Benefits of Incorporation for Canadian Businesses: Everything You Need to Know

Benefits of incorporation for small businesses in Canada:

- Liability shield

- Tax savings

- Lifetime capital gains exemption

- Selling Flexibility

What are the benefits of incorporation in Canada?

If you own a small business in Canada, here are four reasons why you may want to incorporate: liability shield, tax savings, lifetime capital gains exemption, and selling flexibility.

Liability Shield

If your business is not incorporated, then you’re a sole proprietor, meaning that you and your business are one and the same. Anything that happens to the business also happens to you personally, and vice versa. Your personal assets - your home, car, savings - are on the line.

Bare Trusts: The Basic Terms Every Canadian Business Owner Should Know

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

- What is a bare trust?

- What are the benefits of bare trusts?

- Avoiding property transfer taxes

- Easier change of property ownership

What is a bare trust?

Often used in real estate, bare trusts are legal structures that facilitate the separation of legal and beneficial ownership of a property. The process of creating a bare trust involves appointing a trustee (or ‘nominee’) to be legal owner of the property and hold the legal title on behalf of the beneficial owner. The name “bare trust” is derived from the fact that, unlike in other forms of trusts, the trustee/nominee of the bare trust has no other responsibilities or obligations with respect to the property other than to hold legal title.

Why Every Canadian Business Needs a Shareholders’ Agreement

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

• Why shareholders’ agreements are useful

• The legal power of shareholders’ agreements

• The shotgun clause

• Default provisions

Shareholders’ agreements are notoriously frustrating documents, mainly because they are long – in some cases, 60 pages long – and loaded with confusing legalese. Yet they are among the most important documents in any business owner’s arsenal, and having competent counsel on your team can help to eliminate some of that confusion.

Don’t believe me? Here’s a story that will change your mind…

Finding Your First Advisors: A Guide for New Entrepreneurs

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

- The first four advisors to your new company

- Bookkeeper

- Accountant

- Financial Advisor

- Corporate lawyer

When starting a business, most entrepreneurs will focus first on generating revenue, and rightfully so – profitability is, after all, the main thing that makes a business viable in the long term. But once you’ve crossed that threshold and your business has begun to take flight, that’s when you start building the next mechanism to keep your business in the air: a circle of key advisors.

But how do you find them? How should you bring them into your circle? Let’s dive in.

Advance Directives vs. Representation Agreements: Key Things to Know

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

- What’s an advance directive?

- What’s a representation agreement?

- What’s the difference between the two?

How to Draft a Will: The Basic Terms Every Canadian Business Owner Should Know

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

- What makes up an estate?

- What is an executor of an estate?

- What is power of attorney?

- How is power of attorney involved in estate plans?

Cap Tables and Ownership Stocks: The Basic Terms to Know

How to Avoid Lawsuits: A Guide For Canadian Business Owners

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

- How to protect your business from lawsuits

- Overcommunicate

- Shareholders’ agreements

- Corporate structure

- Holding companies

- Appropriate contracts

Power of Attorney: Everything Canadian Business Owners Need to Know

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

- What is power of attorney?
- The two types of power of attorney
- Who should receive power of attorney

What is power of attorney?

Power of attorney is one of the two most common ways people plan for a time in their lives that hopefully never comes – the day when they are physically or mentally incapable of making decisions on their own. Establishing power of attorney essentially entrusts another person to be seen, through the eyes of the law, as the person who makes all of your decisions, including those that deal with finances and other legal matters.

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.

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.