The 2 Best Strategies to Optimize Your Family Trust’s Taxes

In this article, we’ll cover the following topics:

Family trust tax planning strategies

Strategy 1: Multiplication of lifetime capital gains exemption

Strategy 2: The prescribed rate loan strategy

Let’s start by acknowledging that family trusts are a very complex subject. As such, this article is not meant to be comprehensive and there are many nuances that require expert legal and tax advice. To determine whether or not a family trust is right for you, it’s best to speak with your tax advisor and lawyer.

That said, there are two important tax planning strategies to keep in mind when considering a family trust.

Employee Stock Options: Everything Canadian Business Owners Need to Know

• In this article, we’ll cover the following topics:

• What’s a share?

• What’s a stock option?

• Why employee stock options are useful

• The best time to use an employee stock option plan

• How much to put into an employee stock option plan

• Tax consequences of employee stock option plans

• What happens to employee stock option plans if a company is bought

• What happens to employee stock option plans if an employee is fired or quits

4 Ways Canadian Business Owners Can Benefit From Using a Holding Company

In this article, we’ll cover the following topics:

• What’s a holding company?

• Four reasons to use a holding company

• To protect your business assets

• To maintain eligibility for lifetime capital gains exemption (LCGE)

• To use as an investment vehicle

• To control the timing of dividend payments

What Is a Family Trust, and Why Is It Useful to Business Owners in Canada?

In this article, we’ll cover the following topics:

• What is a family trust?

• How does a family trust work?

• Why are family trusts useful?

• When are family trusts needed for a family-held corporation?

• What is an “estate freeze”?

• What happens to a family trust if the family-held corporation gets sued or a dispute arises within the corporation?

In this article, we'll cover off some of the nuances of that and ensure that if you are thinking about making use of the principle rents exemption that you are doing it properly. So the first thing you want to keep in mind is that the exemption needs to be reported.The principal residence exemption allows you to sell a property and not pay any tax on it, the capital gain that you would normally accrue from the sale of that property doesn't apply. Since 2016, the CRA has required that this exemption be reported on your personal income tax return. So you want to make sure that you're working with your accountant to ensure that that is done.The second criteria is that residence exemption is only going to apply to a property that you actually live in. So a property the CRA uses the term 'ordinarily inhabited.' So while there's not a specific set number of days that the CRA sets out that you are actually resident inside of the home, it is the CRA if they assess and looking deeper into whether the exemption actually applies or not.

4 Things To Consider When Selling Your Business

You might be selling your business because you're ready to retire, because you want to pass it down to the next generation, or perhaps because you have just moved on and you want to pursue different business opportunities. There are some really key items that you're going to want to start thinking about.

Are you structuring your sale through assets or shares?

So goes the old saying, acquire assets, sell shares, with the notion being that it is somewhat more tax beneficial to purchase shares and slightly more tax advantageous for the seller to sell their shares. On the asset side, the rationale for this was that there used to be certain tax factors connected with a company's goodwill that made it highly favorable for a purchaser to buy those assets; those advantages are no longer as important as they once were. However, on the selling of shares, this is still very much the case. Because in Canada, there is a provision known as the lifetime capital gains exemption, which allows you to deduct up to $850,000 of the capital gain on the sale of your business. That is the price difference between the adjusted cost base, or the original purchase price of the firm, which is frequently minimal if you founded it yourself, and the real exit price. If you were able to take full advantage of the lifetime capital gains exemption on the sale of your company, and your company was worth $850,000.

Below are 10 key steps to ensure your estate plan is successful:

1. Document Storage

Make sure to store your estate planning documents safely. If you have a safe deposit box, store your important papers there. Give your executor a copy of your estate planning documents and advise them on where the originals are stored.

2. Make copies of your Will and provide to your executor and beneficiaries

It is in your best interest to provide a copy of your will to beneficiaries. This reduces the possibility of confusion. It is unlikely you will ever change your will, but even if you do, providing a copy of your Will to your beneficiaries does not mean you can’t change it.

3. Inform your Power of Attorney

If you have power of attorney, they should be able to access your safe deposit box. It may be a good idea to have your attorney as a signatory on your safe deposit box. Additionally, keep one original Power of Attorney in your home so that your attorney can retrieve your documents.

4. Create a list of assets and liabilities

Parr Business Law can provide you with an estate planning checklist. Please contact us. Additionally, many financial institutions provide an estate planning checklist. Be sure to also include the names of your lawyer, accountant, and other contact people. Additionally, make sure your list of assets and liabilities is always readily accessible to your executor and your attorney.

Having a Power of Attorney is a huge responsibility. If one is ever granted a power attorney by a loved one, the person who grants that authority (the “Grantor”) is putting you in charge of them if they were ever to become mentally incapacitated.

Here are 10 important things to know if you are holding a Power of Attorney.

1. Ensure you have a valid Power of Attorney and financial representation agreement.

Make sure your agreement is valid under the Power of Attorney Act (British Columbia). For instance, if you are appointed an enduring Power of Attorney prepared by a lawyer or notary public in British Columbia, it is likely valid and will continue throughout the Grantor’s incapacity. However, if the document is specific, conditional, prepared, signed in another jurisdiction, or hand-drawn, the document might not be valid. If this happens, you may not have the authority to act under the Power of Attorney. If you are unclear whether or not the Power of Attorney is valid, obtain legal advice as soon as possible. If you are not authorized to act as power attorney but do act, you will be held liable. If the Power of Attorney is invalid, consider handling the matter at the Public Guardian and Trustee or apply to become a committee of the individual.

Making a Charitable Legacy Part of Your Estate Plan

Throughout drafting many Wills in our law practice, we have noticed the majority of people do not provide for charity. Here are four top reasons why the current generation does not provide more to charity:

1. Misunderstanding of the Benefits of charitable giving

There is substantial misunderstanding surrounding the taxation of estates and the benefits of charitable giving. Many people do not realize that RRIFs and RRSPs will go into their income at the time of death (or, if there is a surviving spouse and a rollover of funds, on the spouse’s death). Obviously, this can create a substantial tax liability with items such as RRSPs, RRIFs, and capital gains. Because most charitable bequests are tax-deductible, there is a substantial benefit to providing for charity within your estate plan.

Having a Power of Attorney is a huge responsibility. If one is ever granted a power attorney by a loved one, the person who grants that authority (the “Grantor”) is putting you in charge of them if they were ever to become mentally incapacitated.

Here are 10 important things to know if you are holding a Power of Attorney.

1. Ensure you have a valid Power of Attorney and financial representation agreement.

Make sure your agreement is valid under the Power of Attorney Act (British Columbia). For instance, if you are appointed an enduring Power of Attorney prepared by a lawyer or notary public in British Columbia, it is likely valid and will continue throughout the Grantor’s incapacity. However, if the document is specific, conditional, prepared, signed in another jurisdiction, or hand-drawn, the document might not be valid. If this happens, you may not have the authority to act under the Power of Attorney.

Fundamentals of Canada's Intellectual Property Laws

It’s inevitable that a business will have to deal with intellectual property rights at some point. Many businesses are unfamiliar with the concept of IP rights and the steps they need to take to protect their business and creations.

When ideas are transformed into an actionable plan, they turn into a business. Ideas can be used for a variety of purposes; it only takes a bit of direction to make them work for you.However, in order to prevent piracy, intellectual property laws in Canada need legal defense. The following are some of the distinctions between the various forms of Intellectual Property laws in Canada.

1.Trademarks

Trademarks are a mixture of words, letters, tones, or designs that differentiate the company's goods or services from those offered by competitors. These trademarks may come to reflect the company's image over time. Some companies could not be able to use the trademark if you have an intellectual property rule in place.

When you are looking to incorporate a company in B.C., you need to really consider what you are going to name the company. There are two options when it comes to naming a company In B.C.

1.Numbered Company

The first option is to have a numbered company. Here, the corporate registry assigns a number followed by ‘B.C. Ltd.’. The assigned number is the incorporation number assigned to the company, so an example of a numbered company could be 1234567 B.C. Ltd.

5 Ways To Protect Your Family Financially in Case of Unexpected Passing

Family Estate Planning

Estate planning is so important, yet it is overlooked by many because it may be viewed as being challenging and complicated and bringing about morbid thoughts. However, one of the smartest things you can do is to leave all of your affairs in order so that there is no uncertainty or tough decisions to be made by your loved ones. When undertaking the process of Family Estate Planning, there are some strategies that can be used in order to reduce the financial impact on your estate following your death.

1.Have a Will in place

Life-interest trusts Will, Estate Planning for 65+

When thinking about estate planning, most people think about the usual documents; wills, powers of attorney and representation agreements. However, Canadians over the age of 65 are eligible for two types of life-interest trusts. These trusts essentially act as a substitute for a Will and address some of the disadvantages of having a Will.

Two types of life-interest trusts:

1.Alter ego trust – created for the benefit of the settlor (trust-maker) alone, during his/her lifetime; and

2.Joint spousal trust – very similar to the alter ego trust, except it is created for the benefit of the settlor and the settlor’s spouse, during both of their lifetimes.

5 Professionals to Consult Before Starting Your Small Business

There are many important steps that need to be taken prior to starting a small business. Consulting with professionals can help prevent negative legal consequences for you and your business down the line. Here are some of the most important professionals you should consult before starting your business.

1.An Accountant

Prior to starting a small business, it is important to have your finances sorted and learn about taxes, both of which an accountant can help with. An accountant will also be able to review your business plan and budget and ensure that your numbers are all correct.

Your accountant can also be a trusted advisor as your business grows. He/she may be able to help you think over opportunities that present themselves along the way.

What is a Joint Venture Agreement?

As a small business owner, it is important to know the ways in which you can explore different opportunities should you wish to. A joint venture is one of those ways and it is described below along with some of its pros and cons.

What is a Joint Venture Agreement

A joint venture is an agreement between two or more people or companies to work on a new business project together. The parties in this arrangement agree to combine their resources in taking on this new project. It is important to distinguish a joint venture from a partnership. In a partnership, the parties have come together to operate a “business in common”. Whereas in a joint venture, the parties have come together for a specific project, but they continue to retain full ownership of their own company.

The joint venture agreement is a legally binding document that should be drafted with the assistance of a lawyer. Here are some examples of what a joint venture agreement should include: the type of venture, the start/end date, details of each party, the resources each party is contributing and the responsibilities of each party moving forward. Working with a small business lawyer can be extremely beneficial when drafting this agreement as he/she will be working with your best interest in mind and can ensure that you are protected by the contract.

Advantages and Disadvantages of Buying a Small Business

Starting a small business can be an exciting time with the potential for great success. However, starting from the ground up is not your only option; you can also purchase an existing and established small business. This may seem like the more attractive option for some, but it is important to consider all of the Pros and Cons of Buying a Small Business and a few of them are discussed below.

Advantages

1. Everything is already set up

A lot goes into starting up a business, but most of the start up work has already been done when you are purchasing an existing business. You will be acquiring a business where there are suppliers in place, staff is trained, and procedures and protocols already exist. This can make the transition much smoother while you adjust to the new business. This seems much more attractive when compared to starting up your own business because you will have to invest a lot of time and money in order to get to this point.

What should you watch out for in contracts?

There are numerous reasons why you may enter into a contract while you are running a small business. The important part is to always know exactly what you are agreeing to and how a breach of contract may affect you and your business. Here are some factors you should consider before signing a contract…

1. Know who you’re dealing with

A contract will tie you with another party for a specific amount of time. It is therefore important that you conduct thorough research and get to understand exactly who the other party is. If it is a company you are dealing with, you can check with the Better Business Bureau to check their reputation. A small business lawyer may also be able to help if they have had dealings with this other party in the past.

How to Terminate an Employee: 4 Steps

Terminating an employee is not something anyone wants to do, but sometimes there is no other choice. As a small business owner, it is important that you take the appropriate steps when doing so, in order to protect yourself and your business.

Here is a brief outline of the steps that you should be taking.

1. Keep a record of issues

It is a good idea to note down all issues as they arise. You can address these issues as they come up and set in place a plan for improvement. Having a record of all issues and how they were addressed will provide you with justification for termination if there is no improvement from the employee. It will also help the employee understandwhy they are being terminated.

Most Common Reasons Small Business Owners Get Sued

Setting up a small business is a complex process and it requires investing lots of time and money. Having to deal with lawsuits can completely destroy the investment and small business. This is why it is critical that you take steps to put in place the appropriate protective measures that will protect you and your business. Here are some common reasons why small business owners get sued and ways to avoid them.

Liability

Liability is possible in almost every business and it is impossible to negate all risks of liability. However, you can take out various types of insurance to protect yourself and your business as much as possible. This can include but is not limited to business liability insurance, product liability insurance, property insurance and cyber liability insurance. The types of insurance you get is specific to your business needs and a small business lawyer can help you determine what is necessary.