October 20 – 26 - Small Business Week in Canada is Here

It’s the time to celebrate our innovative risk takers:  the Canadian Entrepreneurs! Small Business week is Oct 20-26!  And what a ride it has been! The economy and business environment has changed significantly for small business owners and now too, they are changing the environment as they transition in the workforce. But tax rules bring audit risk to new entrepreneurs as well as transitioning business owners.  In short, there are plenty of demographic, economic and tax triggers that will help you open new conversations during Small Business and beyond in Canada.  You may also wish to introduce to them    the DMA™ Small Business Management Program, at a special rate, available only until the end of the month.

Trigger #1 – New Business Acquisitions.   Many existing small business are ready to sell their business; in fact, 76% of owners plan to leave their business within the next 10 years, suggesting that the business landscape will be shifting dramatically to a new generation of business owners who will have acquired assets worth potentially $2 trillion.  Specifically

• 15% will exit within 12 months,
• 41% will exit within 1 to 5 years, and
• 20% will exit within 6 to 10 years.

For new entrepreneurs, these represent great new investment opportunities. However, financing is always a challenge.  Good news?  Interest rates are on their way down.   In all cases, they will need assets of their own to secure loans.    Advisors have a significant opportunity to help new entrepreneurs to get their financial house in order, that is, to build a strong balance sheet.

Trigger #2.  Business Succession Planning.  Will the business be sold to a third party or to a family member?  When? It's a point of discussion that can be proactively posed to every small business owner at least annually at tax filing time. A key issue in family businesses is whether a future transfer will be consider "genuine" - where the parents give up both ownership and control with adult children  managing the business.

Without specific planning details in place there is a threat that the capital gain on a non-arm's length sale may be "recharacterized" as a dividend.  If that happens capital gains treatment including access to the capital gains exemption and  reserving provisions will vanish too.

Other Triggers.  If sold to an unrelated third party there are other considerations:  access to the Canadian Entrepreneurs' Incentive (CEI) or the new Employee Ownership Trusts.(EOT).  Also consider:

• The General Anti Avoidance Rule ("GAAR")  has been changed.  GAAR was originally designed to be an all-encompassing rule used by the CRA to prevent abusive tax avoidance transactions.  New rules implemented on January 1, 2024 introduced an “economic substance test” to ensure that transactions do not occur for a tax benefit alone. The government has emphasized that  “It cannot be said that a transaction complies with the provisions of the Act if it doesn’t comply with the GAAR”.
• Refund Verification Processes  - This new focus extends to audit practices as well.  There has been a shift in taxpayer compliance expectations as well.  CRA will now want to know more about the rationale behind a taxpayer’s transactions, in particular before it issues tax refunds. In 2023 it has provided several new forms known as “Verification Questionnaires” to do so.  For entrepreneurs it is especially important to review two with their tax and financial advisors:

• RC683 – Refund Examination Program - Business Information
• RC685 – Refund Examination Program – Rental Information

• Corporate tax rate changes.  There have been some important changes to corporate tax rates in Canada for 2024. The general corporate tax rate is 15%, calculated as follows:

• The basic rate of Part I tax is 38% of taxable income
• Less 10% for the federal tax abatements =28% ( federal tax abatement.)
• After the general tax reduction, the net tax rate is 15%.

• Temporary Tax Rate Reductions are available for zero-emission technology manufacturers, provided that at least 10% of the corporation's gross revenue from all active businesses carried on in Canada comes from zero-emission technology activities. For tax years starting after December 31, 2023, the eligible activities that qualify for the reduced tax rates will be expanded to include the following nuclear manufacturing and processing activities: 

• manufacturing of nuclear energy equipment
• processing or recycling of nuclear fuels and heavy water
• manufacturing of nuclear fuel rods

Bottom Line:  It’s the time to celebrate our innovative risk takers:  the Canadian Entrepreneurs! Small Business week is Oct 20-26!  We are celebrating with Tuition Fee Reductions on Business Tax and Management Courses from Knowledge Bureau. 

As a DMA™- Small Business Management Specialist you’ll be position to help business leaders create and implement strategies, processes and plans that develop and enable business growth. Or take advantage of this educational opportunity to scale up your own enterprise to its greatest potential. Check out these special offers for the month of October!

• Diploma in Tax Preparation for Small Business – Start anytime – Available immediately -  $1995 until October 31  Save 33% 

• Designation in Small Business Management Special Save $200 off designation fees until October 31

Use code: BUSINESS, until October 31!

DMA-Small Business Management Program

This is executive education especially designed for small to medium sized enterprises poised to grow in a new economy. For professionals interested in Learning how to nurture micro businesses with strategic planning and the operational foundations to engage both new employees and new clients, while you help owner-managers transform into powerful leaders.

Especially for Professionals Who Are:

• Business Owners
• Entrepreneurs
• Accounting & Tax Practitioners
• Business Consultants

Curriculum:

Earn your diploma with these 3 courses delivering core professional skills:

• Leading Teams
• Building Business Plans
• Scaling Business Operations

Take these additional 3 courses focused on Mastery and Specialization to earn your Designation:

• Succession Planning
• Advising Family Business
• Investment Tax Strategies

Learn more and register here!