Reorganize your affairs for maximum tax savings
One way to maximize your business profits is to reduce your taxes.
Often, income taxes and other taxes could be significantly reduced if
only taxpayers were willing to plan ahead. taking some simple
steps to reorganize your affairs, you could save a fortune!
1. Are you splitting your business income?
You can pay reasonable wages to your spouse or children through your
incorporated or unincorporated businesses. If you’re not doing it,
you may be missing out on some real tax savings.
In the Canadian Federal Budget of February 16, 1999, measures were adopted
introduced to discourage income sharing with minor children through
family trusts. However, these measures do not apply to payment
Reasonable wages to family members. Therefore, this may be one of the
Last Ways to Legally Divide Leftover Revenue for Small Business
person with minor children
Obviously, the amounts paid must have some relation to the job
done. Of course, all required payroll taxes must be remitted
and proper records need to be kept.
Why not rearrange your affairs so that family members with little or
no income can perform tasks for your company and be paid by it? So,
can contribute their own income to the operation of
the home owner. This way, your company will pay little or no tax.
dependents and will have successfully transferred the taxable income
from your hands
2. Do you have to register for the goods and services tax?
Even if your business generates less than $30,000.00 per year in taxes
sales, you can still benefit from registering your business to collect
the Goods and Services Tax (GST). If you’re not doing it, you
you may be missing out on some real tax savings.
For example, you will pay GST on many of your businesses
bills. If you are not registered for GST, you must absorb this cost.
If you are registered, you can deduct the GST paid on such business expenses
(input tax credits) of the tax collected. many business people
expect to pay GST and it doesn’t really cost them anything since
deduct such amounts as entry tax credits from the GST they collect
of your clients.
In some cases, the quick method for calculating GST can actually
allow you to keep more of the GST collected than you would have
simply claiming the GST actually paid by you.
One factor to consider as well: if you are not registered for GST
in Canada, you are telling your clients that you make less than $30,000.00
per year in taxable sales or that you cheat. Is this the image you
do you want your customers to have?
3. Could you benefit from incorporating your business?
Although incorporating your business may result in increased
accounting and legal fees (for installation, additional tax returns and
minutes), the advantages of the incorporation can justify this addition
bills. You will not only enjoy limited liability by incorporating,
but you can also get significant tax savings.
Corporations are often subject to lower small business tax rates.
income. In Canada, sales of shares of qualified small companies
corporations can earn a capital gain of $500,000.00 for life
exemption. Certain tax incentives and government programs are only
available to incorporated entities. Additionally, corporations can
be used for division of income and estate, retirement and probate
planning goals.
4. Do you participate in tax planning throughout the year?
Some people only worry about their taxes during tax season. However,
you will save a fortune in taxes, legally, if you do tax planning
your concern throughout the year.
Can you make some changes to turn your hobby into a source of income?
business? Can you use that extra room in your house as a home office for
your business? Can you arrange to use your car more for business?
purposes and have you documented your mileage for business use? Can
arrange for more of your entertainment expenses to be business related
And have you noted the business purpose on the back of each receipt?
Do you make business and personal purchases, investments and other
expenses with tax savings in mind. Do you document your expenses?
Well why would you guys survive a tax audit? whenever you face
with a business or personal financial decision, do you think the tax
consequences?
Make year-round tax planning part of your business management mindset
and, thus, enjoy maximum tax savings. Yes, rearranging your affairs.
To factor in the tax implications, you’ll save a fortune in taxes.