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 1 st $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