Several clients asked me to blog about the different ways of extracting money from your company - Today I will only explain you one technique to take out cash from your company:
Let's take John, a consultant, incorporated under the name John Doe Inc. The company is making 200k of net profit per year - the Corporation will then pay roughly about 17% of corporate tax (CCPC - Ontario, fiscal year 2008). John is the sole shareholder of is corporation, he will either take a salary, declare a dividend to himself, a mix of both or he will let a portion of the profit in is company as retained earnings.
Let’s make it a little bit more complicated, John got married last year with Julie and they are planning to have a baby next year. Then Julie will stop working for 3-4 year to raise the kid. Did you know that while staying home, Julie could receive up to $32,000 TAX FREE…
How is that possible? Well, trough a series of legal and accountant transactions (namely an estate freeze - S.86 Income Tax Act) Julie would then acquire shares in John’s company and John would be able to issue a dividend to her… The first $32,000 would be non-taxable for Julie if she qualify under the different conditions - (email me to know more about these conditions...)
The important part to know if that If an individual does not have any other source of revenues, this shareholder can receive up to $32,000 Tax Free. As usual, I strongly suggest you consult your own professional advisor before proceeding with an estate freeze.
Too good to be true ?? Contact me and I will explain how we can change your corporate structure to ensure that you save taxes!!
Friday, June 27, 2008
Friday, June 20, 2008
Kevin Dee's Blog: Helpful and really interesting...
I am a big fan of Kevin Dee's blog. Kevin is the CEO of Eagle, since starting the company in 1996 Kevin has led Eagle's growth from 10 employees, 3 offices and $10 million in revenues to become a $90 million company, employing more than 90 people, in 10 offices across Canada. In 2006, Kevin Dee was named CEO of the Year by the Ottawa Business Journal. Eagle has received numerous honours including being named one of Canada's 50 Best Managed Companies every year since 1999. In addition to his business success, Kevin is a terrific guy and I highly recommend that you read his blog, it is really interesting and informative - I promise that you will learn a lot. I am reading it every day !!!!
Wednesday, June 11, 2008
Have You Ever Had An Insurance Audit?
As a business lawyer, I am meeting a lot of entrepreneurs and I always suprised to see how many do not have proper insurance in place (life, critical illness, disability insurance, etc) -Especially when the corporation could pay for it, therefore it's a expense for the company. Today, I would like to share with you a great article from my good friend Milan Topolovec: Milan has more than 25 years of experience and he is providing a FREE Insurance audit for you and your partners - I highly recommend Milan, you only need to setup an appointment and he will review all your insurance policies for you ... in addition, you will have no further obligations. This 30 minutes can save you a lot money and could protect your family and yourself in case of ...
Have You Ever Had An Insurance Audit?
Each year, consumers spend billions of dollars on life insurance products, often needlessly. Many of these individuals could not tell you what type of coverage they have or the amount they pay in monthly premiums. Had they taken the amount they are paying in premiums and invested it, greater attention would have been paid.
We are often called upon to prepare insurance audits and create reports which show all the details of an insurance portfolio. Do you know the value of completing a detailed insurance audit?
Let me take you on a short journey where you will learn what can happen when things are left to chance.
Insurance audits provide you with peace of mind and provide your executors with a detailed summary of all your coverage. On occasion, we discover policies that are active but forgotten by the client. On one such occasion, monthly premiums were being withdrawn for policies no longer required. We were able to assist a client in saving well over $20,000. As the monthly withdrawals were spread over several policies, it remained undetected by the client. If this were a single lump sum, the client would have noticed.
When was the last time you reviewed the beneficiaries on your life policies? There have been documented cases where ex-spouses remained beneficiaries through oversight. In one corporation, the policy on death was being treated as a $10-million taxable benefit to the six shareholders. Ouch!
Recently we were called upon by an accounting firm to create an audit for one of their clients who happened to be a doctor. A number of problem areas were discovered which had nothing to do with amount or type of coverage. This client was using personal after-tax dollars, and through structural error, leaving the proceeds payable at claim to the professional services corporation.
There may be duplication of coverage where you are paying for coverage that you will never collect. Let's assume you have a disability program through your professional organization and a group plan. The coverage is offset at claim time.
Have you stopped smoking? If so, have you applied for NON-smoker rates? What is the difference of "own occupation" and "any occupation" in a disability policy? You say that the company owners have a shareholders' agreement and life insurance coverage. Who is the owner, premium payer and beneficiary on your policies?
You may feel overly secure in the fact that you have long term disability coverage under your group insurance plan. Group long term disability plans exhibit reverse discrimination against executives and shareholders. Show me a dedicated executive who would be able to stay home for 17 consecutive weeks in order to collect the payout under the LTD of a group policy.
Critical Illness and Long Term Care programs are the newest players in the life insurance arena.
Did you know that plans can be created where premiums are a tax-deductible expense to the corporation?
Operating Company, Holding Company, Family Trust or Spousal Trust can all be used to acquire tax-effective insurance solutions.
Work with an insurance professional that is experienced, deals with a number of leading insurers and also understands tax as well as legal structures.
To schedule a complimentary Insurance Audit, contact Catherine Pierre at ext. 231.
Milan Topolovec, BA, RHU, CLU. TEP is president and CEO of TK Group, recognized nationally as premier underwriters of insurance solutions from leading providers. Milan can be reached by e-mail at Milan@thetkgroup.com or by phone at ext. 223. For more information about TK Group visit http://www.thetkgroup.com/
Have You Ever Had An Insurance Audit?
Each year, consumers spend billions of dollars on life insurance products, often needlessly. Many of these individuals could not tell you what type of coverage they have or the amount they pay in monthly premiums. Had they taken the amount they are paying in premiums and invested it, greater attention would have been paid.
We are often called upon to prepare insurance audits and create reports which show all the details of an insurance portfolio. Do you know the value of completing a detailed insurance audit?
Let me take you on a short journey where you will learn what can happen when things are left to chance.
Insurance audits provide you with peace of mind and provide your executors with a detailed summary of all your coverage. On occasion, we discover policies that are active but forgotten by the client. On one such occasion, monthly premiums were being withdrawn for policies no longer required. We were able to assist a client in saving well over $20,000. As the monthly withdrawals were spread over several policies, it remained undetected by the client. If this were a single lump sum, the client would have noticed.
When was the last time you reviewed the beneficiaries on your life policies? There have been documented cases where ex-spouses remained beneficiaries through oversight. In one corporation, the policy on death was being treated as a $10-million taxable benefit to the six shareholders. Ouch!
Recently we were called upon by an accounting firm to create an audit for one of their clients who happened to be a doctor. A number of problem areas were discovered which had nothing to do with amount or type of coverage. This client was using personal after-tax dollars, and through structural error, leaving the proceeds payable at claim to the professional services corporation.
There may be duplication of coverage where you are paying for coverage that you will never collect. Let's assume you have a disability program through your professional organization and a group plan. The coverage is offset at claim time.
Have you stopped smoking? If so, have you applied for NON-smoker rates? What is the difference of "own occupation" and "any occupation" in a disability policy? You say that the company owners have a shareholders' agreement and life insurance coverage. Who is the owner, premium payer and beneficiary on your policies?
You may feel overly secure in the fact that you have long term disability coverage under your group insurance plan. Group long term disability plans exhibit reverse discrimination against executives and shareholders. Show me a dedicated executive who would be able to stay home for 17 consecutive weeks in order to collect the payout under the LTD of a group policy.
Critical Illness and Long Term Care programs are the newest players in the life insurance arena.
Did you know that plans can be created where premiums are a tax-deductible expense to the corporation?
Operating Company, Holding Company, Family Trust or Spousal Trust can all be used to acquire tax-effective insurance solutions.
Work with an insurance professional that is experienced, deals with a number of leading insurers and also understands tax as well as legal structures.
To schedule a complimentary Insurance Audit, contact Catherine Pierre at ext. 231.
Milan Topolovec, BA, RHU, CLU. TEP is president and CEO of TK Group, recognized nationally as premier underwriters of insurance solutions from leading providers. Milan can be reached by e-mail at Milan@thetkgroup.com or by phone at ext. 223. For more information about TK Group visit http://www.thetkgroup.com/
Tuesday, June 3, 2008
Ten habits of successful executive investors
Every entrepreneurs hope to turn a profit every year and therefore try to invest their money wisely hoping to double and triple their initial investment... My good friend Benoit Poliquin, VP & Portefolio Manager of Pallas Athena Investment Counsel wrote an excellent article regarding this topic, I would like to share it with you:
Ten habits of successful executive investors
Unless you're returning from a holiday on Mars, you have surely heard by now that the financial markets have had significant pullback over the winter months.
How bad has it been? For those of you with investments in stocks, you know the answer – severe. The S&P 500 was down over 20 per cent from peak (in October 2007) to trough (in March of this year), while the S&P/TSX Composite Index was down 18 per cent from its peak (in November 2007) to its recent bottom (reached in January).
Even worse – or better – is that the markets have bounced back since then. The S&P 500 in the U.S. is up 11 per cent from its bottom, while the S&P/TSX Composite Index here in Canada is up 16 per cent from the January trough. This kind of volatility is, if nothing else, enough to pull your hair out.
It is during turbulent times like these that your success in investing will be determined. So what is an executive to do? After working for many years managing investments on behalf of executives, I have observed 10 habits that have greatly influenced their investment success.
1) What's the game plan?
As an executive, surely you have an up-to-date business plan. Well then, why shouldn't you have an investment plan? We can refer to your plan as your decision-making framework.
2) Establish and review your goals
You have a set of business goals, and if you don't, you should. Your investments should be considered an extension of your business, and so you should set rational and measurable goals.
3) Be honest with yourself
Can you live with the volatility? Does your mood follow the markets? You must avoid making emotional decisions, which usually entail a version of selling low after buying high.
4) Stop thinking like an executive
No matter how much coaching, mind space or pressure you have devoted to your investments, once the purchase is made, you have lost a great deal of control over the outcome.
5) Stay calm but be decisive
There will be investment mistakes. How you deal with these mistakes has a significant impact on your success. Storms always pass; you must use them to your advantage.
6) Do your homework
You need to understand what you are investing in. If you can't devote the time, or don't have the knowledge to do it properly, find someone who will. Investing on "gut" instinct doesn't work!
7) Quality always wins
An investment in stocks is in fact a partial ownership of a company. Make sure your investment demonstrates the quality you strive for in your own business. Consider the management, core competencies, competition and customers of the company you are considering.
8) Cash is king (or queen)
Avoid investments funded by borrowings. Losing your own money is one thing. Losing somebody else's is extremely harmful to your financial health.
9) Where's the income?
As an executive, you know that cash flow and net income are the lifelines of your business. Why should it be any different for your investments? Net income is great insurance in turbulent times.
10) Pay the tax
If you have taxes to pay on your investments, it means you have been successful. However, it doesn't follow that you should not look for ways to minimize your tax bill. Simply do not let tax questions drive your investment decision process.
The secret to turning volatile markets into fertile markets is to adopt these 10 habits. Volatile markets are a great time to "upgrade" your portfolio, as everything is on sale. As Warren Buffett once said: "Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well."
Ten habits of successful executive investors
Unless you're returning from a holiday on Mars, you have surely heard by now that the financial markets have had significant pullback over the winter months.
How bad has it been? For those of you with investments in stocks, you know the answer – severe. The S&P 500 was down over 20 per cent from peak (in October 2007) to trough (in March of this year), while the S&P/TSX Composite Index was down 18 per cent from its peak (in November 2007) to its recent bottom (reached in January).
Even worse – or better – is that the markets have bounced back since then. The S&P 500 in the U.S. is up 11 per cent from its bottom, while the S&P/TSX Composite Index here in Canada is up 16 per cent from the January trough. This kind of volatility is, if nothing else, enough to pull your hair out.
It is during turbulent times like these that your success in investing will be determined. So what is an executive to do? After working for many years managing investments on behalf of executives, I have observed 10 habits that have greatly influenced their investment success.
1) What's the game plan?
As an executive, surely you have an up-to-date business plan. Well then, why shouldn't you have an investment plan? We can refer to your plan as your decision-making framework.
2) Establish and review your goals
You have a set of business goals, and if you don't, you should. Your investments should be considered an extension of your business, and so you should set rational and measurable goals.
3) Be honest with yourself
Can you live with the volatility? Does your mood follow the markets? You must avoid making emotional decisions, which usually entail a version of selling low after buying high.
4) Stop thinking like an executive
No matter how much coaching, mind space or pressure you have devoted to your investments, once the purchase is made, you have lost a great deal of control over the outcome.
5) Stay calm but be decisive
There will be investment mistakes. How you deal with these mistakes has a significant impact on your success. Storms always pass; you must use them to your advantage.
6) Do your homework
You need to understand what you are investing in. If you can't devote the time, or don't have the knowledge to do it properly, find someone who will. Investing on "gut" instinct doesn't work!
7) Quality always wins
An investment in stocks is in fact a partial ownership of a company. Make sure your investment demonstrates the quality you strive for in your own business. Consider the management, core competencies, competition and customers of the company you are considering.
8) Cash is king (or queen)
Avoid investments funded by borrowings. Losing your own money is one thing. Losing somebody else's is extremely harmful to your financial health.
9) Where's the income?
As an executive, you know that cash flow and net income are the lifelines of your business. Why should it be any different for your investments? Net income is great insurance in turbulent times.
10) Pay the tax
If you have taxes to pay on your investments, it means you have been successful. However, it doesn't follow that you should not look for ways to minimize your tax bill. Simply do not let tax questions drive your investment decision process.
The secret to turning volatile markets into fertile markets is to adopt these 10 habits. Volatile markets are a great time to "upgrade" your portfolio, as everything is on sale. As Warren Buffett once said: "Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well."
Subscribe to:
Posts (Atom)