Investing as a Business Owner

June 6, 2019/in Blog, Business Owners, corporate, Investment, rrsp, Tax Free Savings Account /by L.S. Smith and Associates

Investing as a Business Owners

Many business owners have built up earnings in their corporation and are looking for tax efficient ways to pull the earnings out to achieve their personal and business financial goals such as:

building and protecting your savings
providing for loved ones
planning for retirement

Factors to consider when investing as a corporation:

What’s the purpose of the investment? First, think about what you’ll be doing with your savings. This will help dictate what savings vehicle is best suited for your situation. Then consider the following factors:

Taxes: As a small business owner, you have access to the small business tax rate which is typically lower than your personal tax rate. (See table below.) Also, as of January 1, 2019, the Federal Budget decreased the small business limit for corporations with a set threshold of income generated from passive investments.

2019 Corporate Income Tax Rates

Taxes on investment growth: Depending on what you invest in, you will want to review this as different asset types are taxed at different rates.

Timing: You can control the timing of the payout which means you could potentially defer paying out the money until you need it and determine if you’d like to pay it out as salary or dividend.
Creditor Protection: Sometimes, investments held inside a corporation can be vulnerable to creditors, therefore you may want to consider using a holding company or trust or pay out money to yourself personally. This can be complex and requires professional advice.
Capital Gains Exemption: If your investment grows too large, it may endanger your qualification for the lifetime capital gains exemption that ‘s available when shares of a qualified small business corporation are sold or transferred.

For business owners, before investing personally or corporately, it’s certainly worth seeking professional advice to ensure that it suits your individual circumstances.

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Comparing TFSA’s and RRSP’s – 2019

February 1, 2019/in Blog, Family, individuals, Investment, Retirees, rrsp, tax, Tax Free Savings Account /by L.S. Smith and Associates

If you are seeking ways to save in the most tax-efficient manner available, TFSAs and RRSPs can both be effective options for you to achieve your savings goals more quickly. However, each plan does have distinct differences and advantages / disadvantages. Let’s take a look at their key features:

While a TFSA can be used for any type of savings, an RRSP is used exclusively for retirement savings.
You can enjoy tax free withdrawals from your TFSA due to the fact that you make your contributions after you have paid tax, whereas the opposite is true for withdrawals from your RRSP (except in the case of lifelong learning plan and home buyers’ plan)
TFSA contributions aren’t tax deductible whereas RRSP contributions are i.e. with an RRSP, you can deduct the contributions that you make from your income when you file your tax return.
It is required that you use earned income to contribute towards your RRSP but this is not the case for your TFSA.
You can continue to contribute towards your TFSA for as long as you like, whereas you must close your RRSP and stop contributing towards it when you turn 71 and purchase an annuity or convert it to a RRIF with the savings that you have made within the plan.
You are able to specify your spouse as your beneficiary with both your TFSA and your RRSP, however there is a key difference with how your savings are treated upon your spouse’s death. With an RRSP, there will be taxes payable upon the monies left in the plan by your children who inherit it, whereas with a TFSA, tax is only paid on the increase in the value of the plan since the date of death in the year that it is inherited by your children. What’s more, no tax is payable if the value that they receive is less than the value of the TFSA at the time of death.

In summary, your individual circumstances will dictate which plan is the most appropriate for you, depending on your tax position and withdrawal intentions. The primary difference between both plans is the timing of the taxes payable i.e. if you want to defer the payment of your taxes, particularly if your marginal tax rate will be lower in retirement, an RRSP may be more beneficial for you. Alternatively, if your marginal tax rate will be higher when you plan to make withdrawals, a TFSA may suit you better.

2019 Financial Calendar

January 1, 2019/in Blog, Business Owners, corporate, individuals, Investment, rrsp, tax, Tax Free Savings Account /by L.S. Smith and Associates

2019 Financial Calendar

Financial Calendar for 2019 – All the deadlines you need to know to maximize your benefits!

Getting the best from a financial advisor

June 1, 2018/in Blog, Business Owners, Charitable Gifting, corporate, disability, Estate Planning, Family, Group Benefits, health benefits, individuals, Investment, life insurance, long term care, pension plan, Retirees, rrsp, tax, Tax Free Savings Account, travel insurance /by L.S. Smith and Associates

Working with a professional to help you to make sense of your finances can be a wise move, but for this relationship to work effectively it is important that you understand what to expect from your financial advisor.

What can your financial advisor help you with?

Defining your financial goals and creating a step by step plan or strategy to achieve them.
Planning for the future, including for retirement, future education or housing needs.
Choosing the mix of investments and assets that suit your goals, lifestyle, time horizon and appetite for risk.
Building a solid estate for your family to inherit in the future.
Choosing the most tax-efficient methods of saving and investing.

What should your financial advisor inform you of?

The range of services that they offer and how much and by which method you will compensate them.
Your mutual responsibilities and obligations towards each other.
What the planning process will look like and the documents that they will provide you with.

What will your financial advisor need from you or need to ask you about?

What your financial goals are.
What your personal circumstances – such as your marital status, any dependents, your job, earnings and tax situation.
Any investments or assets that you currently have – such as registered accounts, workplace pensions, property etc.
Your appetite for risk and investment preferences.
Information on your income and also your outgoings, including debts such as mortgages, loans or credit cards.
Whether or not you have a will, and its contents.
Your estate and inheritance planning situation.

If you’re looking to achieve your financial goals, talk to us. We can help.

2018 Financial Calendar

January 1, 2018/in Blog, Family, individuals, Investment, mortgage, pension plan, Retirees, rrsp, tax, Tax Free Savings Account /by L.S. Smith and Associates