When selling your business what is important is how much money you will actually receive. Between you and the sales dollars is Canada Revenue. Yes tax.
A proper tax plan should be installed well in advance of the sale of the company.
Is it going to be an assets sale or a share sale? There is a big difference in the potential tax owing.
One huge tax advantage that all sellers strive for is the 900K plus Capital Gains deduction. Each individual is entitled to this tax exemption as long as the corporate shares are eligible. CRA has very strict rules as to whether the company being sold is eligible for this large tax break. This is why sellers always want a share sale.
For buying or selling the valuation of the business is critical. The old days of just saying that the business is valued at some form of multiples is over. It is much more complex that that. We can have a company making lots of money so should be valuable. But it has a horrible human resource back ground. So law suits may be pending. We can have a company with poor historical performance but is now sitting on technology that could make them very profitable. In both cases the old methods of valuation do not work.
Canada Revenue is in an endless chase to tax the underground economy. One of its newest methods is the lifestyle audit. This type of audit was first used to audit people in the drug trade. Now it is being used to go after the underground economy that exists in our construction and trades industry.
Canadian Tax Law allows a capital gains exemption on the sale of shares of a Canadian Small Business. This exemption is 800k plus depending on the year of sale. This is a huge benefit to the business owner who is looking at retirement through the sale of his business. On the sale of the shares in his business the first 800k is not taxed.
To be eligible there are certain rules that must be followed. The one that causes a lot of grief is what we call the “ 50/90 rule ‘. This rule states that during the two years before the sale of the company at least 50% or more of the company’s assets must have been used for the normal operation of the company. At the date of sale 90% of the assets must be used for the normal operation of the company.
Why You Should Choose Proactive Accountants Inc.There are many complicated financial tasks involved in growing a small business, like balancing books, managing finances, and making sure taxes are calculated and filed accurately. Catering to these aspects of business can take up a significant amount of time and resources. Moreover, ensuring that they are managed optimally can be quite challenging due to the ever-changing guidelines and laws. In such situations, enlisting the services of an accounting company can help you accomplish your accounting and tax necessities with ease.!
In the initial days of the COVID-19 pandemic, there were a lot of changes that were taking place, and most companies and businesses were not sure how they were going to keep up. People were no longer allowed to travel around, so most companies started making changes to allow for remote working and online, virtual meetings. The changes meant a significant decrease in productivity, but there was nothing much that companies could do other than waiting for things to start getting better before they could get back to the way things were.
The B.C. Government has released more details on its Recovery Grant program for small business. One time grants of $10,000 to $ 30,000 are available for approved applicants up to march 31, 2021.
One of the benefits of being an owner or executive for a company has been having the use of the company car. For years it was a wonderful benefit basically ignored by our tax system. It has now become a tax trap for the users of these vehicles. Canadian tax law says that the use of a company owned vehicle is a taxable benefit to the user. The user of a company car should calculate the annual taxable benefit of the car and put it on his/hers T-4. It will then be taxed at the top marginal rate of the taxpayer.
Due to the Covid pandemic, the Canada revenue Agency has made some tax changes to the home office expenses allowed on personal tax returns. Many taxpayers can now use a simplified method of claiming these expenses on their personal tax return.
