SMALL BUSINESS MANAGEMENT

1
SMALL BUSINESS MANAGEMENT

• Chapter 13
• Tax Management

2
Taxation and Small Business

• History of Taxation
• 1917 temporary tax
• Average _______ pays 52 of income to tax
• Table 13-3 10 increase needs 100,00 sales
• Income Taxes
• _______ of principles and frequency of
  legislative changes

3
1.  What books and records must be kept for a
business?

• Any _______ carrying on a business must keep
  books of accounts and records which provide the
  ability to calculate taxes payable.
• _______ documents include
• invoices for purchases and sales, deposit slips,
  cheques, and contracts
• For purposes of income tax, many books of
  accounts, _______, and source documents have to
  be retained for a minimum of six years

4
General Tax Management Principles Ten
fundamental areas

• 1. _______ tax planning
• through the year requirements
• 2. Tax _______
• Use the tax money during deferral period
• Tax laws may change which may reduce tax
  liability
• 3. Income _______
• Progressive tax system
• 4. _______ Tax Rates
• Income and expenses ie 30 30 cents on each
  dollar

5
General Tax Management Principles (cont.)

• 5. Deductibles
• _______ and legal expenses
• Not tax prep or incorporation
• Advertising
• Canadian Media
• business entertaining
• automobile expenses
• _______ expense
• Shareholder loan strategy
• _______ - deducted
• Improvements- depreciated
• office expenses

6
General Tax Management Principles (cont)

• 6. Government Tax-Related Programs
• Special Tax Rate Deductions
• Small Business Deduction (SBD)
• 12 on 1st 300,000, 22 after
• Manufacturing and Processing Deduction
• On income not included in sbd
• Investment Tax Credit
• Deferral Programs
• deferred profit sharing deduct now pay tax
  later when paid out
• registered retirement savings plan
• bonus deferral

7
General Tax Management Principles

• 6. Government Tax-Related Programs (cont.)
• Accelerated Capital Cost Allowance
• Small Business Financing Programs
• 7. The Incorporation Question
• corporation vs. proprietorship vs. partnership

8
General Tax Management Principles (cont)

• 8. The Remuneration Question
• compensation salary or dividend
• 9. Transferring the Business Capital Gains
• capital gains and family members
• 10. Goods and Service Tax (GST) and Provincial
  Sales Tax (PST)

9
Concept Checks

• 1. Why is it imperative that the small business
  owner have some tax knowledge?
• 2. What is continual tax planning?
• 3. What are two good reasons to defer taxes?
• 4. What is income splitting?

10
Concept Checks

• 5. What are the nine fundamental areas of tax
  management of which an owner should be aware ?
• 6. What is the definition of a deductible ?
• 7. List the six government related programs
  available to small businesses.

11
Concept Checks

• 8. Why would a company wish to incorporate ?
• 9. From a tax perspective, would it be better to
  take a salary or dividends from an incorporated
  company ?

12
Appendices

• A. Federal and Provincial Tax Rates for
  Individuals
• B. Tax Reference Tables