Preparing for the 2010 Tax Season? These tips will help!

Now that 2010 is over and we begin to think about personal tax preparation (T4’s, RRSP’s etc.) this is also a good time to think about preparing your taxes for your small business.  If your company has a December 31^st year end, and you owe income tax for 2010, these taxes are due on April 30, 2011.

For small business corporations, partnerships or proprietorships, the following items should be considered when calculating your income for tax purposes and the tax return.                        

In determining net income for tax purposes, ensure that only appropriate and documented expenses incurred in the operation of the business are deducted, some examples include:

Accounting	Advertising
Amortization of capital assets	Bad debts
Business related memberships and subscriptions	Business related start-up costs
Business taxes, fees and dues	Certain group benefits
Collection costs (related to bad debts)	Convention expenses (up to two per year)
Consulting costs	Delivery and freight
Equipment rental	Insurance (fire, theft, liability)
Interest and bank charges	Legal costs
Utilities (light, heat, water)	Maintenance and repairs
management and administration fees	Meals & entertainment expenses
Motor vehicle expenses (fuel, insurance, repairs)	Home office expenses(including postage, stationary, telephone, other supplies)
Property taxes or rent on business property	Purchases of materials and supplies
Salaries	Specific courses to improve business skills
Subcontracting costs	Travel expenses
Workspace in the home (with certain limitations)

Notes on Amortization - Planning Your Software and Hardware Purchases

The 2009 Federal budget proposed a new asset class for general office computing equipment and software that can be expensed 100% if purchased between January 29, 2009, and January 31, 2011 inclusive.  Furthermore, where normally in the year of acquisition only 50% of the maximum annual deduction would apply, it does not apply to these purchases – 100% can be expensed in one reporting year.

Also, additional expenses of a capital nature, but not included in any other asset class may also be deducted.  These include portions of expenses incurred to obtain franchises, copyrights, trademarks, incorporation costs and goodwill.

Tips for Audit Proofing your Tax Return

The Canada Revenue Agency may challenge the expenses claimed if they are deemed to be unreasonable, or there is no or poor record keeping related the expenses claimed.  This is especially true for vehicles used for both personal and business purposes.  CRA encourages taxpayers in this situation to maintain a log of daily mileage travelled, and the associated business purpose for at least one year.  If the mileage is considered typical for the business, the percentage use of the vehicle for business may be used for future claims as a reasonable business expense.  The log may be required after several years to confirm the mileage travelled and percentage of use for business purposes.

It is recommended that you contact a tax accountant with any questions you may have regarding your tax planning or corporate tax return preparation.  More guides and resources from the Canada Revenue Agency are provided below for your reference.

If you have any comments or questions regarding this article, please fill in the text box below

Stay tuned for more articles for small business owners!

Regards,

Stephen Beech MBA, CMA

www.smallbizprosmississauga.ca

Online Resources and References:

CRA Interpretation Bulletin it IT-521R - Motor Vechicle use by Self-Employed Individuals:

http://www.cra-arc.gc.ca/E/pub/tp/it521r/README.html

Online resources from CRA - Review of your tax return by CRA:

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rvws/menu-eng.html

Like this article?  Have additional commentary?  Write a comment on this article below

© Stephen Beech 2011

What Is The Best Corporate Structure for My Business? Find Out Here!

For those starting out with a new business or self-employment now is a good time to consider the best legal structure for your business.  Having an appropriate corporate structure for your business will allow the owner to take full advantage of tax planning opportunities, manage operating risk and facilitate decision-making at future points in the life of the business.

For small or family-owned businesses there are most often two choices to make – to operate as a proprietorship or a corporation.  Partnerships are another type of corporate structure, but are beyond the scope of this article.  Which type of corporate structure to select will depend on the objectives and goals of the business which generally include a number of factors: operating risk, tax planning considerations, financing needs, and factors affecting business transitions, each of which will be discussed below.

Business Objectives

 Having an understanding of not only the nature of the business today, but also that of tomorrow will allow you to select the appropriate structure that will allow for timely decision making and reduce legal and other related costs along the way.  Will this be a full-time or part-time business venture? How will the business receive financing?  Who will manage the business?  Will the business engage is contracts with external parties or the public for products or services?  Will the business operate with parties outside of the province or country?  The answers to these questions and more will determine an appropriate structure for your business.

The selection of a business structure is highly dependent on the nature of a particular business, its owner and family situation.  Generally speaking, where an owner can answer ‘yes’ to one or more of the questions below regarding the operation of the business, then a corporation structure would be appropriate:

-          Will the business operate outside of the home?

-          Will more than one individual be actively managing the business?

-          Will financing be obtained from a bank or other third party?

-          Will the company enter into contracts for goods or services with other companies?

-          Will the company delivering goods or services to the general public?

Tax Planning Considerations

 Operating a business as a corporation provides some tax planning opportunities not available with a sole proprietorship.  Tax advantages may be achieved with a corporation structure when family members are employed or are shareholders in the corporation.  With a sole proprietor, net income is reported as personal income and taxed at the individual’s marginal tax rate with less opportunity to share this income across the family (unless family members were employed and paid fair wages).  In a corporation, income from the corporation may be distributed as wages (when family members are employed), or as dividends (when family members are shareholders), or retained in the corporation to finance operations and distributed at a later date.  Wages and dividends may be allocated accordingly to minimize the collective family taxes for shareholders who are active in the corporation.

Tax planning considerations should also include eventual business transitions – succession planning or the sale of the business.  In a sole proprietor arrangement, selling the business may take the form of selling of assets and goodwill, again taxed in the hands of the owner, at a higher rate of tax than may be obtained if sold as shares of a small business corporation.

A further consideration may be the maintenance time and costs of the selected corporate structure.  A corporation is required to file an annual tax return (often prepared by an accountant) and maintain a corporate minute book containing records of shareholders, directors, and resolutions approving the distribution of dividends (often maintained by a lawyer).  A sole proprietor does not need to report separately to tax authorities and need only retain records related to the daily operation of the business to meet normal tax reporting requirements.   Relative to the other considerations, this one is less critical, however is important for financial budgeting and planning purposes.

Before deciding on or changing entities, a thorough review of the options and a consultation with both an accounting and legal professional are recommended.

Additional resources & Links:

1.       Business Start-up Assistant (**Good source of information for those starting out**)

http://www.canadabusiness.ca/eng/

2.       Canada Revenue Agency (CRA) Information for New Businesses:

http://www.cra-arc.gc.ca/tx/bsnss/sm/menu-eng.html

3.       Canada Revenue Agency guides to setting up your business:

http://www.cra-arc.gc.ca/tx/bsnss/sm/sttng/menu-eng.html

Stay tuned for more articles for small business owners!

Regards,

Stephen Beech MBA, CMA

www.smallbizprosmississauga.ca

Like this article?  Have additional commentary?  Write a comment on this article below

© Stephen Beech 2010

Developing SMART Goals for Personal and Business Success 2011

Goal Setting Tips for 2011

As a new year begins, it is a new opportunity to set goals and objectives and plan for results in 2011.  Below you will find my goal setting tips to help you realize your results and avoid wasting your valuable time and money!

As a first step in your goal setting process, start with the end in mind – defining the end state you seek

  

     What outcomes or goals do you want to achieve? By starting at the end and working back to your current state, you will be able to visualize the milestones, processes and actions that will need to be put in place to achieve your goals.

The goal setting process can be defined using SMART goals – in order to avoid disappointment and wasted valuable time and effort, ensure that you define a Specific, Measurable, Achievable, Realistic and Time-based (SMART) goal. 

Specific – reduce the tasks and goals to specific items that can be seen, felt or measured.  Some examples goal could be increase new clients by 5% this calendar year, or increase net new sales 3% in fiscal 2011.

Measurable – how will you know if you are on-track and how will you know if you have succeeded?

Metrics that can highlight hat you are making progress or to indicate that adjustments to the plan may be required to ‘right the ship’ on course toward the overall goal or objective.  Some examples may be to endeavour to make 20 prospecting calls per week, and to track against this goal.  Then, of the prospects contacted, how many appointments or follow up contacts were made?   Then of these follow-up contacts, how many lead to a close or sale?  Having these results to review will allow you to identify successes and failures in the process and any areas for adjustment along the way.

Achievable and Realistic– is the goal achievable in the stated timeframe provided? Given the current uncertainty in the economy, are the goals realistic?  Goals should stretch just beyond what would normally be expected to provide some incentive or motivation to strive, however goals that stretch too far will be discouraging when results appear to be beyond reach.

Time-based – Goals should be created and plotted against calendar milestones, weekly and daily tasks to provide you with some manageable tasks on a daily basis to keep you on track toward your goals for 2011.  Once the tasks have been defined, you can use calendar tools such as a PDA, or Microsoft Outlook to create repeating tasks, milestone tasks and daily tasks to keep you organized, motivated and focused on the tasks to be accomplished.

Note that smaller more specific goals in a shorter timeframe are more easily managed than larger, multi-year objectives where progress and results along the way may be harder to measure and may reduce momentum, motivation and ultimately miss the desired results.

Following these steps will certainly put on the path to success in 2011!

References:
SMART Goals – detailed guidance notes and tips for effective SMART goals:
http://www.smart-goals.org/

Download a free SMART Goal setting worksheet – tailor this to your particular situation.
http://www.executive-and-life-coaching.com/support-files/smartgoalsettingworksheet.pdf

Stay tuned for more Small Business Tips for 2011!

Regards,

Stephen Beech MBA, CMA

Padgett Business Services

(905)949-4388 ext. 24

http://www.smallbizprosmississauga.ca/

 (c) Stephen Beech 2010

Planning for Small Business Success in 2011 ? Develop Business Mentoring Relationships

Are you preparing for success in 2011?  One way to achieve this for a small business is through developing and leveraging Business Mentoring relationships.

If you don't know exactly what a Business Mentoring relationship is, where to find one, and what to look for in such a relationship, following the Business Mentoring link for more information and related links on the same landing page.

Your local chamber of commerce or board of trade may also have mentoring or small business advisory boards, forums or panels with whom you can discuss your goals and challenges and to obtain business advice.

One important note is that you should expect to receive all the expertise you require from a single individual.  You should first decide what your needs are, for example, marketing, sales, operations, information technology, prioritize which one(s) would have the greatest impact on your top line (sales) and bottom line (profits), and seek out a mentor with these areas of expertise.

See these additional resources for more information about developing and nuturing Business Mentoring Relationships:

1. The Worst Mistakes You Can Make When Choosing A Mentoring Coach

http://www.articlesbase.com/internet-articles/the-worst-mistakes-you-can-make-when-choosing-a-mentoring-coach-2476518.html

 

2. Working with a Business Mentor - How to create a mutually rewarding relationship

http://entrepreneurs.about.com/od/businessmentoring/a/businessmentor.htm

 

Wishing you Happy Holidays and Business Success in 2011!
Regards,
Stephen Beech, MBA, CMA

(905)949-4388 ext. 24http://www.smallbizprosmississauga.ca/
http://www.paytrak.ca/

 (c) Stephen Beech 2010

Business Building Through Business Networking - Overcoming Shyness

As we enter the Holiday Season, I along with many small business owners have the opportunity to attend holiday gatherings of a personal or business nature.  These are perfect opportunities to make business connections and business prospects, that is if you are comfortable talking about your business.

The 5 tips provided below I refer to new business owners to overcome shyness and help capitalize on networking opportunities. 

Good luck and Happy Holidays!

Stephen Beech MBA, CMA

www.smallbizprosmississagua.ca

www.paytrak.ca

Get Over Your Networking Shyness

You can't get the word out on your business unless you're talking it up. Overcome your

marketing hesitance with these 5 tips.

By Sean M. Lyden

Q: I keep hearing that networking is a good way to drum up new business for my home based business support firm, but I hate doing it. I'm shy and I get embarrassed when I'm trying to talk about my company, like I'm forcing myself on the person I'm talking to.  How can I get over this?

A: Your success as an entrepreneur hinges on how well you communicate with people.  Therefore, it's a good thing that you're trying to address this issue right now before shyness can jeopardize your venture. Use these five tips to break the power of shyness and take your business to the next level:

 1. Set clear goals. What do you want to accomplish in your business? What income level do you want to achieve? Think in tangible terms: What would your life look like if you accomplished your goals? Where would you travel? What kind of home would you own? What kind of car would you drive? Then consider the alternative: What might happen if you allow shyness to stop you from pursuing your dreams? What would it cost you in terms of potential income and life fulfillment? By simply taking the time to define your goals and write them down, you intensify your desire to overcome your shyness.

2. Turn your focus away from yourself. When you're at a networking event, instead of feeling embarrassed about "forcing yourself" onto the other person, simply switch the focus of the conversation to that person. Ask questions like:

•  Are you a member?
• How have you benefited from your membership?
• Do you attend regularly?
• Are you on any committees?
• What business are you in?
• How did you get into your business (or career path)?

The irony is that when you allow people to talk about themselves, they will be more likely to enjoy the conversation with you—and naturally view your business in a positive light. In other words, you're indirectly promoting your business without having to force yourself on that person.

Also, after you've met someone new, take it upon yourself to introduce that person to others. This gives you a job to do and the activity takes your mind off your fear.

3. Practice, practice, practice. A key step to overcoming shyness is preparation and practice. Write down in advance the questions you think will stimulate and sustain conversations. Then practice in an environment where you won't feel intimidated. Try role-playing with someone you feel comfortable with, perhaps a spouse, friend, coach or even a sales trainer. This way, even when you feel insecure, you're equipped to push through the fear because you have a clear idea of what you want to say and how you're going to say it.

4. Learn from your mistakes—don't fear them. Often shyness comes from a fear of making a fool of yourself. Diminish that fear by focusing on what you can learn from networking situations, whether good or bad. Perhaps you notice particular phrases you use that generate positive responses. Write these phrases down and use them. On the other hand, when a phrase or action gets no response or a negative response, take notice and avoid it in the future. When you take time to assess your approach, you'll position yourself to be more successful with your interactions with people.

5. Reward yourself when you've done well. If you make it to a networking event and speak with, say, five or six new people and stay as long as you planned, give yourself a reward. Perhaps it's a new book, a dinner out—whatever motivates you. Withhold the reward if you don't meet your goal.

The bottom line? The more you network, the more proficient and confident you'll become at it. In addition, the more your confidence grows the less power your shyness will have over you.

Sean Lyden is the CEO of Prestige Positioning (a service of The Professional Writing Firm Inc.), an Atlanta-based firm that

"positions" clients as leading experts in their field—through ghost-written articles and books for publication. Clients include Morgan

Stanley, IFG Securities, SunTrust Service Corp. and several professional advisory and management consulting firms nationwide.

The opinions expressed in this column are those of the author, not of Entrepreneur.com. All answers are intended to be general in nature, without regard to

specific geographical areas or circumstances, and should only be relied upon after consulting an appropriate expert, such as an attorney or accountant.

Copyright © 2002 Entrepreneur.com, Inc. All rights reserved.

Finding the Right Accountant for Your Business – They’re Not All Alike!

Generally people I speak with understand that not all doctors or lawyers are alike.  Many specialize in only one or two areas such as family medicine, internal medicine or real estate law or commercial law.  Similarly accountants also specialize in a limited number of areas including audit, tax, corporate law, mergers or acquisitions, or even small business accounting!

Consider the following when deciding on the right accountant for your small business:

1.       If you already have an accountant, how often do you see your him/her ? Do you meet with him or her annually?  Quarterly?  Would you appreciate an opportunity to speak with him/her on a monthly basis or only when needed?  When you have reached out to your accountant, how responsive were they?

2.       What do you want your accountant to do for you?

Do you want them to only prepare the year-end financial statements and tax returns, or would you like to receive advice on business issues such as tax planning for future acquisitions, improving the profitability of your business or assist with financing, succession or business plans?

At a minimum, a good accountant for your small business should allow you to save MONEY, save you TIME, and provide you PEACE OF MIND.  Each of these will be discussed in more detail below.

An accountant should be working in the interest of the client to save MONEY.  This effort can take several forms including tax planning to minimize the tax you pay (not to avoid paying tax, because of course this is illegal), maximizing the profits of the business, avoiding tax penalties from inaccurate or late tax filings for payroll, GST/ HST or corporate income tax remittances, or increasing cash flow through management of payables, receivables, or merchant services (a.k.a. credit card processing) fees.  By meeting and discussing the results of your business performance the accountant can help identify areas for reducing cost, improving performance in the short term and plan the course for improving performance in the future.

 Your account should be also working to help reduce the amount of TIME consumed by the client in preparing, delivering, and interpreting the results provided by the accountant.  The accountant can help to introduce record keeping systems to streamline the collection of receipts, invoices, recording of transactions (cheques, automatic deposit/withdrawals), manage payroll calculations and remittances and in some cases pick up and deliver the accounting information for bookkeeping processing on a regular basis.  The accountant should be able to meet with the client on a regular basis to evaluate the performance of the business against pre-established goals for cost containment, profitability and growth or other objectives to allow the owner-manager to adjust throughout the year in order to respond to market conditions or other operational events.

Finally, through the accomplishment of the first two elements above, the accountant should seek to provide PEACE OF MIND to the small business owner.  This should be achieved by providing sound and timely financial advice, avoiding unnecessary interest charges and late filing penalties for payroll and other taxes, open communication regarding business plans and objectives, accurate and complete record keeping including capital and other assets in the business, and through timely and well developed tax planning for business and life events which may include as succession planning, purchase and sale, mergers and acquisitions, changes in shareholder arrangements.

Some small business owners say “I prefer to use a Chartered Accounant (CA)”.  In response I would say that there are several types of qualified parties that may be able to provide the services you require. CA’s are often used when a business requires several type of accounting services such as cross-border tax advice, servicing complex issues related to multi-location, multi- shareholder groups, or when an audit is required by a bank.  If this does not apply to your business, then it may be possible to reduce the fees you pay for accounting and bookkeeping services.  If you are a business owner and sole shareholder, you may only wish to maintain your records for tax purposes.  For this purpose you may only need the services of a bookkeeper for the regular accounting and an accountant for the year-end tax return.  This may be one in the same individual who may or may not be a designated general (CGA) or management accountant (CMA) and may also be able to provide you with tax return preparation and tax planning services based on an intimate understanding of your business gained through the regular bookkeeping performed for your business.

When selecting the accountant for your business, develop a clear understanding of the needs and goals of your business, and an understanding of the qualifications of who exactly will be providing the accounting services - a CA firm partner, manager or intern - and whether this will provide the level of value you receive for the fees that you pay.  Having considered these and the other factors discussed above will position you well to obtain value for service provided, and above all your business success.

Good luck and stay tuned for the next instalment of Small Business Tips!

Regards,

Stephen Beech, MBA CMA
Padgett Business Services
(905)949-4388 ext. 24
http://www.smallbizprosmississauga.ca/

 (c) Stephen Beech 2010

Small Business Tip #1 - Credit Card Processing Charges - The devil is in the details

I recently reviewed several service offerings from a number of prominent merchant services providers (credit card transaction processors) and was surprised to learn of the various charges that could apply over and above the standard transaction fees for Visa, Mastercard and Debit card transactions which normally range from 1.65% - 3%+ of the value of the transaction for credit cards and 7 - 10 cents per debit transaction.

Where credit cards are manually entered into the credit processing terminal or online, the transactions are considered "non-qualified" or "non-verified" and are assigned slighthly higher rejection risk, and therefore attract an additional charge of 0.2-1.0%  per transaction depending on the service provider.  This is also true for processing of premium credit cards with 'cash back', travel points, or other premium benefit programs attached to the cards.  In effect, the premium packages are funded in large part by the additional merchant fees and not by the annual fees charged to the card holders.

In addition to the base and additional service fees, a merchant should also consider the after sales service and support that will be provided, as well as any switching costs that may be incurred when considering changing to another provider - are you locked in for a term contract?  If so, what are the cancellation charges?  Will they take back the processing terminal? If not, will the terminal be compatible with the new service provider's software and hardware? Based on the answers to these questions, you may be on the hook for additional charges upon early termination of your contract to switch to another merchant services provider.

Armed with this information from the 'small print' of the merchant services contracts, it is recommended to shop around to find the best combination of price and service for your business, given the mix of cards, volume operation of your business.

Stay tuned for additional financial tips for Small Business.

Stephen Beech, MBA, CMA
Padgett Business Services
www.padgettmississaugasouth.ca
(905)949-4388 ext. 24

 (c) Stephen Beech 2010