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Business Management – Common Tax Considerations

There are a number of tax matters that entrepreneurs should consider when starting a business. This will ensure that they benefit immediately from any savings, and will avoid any costs for upfront errors. However, it is never too late. Summarized below are some of the many areas to be considered.

  • Form of business ownership, including proprietorships, partnerships, joint ventures and incorporation;
  • Income splitting among family members to reduce taxes;
  • Selection of year end to allow maximum tax planning benefits;
  • Canada Pension Plan, Employment Insurance, Workers’ Compensation coverage, as well as eligibility for R.R.S.P.’s;
  • What expenses are tax-deductible?
  • Personal assets transferred to business use – market value, income tax, HST/GST and PST issues;
  • Deduction for business use of personal vehicles and other personal assets, and documentation required;  also, tax consequences of personal use of business vehicles and other assets;
  • Deductions for business use of your home;
  • Interest deductibility of loans – proper structuring to obtain tax deductions;
  • Out of province or out of country transactions, particularly issues with respect to Provincial Sales Tax, GST/HST and income taxes – e.g., transfers to the business from personal use; out-of-province purchases and sales, travelling sales representatives, and other compliance issues;
  • Reporting for employees and subcontractors, as well as differentiating between an employee and a self-employed contractor; directors’ liability and penalties for non-compliance;
  • Taxable benefit rules – such as benefits on loans to the owner, automobile use, group insurance, life and disability insurance, etc.;
  • The difference between leasing and purchasing assets;
  • Accounting for business payments made personally;
  • Federal and provincial investment tax credits, including scientific research tax credits;
  • Special issues regarding purchases and sales between related parties;
  • Estate planning issues
  • Shareholder and partnership agreements;
  • Different ways to pay yourself;
  • Other tax deferral and reduction methods;
  • Taxation differences between investment, rental and active types of income.

Blair Corkum, CPA, CA, R.F.P., CFP, CFDS, CLU, CHS holds his Chartered Professional Accountant, Chartered Accountant, Registered Financial Planner, Chartered Financial Divorce Specialist as well as several other financial planning related designations. Blair offers hourly based fee-only personal financial planning, holds no investment or insurance licenses, and receives no commissions or referral fees. This publication should not be construed as legal or investment advice. It is neither a definitive analysis of the law nor a substitute for professional advice which you should obtain before acting on information in this article. Information may change as a result of legislation or regulations issued after this article was written.©Blair Corkum