• 15 Feb 2017 1:46 PM | Editor (Administrator)

    Taxes and The Tax Man are not things you should only consider during tax season. The CRA’s audit and verification selection process is complicated and risk based, do you cannot always be sure when you are at risk of an audit. What is certain is that if your corporation has been less than compliant, the perceived risk level is increased, and the chances of an audit are higher.

    It is not only the corporation (and its shareholders) that stand to lose on a CRA Audit. Directors, in specific instances, are personally liable for the corporation’s tax debt and, in some circumstances, so are persons who don’t deal with the corporation at arm’s length (when they receive property and cash from the corporation).

    As with many things in life, prevention is the least costly and least painful solution. What are some things that your corporation can do to keep the CRA happy and to reduce the risk of a visit by an auditor?

    The most obvious and the simplest thing your corporation can do is to stay up-to-date with all of its GST/HST, payroll, and income tax (including installment) filings and remissions. If you don’t file your returns on time or don’t make payments by the deadline, you are asking for trouble.

    Related to this first point, always make sure you keep detailed records, including business information, invoices, bills, receipts, deposits, payments, and so on. This way, you can provide the CRA with any information they may request quickly and you don’t have to move to an audit. Also, don’t dispose of your information until more than 7 years have passed since the document would have been needed (this may in some cases be indefinitely).

    Something that most small businesses run afoul of is shareholder accounts. This includes records of all payments (capital or loans) from shareholders and all payments to (dividends, loans, benefits, etc.) to shareholder (or people related to them). All debits and credits should be well documents and explainable. A corporation is, by law, a separate entity and you cannot use its money as your own (even if you own 100% of the shares).

    It’s important to remember that where you misreport information to the CRA, in most cases the effect is that the CRA can reassess you at any time. There will be no limitation period.

    Compliance is the key to tax safety. Doing a third-party audit by a tax professional, to make sure your accounts are up-to-date and that you are not facing any obvious risks is probably the best money any corporation can spend. Once an audit results, not only do you have to suffer the expenses associated with the Audit, but your corporation and you may face hundreds of thousands of dollars in taxes, penalties, and interest.

    Faris CPA regularly provides its clients with effective tax risk assessments and analysis, even if you have another accountant for your day-to-day needs. Email Sam Faris.


  • 25 Jan 2017 1:23 PM | Editor (Administrator)


    ACCOUNTANTS CENTRAL MEMBER: Louis Sapi

    Louis Sapi is pleased to introduce Hockley Miller Ltd. (HML), a leading globally-focused corporate consulting and advisory firm that combines industry knowledge with specialized expertise in strategy, operations, financing, and organization transformation.

    Our professionals help clients optimize their businesses, improve their operations, and accelerate their organizational performance to seize the most attractive opportunities. As a result, we have a tangible impact on clients' revenue and net earnings.

    Hockley Miller's capabilities and intellectual capital are enhanced by our extensive industry expertise, geographic range, analytical rigor, and hands-on collaborative approach.

    Our professionals see what others don't, challenge conventional thinking, and consistently deliver innovative, customized solutions. We also work side by side with senior executives to accelerate execution through a blend of analytical and management approaches.

    • Services include:
    • Corporate finance with debt or equity raises
    • Acquisitions and divestitures
    • Strategic and tactical business planning
    • Business introductions to expand sales

    Visit the firm's website at Hockley Miller Ltd. to learn more.


  • 19 Jan 2017 1:10 PM | Editor (Administrator)

    ACCOUNTANTS CENTRAL MEMBER:  Richard Taylor

    Bashing the big banks is one of Canada's favourite sports, slightly behind hockey. Private business owners have legitimate complaints about our banks, among them: multiple, irritating excessive fees; lack of understanding of small business; and frequent changes in account managers.

    But one misconception is that banks don’t want to lend. In fact, banks do want to lend. Banks don’t make money by hoarding cash in their vaults. They have to lend. Your local account manager is recognized and rewarded based on the size of his/her loan portfolio. He or she is under pressure to lend more.

    However, despite the push to grow, banks only want quality loans. Ones on which the interest will be paid and the principal retired. Banks have criteria against which to assess the financial viability of loans. They want security to back the loan to ensure the principal is repaid.

    Banks tend to favour physical assets for security, such as real estate with multiple use buildings in a good location. Having solid net working capital, such as collectable receivables and saleable inventory, provides additional security, and against which banks may provide loans. Banks also want to see reliable, steady cash flow so they know the interest will be paid and that loan installments can be met.

    While banks need to lend to stay in business, their appetite for lending does fluctuate with economic cycles. When the economy is booming, their willingness to finance business rises and their lending criteria will loosen, slightly. In economic down turns, banks become more stringent and raise the borrowing conditions. Even in stable times, banks may decide not to lend to certain business types or industries for a variety of reasons.

    Within the context noted above, most banks want to further develop their private enterprise business. Some banks have major marketing initiatives to attract business owners by packaging personal and business banking services. Most banks offer a wide spectrum of services supporting private companies, including seminars on hot topics, such as writing business plans and on line tools for cash flow forecasting. They are all trying, with mixed success, to develop account managers that understand private businesses and the challenges their owners face.

    Don't scorn bankers, hug them instead. We will suggest how to do that in an upcoming blog about treating your banker as a ‘favoured customer’. At a future date we will also talk about when is the best time to ask for a loan. The answer may surprise you.

    For more tips on how to work with your banker, contact Richard Taylor, at TrustedAdvisor.biz.


  • 17 Jan 2017 12:59 PM | Editor (Administrator)


    ACCOUNTANTS CENTRAL MEMBER: Raffael Mazze, right

    Technology companies are thriving in the GTA. From Toronto's King Street West to Milton, there are new technology businesses sprouting all over. 

    It takes one idea and talented, qualified entrepreneurs to see an idea through to becoming the next big App that everyone is talking about. At MP Accountants, we see first-hand the issues that tech companies face from accounting, finance and tax standpoints.

    As they should be, entrepreneurs are focused on generating revenues and business development. Meanwhile, the accounting and tax considerations are put on the back burner until the business starts to grow and generate revenues. There are many things to track to ensure that you minimize taxes and maximize your tax credits:

    1) Consider Incorporating

    It may be great idea to incorporate your tech business early on and ensure that your intangible or tangible assets are held in the company. For tech companies, having a good corporate structure is needed when it's time to raise financing, especially when you have an Angel investor who may be interested in your venture.

    It is also helpful to incorporate early on, to avoid having to transfer your assets held as a sole proprietor to the new corporation set up as a Section 85 rollover, to avoid triggering capital gains.

    2) Loss Carry Forwards

    Tracking your expenditures properly is important, as any business losses incurred for the taxation year can be carried forward to future years when the company starts becoming profitable. This is a great way to save taxes in the long run and ensure you can use the tax savings toward growing the business further.

    3) Scientific Research and Experimental Development (SR&ED) Tax Incentive Credits

    SR&ED tax credits represent a significant financial incentive for undertaking eligible activities and filing a corresponding SR&ED claim with the Canada Revenue Agency (CRA). The tax credits may be used to reduce your income tax liability with CRA or instead paid directly to your organization, subject to some restrictions.

    For Canadian-controlled private corporations, the SR&ED tax credit is a refundable tax credit which means the company will receive a cheque from the government for the amount of the tax credit. Generally, expenditures that can be considered innovative and related to the research or enhancing the development of a product or processes can be claimed for the SR&ED credit.

    4) Financial Modelling and Pitch Book

    Before getting to the stage of raising capital via the Series A round, a tech company would need to create a presentation deck and financial models to support their business opportunity. A sound financial model is something that investors look for when considering investing in your tech company.

    Essentially, there are 3 things that an investor will consider when investing: 1) the idea and business concept; 2) the management team and their competence; and the 3) the numbers.

    For more information, contact Raffael Mazze at MP Group.

AccountantsCentral.com is a national Canadian directory of accountants, combined with a web-based magazine (webzine).

We encourage owners and managers of small and medium businesses to better understand the use of numbers in business management, and encourage them to hire accountants as part time Chief Financial Officers, and as advisers on overall business management.


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