Tag Archive for Larry Stolberg

Professional Corporations

TaxConnections Picture - Government EmployeesOverview

For a number of years, provincial governing bodies of regulated health professionals (1) and other professional organizations (2) have allowed the incorporation of the professional practice. The major tax advantage of incorporation, is the ability to defer tax by retaining income in the corporation that would otherwise be taxed at a much higher personal tax rate if you earned the same income as a sole proprietor or as a partner.

Commencing in 2006, family members of doctors and dentists may hold non-voting shares of the professional corporation. Other professional corporations may not have family members as shareholders.

Non-voting shares may include both non-voting common and non-voting special shares. Common shares participate in the value of the corporation, preferred or special shares do not. The advantage in having family members as shareholders is that the corporation may pay your parents, adult children and spouse, dividends taxed at lower tax rates to finance tuition and other personal expenditures as opposed to you receiving the income and having to pay more tax at your marginal tax rate to finance the same expenditure. Dividends are not paid to minor children because they will be subject to tax at 32.57% (ie., kiddie tax). Read More

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Planning For Succession – Canadian Taxation

TaxConnections Blogger Larry Stolberg posts succession planning ideasPlanning For Succession (1)

Asset/creditor protection and the valuation of your business requires on-going attention.

By being proactive, say 5-7 years out, you are in a great position to minimize risk and maximize the value of your business.

The First Step

♦ If something happened to you today

• who would run the business?

• what income would you need?

♦ Valuation-how much do you think the business is worth if sold to an:

• outside buyer

• family member

♦ Do you have a Will, power of attorney, shareholders agreement? Read More

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Corporate Restructuring

TaxConnections Blogger Larry Stolberg posts about corporate restructuringExpansion, growth and new objectives may require some form of corporate reorganization. Often owner managers wish to add family members or key employees as shareholders. In order to avoid adverse income tax implications, the issuance of shares has to be implemented properly.

Family Members

First freezing the value of the present shareholders interest before issuing shares to family members is recommended to avoid the conferral of benefits to the present shareholder(s). Family shareholders may hold voting or non-voting, participating or non-participating shares. The opportunity to income-split dividend income to lower income bracket individuals as opposed to the higher income tax bracket shareholder may result in years of benefits, especially if the dividends will be used to fund post-secondary education and other expenditures.

Family Trusts

Generally a family trust will own non-voting common shares while the parent continues to hold voting shares. A properly structured family trust will provide the trustees with the discretion to pay dividends or capital from the trust to beneficiaries of the trust, thereby accomplishing an efficient income splitting strategy for family members. A T3 tax return for a family trust is due for filing on March 31st because the year end is always the calendar year. Read More

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