage to grow (LOC, leasing and term loans)
• Look at options such as finance/lease vs. renting/purchasing with cash
• Assess ratios related to: A/R turnover, Inventory turnover, Non utilized capital assets
It’s not always about increasing sales to ensure financial growth. Other things to consider are:
• Reducing the cost of sales to increase margins
• Reducing wastage (increase billable/recoverable time)
• Being efficient and watching margins and focusing on areas such as Gross profit / Net Profit / EBITDA
Banks are your friend. They can help your business by providing operating capital through:
• Lines of Credit – 75% of A/R <90 days plus current inventory
• Term loans – existing assets that are not financed
• Tax planning is critical for ensuring your business is compliant with the government yet provides a possible tax savings to maximize benefits for the company (i.e. holding cash in company).
• Another area that we can assist you with is planning for your retirement by the proper corporate structure.
FINANCIAL GROWTH
As a separate entity your Corporation will need the following:
• Monthly bank account reconciliations
• Monthly credit card account reconciliations
• A record of Personal expenses vs. Corporate expenses
As a business owner you have a variety of ways to track your books. You can choose to do it yourself or hire a professional Bookkeeper. This depends on your time and your budget. It is highly recommended that you enlist the services of a professional bookkeeper however if you choose to do it on your own we recommend using recognized software programs to help you such as:
• Simply Accounting
• Quickbooks
• Excel Spreadsheet Synoptic
• Accounts Receivables (remember to Invoice regularly)
• Record Expenses
• Accounts Payable (Note: Capital Assets are not a direct expense when purchased)
• Monitor cash flow and profitability monthly and by project
• Always be ready to make the hard decisions on customers/product lines.
• Provide what the accountant needs to reduce time and billing
• Demonstration of year-end binder
CORPORATE BOOKKEEPING
• Operating Company
• Holding / Investment Company
• Family Trusts
• Tax free dividends from Opt. CO to invest
• Reduced liability risk on company equity
• Set-up for a retirement plan
• Split income with family members.
• Allocation of income to children under 18 (in compliance of rules)
• Allocation of Capital Gains Exemption
• Transition to children
• Sale of the Business
• Significant Growth
• The main word is PLANNING – no right answer, you just need to plan
TAX PLANNING & SUCCESSION PLANNING
• Analyzing on a monthly or quarterly basis (NOT ANNUALLY)
• Understanding the current financial position not just historically
• Collection of accounts receivable and Cash flow
• Knowing your margins and clients
• Banking covenants and reporting requirements
• BUDGETING and PROFITABILTY
FINANCIAL MONITORING & REPORTING
Click here for a handy checklist to help you assemble your financial information for preparation of your income tax return. Keep this checklist handy. The checklist should be completed and returned to 4-A together with the financial information assembled.
Handy Checklist for Personal Taxes(undefined)
PERSONAL TAXES
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