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This article was originally published in the Business Examiner Peace Cariboo and has been reproduced with permission.
PEACE CARIBOO - Many factors can influence the success of your business — not least of which is the legal structure of the business itself.
Unfortunately, there’s no “one-size-fits-all” solution, say local tax experts. The ideal structure to use depends on the unique aspects of your situation: your family, your business and your goals.
“Generally speaking, there is no single ‘right’ structure for a business, but there is a ‘best’ structure for every situation,” advises Mindy Wight.
Wight is a taxation specialist with MNP LLP in Prince George and is a member of the firm’s regional specialty tax group. The team of eight has more than 65 years of combined experience advising business owners on taxation matters such as income splitting strategies, corporate re-organizations, structuring the purchase and sale of businesses, and estate and succession planning.
“We work with businesses and organizations of all sizes and at every stage of their life cycle – from start up to succession and all stages in between,” she explains.
Wight cautions that using the wrong structure for your situation can have far-reaching tax consequences, so it becomes increasingly important to update your structure as your enterprise grows and becomes more successful.
In other words, don’t wait until you’re a big company to consult a tax specialist. It pays to put the right structure in place from the start.
“We see a lot of situations where the corporate structure of a family business or group of companies has become extremely messy and it puts the business owner at a distinct disadvantage,” Wight notes. “This is especially common for businesses that are in the growth or maturity phase.”
Very often the business has come through a period of rapid change and growth and has started to generate excess funds, accumulate significant business assets or add new business lines. While these are all good things on the surface, they can actually start to cause problems if the business is not structured correctly.
“Your corporate structure not only impacts the amount of funds that can be extracted from the eventual sale of your business through the Lifetime Capital Gains Exemption, but it can impact asset protection, income splitting opportunities and estate planning concerns,” Wight explains. “In addition, we commonly see businesses with only one shareholder, which results in lost tax planning opportunities.”
Fortunately, it is possible to reorganize your corporation to fix some of these common problems and put proper tax planning strategies in place. But it’s important to consider the big picture and not look at your corporate structure in isolation.
“Tax is a critical component to almost any business decision, but it’s not the only consideration,” advises Michael Johnson, a business advisor in MNP’s Terrace office. “Anything we do from a tax perspective needs to help the client move closer to their objectives – whether business or personal. It comes back to what you want to achieve.”
That’s why the taxation specialists at MNP work closely with the firm’s other business advisors and professionals to help clients look at their situation from all angles.
Johnson uses a medical analogy to explain how this plays out in practice.
“If you are not feeling well, you go to your family doctor who will diagnose the problem and either recommend an appropriate treatment or refer you to a specialist for further assessment,” he explains. “Our business advisors play a similar role in that we help you assess the overall health of your business, clarify your goals, identify specific challenges and opportunities, and then work with you to develop solutions and bring in the appropriate specialists as needed.”
In some cases, that means pulling in a corporate restructuring specialist like Wight. But it could just as easily lead to a conversation with a different type of tax specialist.
“For example, if we are working with a business owner who is expanding into the United States, we’ll involve our cross-border tax specialists,” Johnson notes. “Other clients may be having issues with PST or GST, so we’ll involve an indirect tax specialist. It’s whatever the client needs.”
Other speciality tax services offered by MNP include personal and corporate tax compliance, transfer pricing, Scientific and Experimental Development tax credits, and helping clients dealing with tax disputes federal or provincial tax authorities.
“At the end of the day, our goal is to be our clients’ partner in business,” Johnson concludes. “Whether we are working with a small owner-managed business, a high net worth professional or a large corporate group, our goal is to tailor a strategy that makes sense for their business and their goals.”
For more information, contact:
Mindy Wight, CPA, CA Taxation Specialist T: 250.596.8316 E:
Michael Johnson, CPA, CA Business Advisor T: 250.635.4925 E:
Related Topics:Business Structures
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