Companies with fewer than 100 employees make up 98 per cent of the businesses in Canada.
Home-based businesses are thriving with access to technology and tools available only to large companies just a few years ago. However, as small companies grow, many business owners start to wonder how they can get themselves and their companies on stronger financial footing. Here are three smart strategies to consider:
# 1 – Choose the right structure – A sole-proprietorship or partnership may be the simplest to administer but it may leave you vulnerable to creditors and liability. Incorporating comes with more record-keeping and professional expenses but it creates a separate legal entity to reduce personal liability.
Which structure is best for your business depends on many factors. Your lawyer and financial advisor can help you make the best decision.
# 2 – Protect your personal assets – No matter the structure, it’s important to receive proper legal and tax professional advice to create a creditor protection plan prior to issues developing.
One solution for personal savings is to hold the money in a segregated fund or Guaranteed Insurance Contract purchased through an insurance company with a named “family class” beneficiary. Assets held within the segregated fund and GIC benefit from potential creditor protection.
# 3 – Actively plan your retirement income. – Business owners may not have access to an employer-sponsored pension plan but they have options to diversify their retirement income..
They can choose to participate in CPP/OAS and build RRSP room like employees. At higher incomes, they may take advantage of the tax savings of an Individual Pension Plan.
Business owners may take compensation as dividends from their company to invest in TFSAs or non-registered accounts. Or they may take less income and leave the cash in their company or holding company for the tax advantages of capital gains and corporate investing.
Your financial advisor, combined with the advice of your legal and tax advisors, can offer strategies to protect your family while building tax efficient wealth and retirement plans. Whether you’ve just launched your business or have been running it for some time, speak with your advisor today.
Provided by Dan Allen, CFP, MFA, EPC, Financial Advisor with The Heritage Group, Guelph
