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