Operating company? Holding company? So Confusing?!?

So you are a seasoned business person and have been making sales ninja style. However what happens if you are sued? How do we eliminate the additional liability from your operations? You made a profit this year and that's awesome but how do we keep this money safe from sticky fingered Lawyers?

The short answer is incorporation of a Holding company. The idea behind such a setup is that you do all your regular operations on your current company that means all your revenues and expenses remain within OpCo however we transfer the "Net Income" or in the accounting world we call "Retained Earnings" directly as a dividend to HoldCo. Tax Free. Yes that's right.

Some associations such as Doctors, Dentists and Engineers are required to have professional corporations where only another Doctor/Dentist/Engineer can be a partner and own shares. The rules are very strict but they do allow a HoldCo to own the building and receive rental income from the OpCo for using the premises. So technically you are paying your own company rent at market price. Yes it gets confusing but it's legit. #LegitAccounting

So once the money is being held in HoldCo you are reasonably protected by any potential law suits. What do you do with the money that's in the HoldCo you ask? Well you can use it for something accountants call "Dividend Sprinkling". If you have a spouse or children the right amount of dividend can be declared to maximize the after tax income you will receive. Setting up your corporate structure is critical to the success of your company. If you plan for the future then this HoldCo can one day evolve into becoming your Estate where you can transfer the entire corporation to your Kin(s) Tax Free upon retirement or death.

The incorporation costs are relatively minor compared to the peace of mind and additional security of your investments. It can get confusing to manage a HoldCo but remember it's in your “Taxvantage” to do so!

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

Why Do I need to get my Business Incorporated?

Well the short answer is you don’t need to but it’s in your benefit to do so. In Canada the government wants entrepreneurs to start new companies which generates new jobs and stimulates the economy. If the government stimulates the economy in a positive manner then what do you know you have the same government next election #Liberals. So the government provides tax incentives by offering a special tax deduction called the “Small business deduction”. This deduction in one word is Awesome.

Basically on your first $500,000 of income you make within your business you are going to pay a far less taxable liability compared to if you made the same income under employment taxes. On average a Corporation is taxed much lower and a good rule of thumb is 15%. A average employee would be taxed in the 35-40% bracket. Simply by incorporating and keeping the profits inside the company and only giving yourself a salary/dividend on what cash requirements you personally have will help you in your personal taxes because of the basic salary tax deduction offsetting your income. You can always implement a dividend sprinkling strategy more on this later. #WinWin

Apart from the tax savings there’s a security and peace of mind element to incorporations. In the unfortunate circumstance that you are sued under most circumstances your liability to the corporation is limited to the assets within the corporation. Since you are an employee/shareholder your personal assets are not impacted so you won’t lose your house/car.

Additionally since you have an incorporation you can take your papers to the bank and open a Business Bank account and a Business credit card. When you borrow money under your business it doesn’t show up under your personal liability which in short is a win/win situation for you. Since you legally own the name/company you can have a level of ownership and build your space in the market where no one else can do business using your name. You can now effectively start to brand and build your profile online. #Marketing101

So going back to the original question do you really need to get your business incorporated? Reading the above makes you wonder why wouldn’t you? The costs of sustaining a corporation are offset by the great savings and value of having one. #MakeItOffical

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

SETTING UP YOUR RECORD KEEPING SYSTEM

One of the most frequently asked questions we get is, "How long do I have to keep my business receipts?" Well the short answer is 6 years. 

Not keeping your receipts is the leading reason why people end up paying more tax then required. Keeping lousy records only hurts your business net income. Taming that paper pile is difficult but a necessary evil. Your tax organization and preparation will not only keep you audit proof but will also put you in the driver seat on cost control. 

Save all the receipts and records associated to the business. The CRA require source documents (your receipts) to be available if they ever come to audit. You only need to keep the relevant receipts and can throw the other unnecessary paper. If you like to keep it old school we recommend picking up a file accordion at Staples or any office supply store. If your feeling Techy Evernote or Genius scanner smartphone apps do a great job. Label each section by expense category such as donations, office supplies, repairs, auto-gas, parking, advertising etc. As you go out during the year keep filing all these receipts away. 

When it comes time to filing your taxes simply add all your receipts in Excel or a simple calculator ensuring you are taking calculating that sneaky HST tax. All these summary numbers get reported on the tax return schedules such as statement of real estate rentals, capital gains and losses, GIFI statements and statement of business activities. 

At Capex we want to make record keeping as easy and simple as possible allowing you to focus on growing your business. We digitize your box of receipts by scanning and filing all your receipts and get your accounting/bookkeeping done at the same time. This service is quite popular amongst our clients as they love their accounting to be on cruise control. 

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

Why is Marketing so Important?

As a Chartered Professional Accountant I see many people excited to come see us Accountants with their business idea. They engage my firm for business plans and forecasted financials. During this process of planning I consistently see many of these individuals cutting down marketing budgets. Stretching your dollar is great but completely cutting down on your marketing budget is business suicide.

Now it might seem a little odd that an “Accountant” suggesting the idea of marketing is ironic considering many Accountants don’t really need to market it’s a word of mouth business but hear me out! #Stigma. Word of mouth marketing has lasted the test of time and it holds true even today. The reason word of mouth marketing is so effective is because of one fundamental reason. Trust. Building trust is fundamental and essential to long term growth.

The internet as we know it has been changing and evolving just look at the last 10-12 years. The Internet was not readily available and trust me we were all excited about the next flip phone. Many companies have harnessed the power of the internet and almost effectively replaced Television and Radio advertisements with the internet stretching their dollar with targeted marketing such as Facebook, Twitter and Youtube.

I always recommend start-up’s to keep a healthy budget for marketing. The real tangible results come after having an online presence. The old days where we could just open a newspaper or open up Yellow Pages and find someone to do the job are long gone. Future clients/customers want to be engaged they want to be educated and most importantly they need to know you exist. Ultimately the client is voting. Voting with their money. It’s your job to present your candidacy and promote your campaign.

Having a great idea is awesome, getting your governmental filings done gets you an A+ but nothing becomes more important than spending on marketing because here’s the equation. Higher marketing expense suggests higher sales which increases your revenues and given all of you will keep a sharp eye on your expenses your bottom line will only grow.

Which means more money for you. Which means more vacations. Vacations are awesome. Online Accounting Firms like Capex can help you get there.

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

Help I overpaid on my Payroll Taxes!?!

Switching jobs can be a exciting time. Meeting new people and learning new skills is awesome but what's the tax impact of switching employers? Yes, there is a tax impact.  All employers in Canada are required to collect "source deductions" which are typically your CPP (Canada pension plan), EI (employment insurance) and income taxes from your paycheque. Your employer remits these payroll taxes on your behalf to the CRA in addition to the employer contribution portion. 

If you have worked at one Job for the entire year then it is unlikely your CPP and EI are incorrect. However if you had more than one employer or switched employers in a year then both employers old and new will have to deduct CPP and EI regardless of the fact you have paid them before. This has nothing to do with your old employer's payroll skills its solely because of the way the calculation is done. #IncomeTaxAct

Clear as mud? Ok, let's say Jag worked at company old from Jan 2015 to Sept 2015. Old employer would have deducted the required source deductions between these months and remitted to the CRA. Good job old employer! The new employer will start your CPP and EI deductions from Oct 2015 to Dec 2015 and will not account for your payments to CPP and EI from the old Employer this leads to overpayment on CPP and EI. Assuming you paid your total maximum 2015 CPP amount of $2479.95 and your EI amount of $930.60 any additional dollar paid over this turns magically into a refund.

It sucks to overpay but it's your responsibility to keep both T4 slips so when you file your income taxes the difference of the over payment will be refunded to you. Small business tax accountants can help you with this.

Let's think of it as forced saving *cough* or Vacation money?

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team

Why the name Capex?

Quite recently at a networking event I got asked why did you name your firm Capex? Interesting question because I love explaining this one!

Capex is a finance term that stands for “Capital Expenditure” which is money invested by a company to acquire or upgrade, fixed physical, non-consumable assets such as buildings and equipment or a new business. So how does this all tie into the Capex name?

The driving factors of starting this Firm and choosing this name was to help educate small business owners on the benefits of Capex to the bottom line. Embracing change and making the necessary investment into your business is critical to stay cash flow positive. There are many unique challenges in every industry/business and Capex spending is used to mitigate these risks and gaps for the long term. The goal of this firm is to not only do your Governmental compliance work but also work together to build a more profitable business. We want to project the benefits of positive Capex investment which will lead to solid business performance and profitability.

Almost anyone can hire an Accountant for a business to do the taxes or bookkeeping but finding a CFO styled partner is a bit more rare. Apart from keeping the boat afloat we like to coach on business best practices and provide recommendations to better your business. Capex is helping one business at a time to focus on the big picture by laying down the necessary foundation steps in order for our clients to remain future-proof. We believe strongly in education and technology. Technology is part of the Capex DNA and without the efficiencies realized we would not be able to play the business advisory role we do for our clients.

We adore technology such as cloud accounting and cloud storage but more importantly we encourage our clients to also do so.  So to sum it all up in one word, one mission, one vision. Capex.

p.s. Capex is pronounced as "Cap-X" sort of like FedEx except CapEx :) Easy to remember see! 

Contact your Accountants today click on this link —> https://capexcpa.com/contact

- The Capex Team