Applications for the Canada Emergency Business Account starts TODAY!

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The new Canada Emergency Business Account (CEBA) is available starting TODAY and is available through major banking institutions: TD, Scotiabank, BMO, CIBC, RBC, National Bank, HSBC and Canadian Western Bank.

The CEBA will provide interest-free loans of up to $40,000 to small businesses and not-for-profits, to help cover their operating costs during a period where their revenues have been temporarily reduced until December 31, 2022. Up to $10,000 of that amount will be eligible for loan forgiveness if $30,000 is fully repaid on or before December 31, 2022.

Eligibility

Organizations will need to demonstrate they paid between $50,000 to $1 million in total payroll in 2019

How do I apply?

Prior to applying, please make sure you have this information readily available:

  • Canada Revenue Agency Business Number (BN 15 digits)

  • 2019 T4 Summary of Remuneration Paid (T4SUM)

Apply online at the financial institution your business banks with:

Rules changed to allow more struggling business owners access to CERB, Wage Subsidy. Summer jobs program increased to 100%

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Help for Small/Medium Businesses & Entrepreneurs – 75% wage subsidy, $40,000 interest-free loan & more

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March 27, 2019 – Prime Minister Justin Trudeau announced programs and measures focused on helping Small & Medium Sized Businesses and Entrepreneurs cope with the economic consequences caused by the COVID-19 pandemic.

“With these new measures, our hope is that employers being pushed to laying off people due to COVID-19 will think again,” Trudeau said. “And for those of you who have already had to lay off workers, we hope you will re-hire them.”

Wage Subsidy increased to 75%

The Prime Minister has been under pressure from the small business community to boost the wage subsidy beyond the 10% initially announced to help keep people employed. Today, Mr. Trudeau announced the government will increase the wage subsidy from 10% to 75% to help keep employees on the payroll. This increase will be backdated to Sunday, March 15th.

“It is clear we have to do more, much more so we are bringing that percentage up to 75 per cent for qualifying businesses”

– Prime Minister Justin Trudeau

Canada Emergency Business Account (CEBA)

The CEBA will allow banks to offer $40,000 loans that will be interest-free for the 1st year which will be guaranteed by the government. If you meet certain conditions, $10,000 of the loan can be forgivable.

“To help you bridge to better times, we are launching the Canada Emergency Business Account. With this new measure banks will soon offer $40,000 which will be guaranteed by the government”

Defer GST, HST, Duty

The government will defer GST & HST payments, as well as duty and taxes owed on imports until June 2020.

“This is the equivalent of giving $30-billion of interest free loans to businesses”

Bank of Canada Rate Cut

Bank of Canada slashed its key overnight interest rate to 0.25%.

Full details and qualification requirements will be available on Monday.

Salary vs Dividend

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As a business owner, you have the ability to pay yourself a salary or dividend or a combination of both. In this article and infographic, we will examine the difference between salary and dividends and review the advantages and disadvantages of each.

When deciding to pay yourself as a business owner, please review these factors:

  • How much do you need?

  • How much tax?

  • Other considerations including retirement and employment insurance.

How much do you need?

Determine your cash flow on a personal and corporate level.

  • What’s your personal after-tax cash flow need?

  • What’s your corporate cash flow need?

How much tax?

Figure out how much you will pay in tax. Business owners understand that tax is a sizeable expense.

  • What’s your personal income tax rate?

Depending on the province you reside in and your income, make sure you also include income from other sources to determine your tax rate. (Example: old age security, pension, rental, investment income etc.)

If you decide to pay out in dividends, check if you will be paying out eligible or ineligible dividends. The taxation of eligible dividends is more favorable than ineligible dividends from an individual income tax standpoint.

  • What’s your corporation’s income tax rate?

For taxation year 2020, the small business federal tax rate is 9% . Please also remember, if you pay out salary, salary is considered a tax-deductible expense, therefore this will lower the corporation’s taxable income versus paying out dividends will not lower the corporation’s taxable income.

Other considerations

If you pay yourself a salary, these options are available.

  • Do you need RRSP contribution room?

As part of this, it’s worth considering ensuring that you receive a salary high enough to take full advantage of the maximum RRSP annual contribution that you can make.

  • Are you interested in contributing to the Canada Pension Plan?

This is unique to your circumstances and a cost-benefit analysis to determine the amount of contributions makes sense.

  • Do you need employment insurance (EI)?

For shareholders owning more than 40% of voting shares, EI is optional . There are situations worth careful thought such as maternity benefit, parental benefit, sickness benefit, compassionate care benefit, family caregiver benefit for children or family caregiver benefit for adults.

The infographic below summarizes the difference between Salary vs. Dividend.

We would also advise that you get in touch with your accountant to help you determine the best mix for your unique situation.

Contact Us

The Difference between Segregated Funds and Mutual Funds-Infographic

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Segregated Funds and Mutual Funds often have many of the same benefits such as:  

  • Both are managed by investment professionals. 

  • You can generally redeem your investments and get your current market value at any time. 

  • You can use them in your RRSP, RRIF, RESP, RDSP, TFSA or non-registered account. 

There are key differences including:

  • Contract

  • Fees

  • Guarantees

  • Resets

  • Creditor Protection

  • Probate

Contract:

  • Segregated Funds: Policy owner, Annuitant and Life Insurance company

  • Mutual Funds: Account holder, Mutual fund and Investment Company

Fees

  • Segregated Funds: Management Expense Ratio & Insurance Fee (Typically higher)

  • Mutual Funds: Management Expense Ratio

Why is this important?  

  • Since Segregated funds are offered by life insurance companies, they are individual insurance contracts. Which means….

  • Maturity Guarantees

  • Death Benefit Guarantees

  • Maturity and death benefit resets

  • Potential Creditor Protection (depends on the setup)

  • Ability to Bypass Probate

Mutual Funds do not have these features with the exception of possible creditor protection of RRSP, RRIF dependant on provincial legislation.

What are these features?

Maturity and Death Benefit Guarantees mean the insurance company must guarantee at least 75% of the premium paid into the contract for at least 15 years upon maturity or your death. 

Resets means you have the ability to reset the maturity and death benefit guarantee at a higher market value of the investment.

Potential Creditor Protection is available when you name a beneficiary within the family class, there are certain restrictions associated with this. 

Bypass Probate: since you name a beneficiary to receive the proceeds on your death, the proceeds are paid directly to your beneficiary which means it bypasses your estate and can avoid probate fees. 

We can help you decide what makes sense for your financial situation. 

Estate Planning for Business Owners

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Estate Planning for Business Owners

What happens when the children grow up and they are no longer dependent on their parents? What happens to your other “baby”- the business? Estate planning for business owners deals with the personal and business assets. Business succession planning is different because it deals with your business assets only and can also take place while you’re alive. You need to have an estate plan regardless if you have a succession plan or not. Estate planning for business owners is typically more complicated because the estate plan needs to deal with:

  • Complex business and personal relationships

  • Bigger and more intricate estates

  • Tax issues

  • Business Succession

When putting an estate plan for a business owner together, one of the most difficult conversations is around fair or equal distribution of assets. What if one of the children are working in the business how do you treat them? Before you begin putting a plan in place, we always encourage open conversation and a family meeting between the parents and children to provide context behind decisions and therefore it minimizes the surprises and provides an opportunity for children to express their concerns.

We’ve put together an infographic checklist that can help you get started on this. We know this can be a difficult conversation so we’re here to help and provide guidance.

Adult Children

  • Fair vs Equal (also known as Equitable vs Equal) – like what’s considered to be fair may not necessarily be equal. ex. Should the daughter that’s been working in the family business for 10 years receive the same shares as the son who hasn’t worked in the family business at all?

  • Are the adult children responsible enough to handle the inheritance? Or would they spend it all?

  • Who works in the family business? Is it all the kids or just one of them?

Family Meeting

  • Encourage open conversation with parents and kids so context can be provided behind the decisions, there are no surprises and allows the kids to express their interests and concerns.

  • Facilitate a family meeting with both generations, this will help promote ongoing family unity after death and decrease the chances of resentment later.

  • Start looking at considerations for a succession plan for the business. (This needs to be documented separately.)

Assets/Liabilities

  • What are your assets? Create a detailed list of your assets such as:

  • Home, Real Estate, Investments- Non registered, TFSA, RRSP, RDSP, RESP, Company Pension Plan, Insurance Policy, Property, Additional revenue sources, etc…

  • What about shares in your business? How does this need to be addressed?

  • What are your liabilities? Create a detailed list of your liabilities such as:

  • Mortgage, Loans (personal, student, car), Line of Credit, Credit card, Other loans (payday, store credit card, utility etc.)

  • Did you personally guarantee any business loans and how does this need to be addressed?

  • Understand your assets-the ownership type (joint, tenants in common, sole etc.), list who are the beneficiaries are for your assets

  • Understand your liabilities- are there any cosigners?

Make sure you have a will that:

  • Assigns an executor.

  • Provide specific instructions for distribution of all assets.

  • Consider a power of attorney for use when you’re incapacitated or otherwise unable to handle your affairs.

  • Always choose 2 qualified people for each position and communicate with them.

Taxes and Probate

  • How much are probate and taxes? (Income tax earned from Jan 1 to date of death + Taxes on Non Registered Assets + Taxes on Registered Assets, Taxes on Business Shares)

  • Are there any outstanding debts to be paid?

  • You’ve worked your whole life- how much of your hard earned money do you want to give to CRA?

  • How much money do you want to to give to your kids while you’re living?

Consider the following:

  • The use of trusts.

  • The use of an estate freeze if you wish to gift while you’re living.

  • The use of a holdco for effective tax planning.

  • Once you determine the amount of taxes, probate, debt, final expenses and gifts required, review your life insurance coverage to see if it meets your needs or if there’s a shortfall.

Execution:It’s good to go through this but you need to do this. Besides doing it yourself, here’s a list of the individuals that can help:

  • Financial Planner/Advisor (CFP)

  • Estate Planning Specialist

  • Insurance Specialist

  • Lawyer

  • Accountant/Tax Specialist

  • Chartered Life Underwriter (CLU)

  • Chartered Executor Advisor (CEA)

Next steps…

  •  Contact us about helping you get your estate planning in order so you can gain peace of mind that your family is taken care of.