Navigating business growth can be overwhelming.
Through Zeifmans Entrepreneurship in Focus initiative, we’re supporting companies by sharing fundamental insights tailored to Canadian businesses.
Our 5-part Entrepreneurship in Focus video series aims to answer common questions about a variety of topics, including The Scientific Research and Experimental Development (SR&ED) tax incentive program, what you need to know when bringing in new investors and important tax considerations when working with US customers.
Dealing with new investors
The first video in our series focuses on how to efficiently bring in new investors. Before this step, Zeifmans Partner Ahmad Aslam says your company should have a proper plan in place. He also recommends that your business’s reporting requirements (such as financial statements, reviews and audits) be organized and up to date.
Once you’re ready for new investors, consider how best to structure the investment. Ahmad discusses the tax advantages of selling existing shares versus issuing new shares. If you opt to sell existing shares, you could benefit from the lifetime capital gains exemption.
Preparing to sell your business
Selling your business is a complicated, often emotional process akin to selling your first home. Jennifer Chasson, Zeifmans Partner and President of Springbank Capital, Corp. shares some important tips on how to best prepare for a sale.
According to Chasson, businesses looking to sell should start preparing one to three years in advance to maximize revenue and ensure a smooth process. It’s important to get your financial info organized, she says, ensure you have a strong management team to avoid relying too heavily on the business owner and prepare your documentation. Unaddressed, potential buyers could see these things as red flags, and complicate the sale.
What to know when working with US customers
Lorynne Schreiber, Zeifmans US Tax Director, explains what to look out for when selling goods or services in the US. Some important questions to ask yourself include whether you’re selling goods or services, how you’re selling those goods and, if services are provided, where they’re provided (the US or Canada). The answers to these questions will determine how much US tax you’ll need to pay.
Schreiber adds that while federal taxes often fall under the US / Canada tax treaty (which will likely protect you from federal tax exposure), US states aren’t bound by this agreement, meaning you may still have to pay state taxes. It’s vital to have a trusted tax expert who can guide you through these tax considerations.
Taking advantage of the SR&ED tax credit
Many businesses don’t realize they can benefit from Canada’s Scientific Research and Experimental Development (SR&ED) tax credit. According to Nathan Jung, Canadian Tax Director, many companies assume only high-tech businesses or large corporations can apply. This isn’t true. The tax credit can be claimed by any local company, as long as they’ve invested in research and development in the country.
Should you register your business for GST/HST?
In this video, David Posner, Zeifmans Partner, explains why not registering for HST in time is a huge misstep for new businesses. Once you start incurring expenses, you won’t be able to claim back the HST on those expenses if you’re not already registered.
If done properly, you’ll be able to get back the HST on your big ticket expenses, like purchasing equipment or paying contractors. The good news for business owners is that even if you register late, Zeifmans tax experts can still help you recoup part of the HST costs.
Posner urges business owners to save all source documents (like receipts and invoices) when trying to claim HST. Credit and bank statements aren’t enough, he warns.
The right help when your business needs it
Whether you’re starting a company, advancing an established business or preparing to sell, it’s important to have an experienced team to guide you.
For more advice on preparing your business for sale, applying for SR&ED, understanding HST/GST registration and other important business considerations, contact our team.