Employee Benefits – Some Tips and Traps

Christmas parties and other special events

Did you provide your employees with a Christmas party this year? In general, no taxable benefit will have to be reported for social events that are made available to all employees, provided the cost per employee is $100 or less...

I came across this article on a lawyer’s website in BC that discusses shareholders’ agreements and the importance of having one – the link is http://www.magellanlaw.ca/article-shareholders-agreement/.  It is a good read that summarizes what such an agreement consists of and why it is important.

I wholeheartedly agree that the time to put one in place is when the business begins and everyone is getting along.  This is even true in situations where a private company is passing on ownership to the next generation and there are multiple shareholders of a company (where mom and dad used to be the only shareholders).  A shareholders’ agreement should be reviewed and/or revised at the time a succession or estate plan is being worked on...

PRIVATE COMPANY OWNER – CAPITAL DIVIDEND PLANNING:

Many private company owners in Canada have accumlated wealth inside of their operating and/or holding companies.  Usually these amounts are invested in some type of investments that generate a return on the investment.  If the income generated includes capital gains, it may be possible to remove some of the funds inside of the company as a “tax-free capital dividend”.  In order for the divdends to be tax-free to the shareholder several conditions must be met:

1)  The dividend must be received by a Canadian resident

2)  There must be a sufficient balance in the Capital Dividend Account prior to the payment being made.

3)  An election form must be filed with the Canada Revenue Agency prior to the dividend becoming paid or payable.

4) ...

PRIVATE COMPANY OWNER PRE-YEAR END REMUNERATION PLANNING:

Very recently the Ontario government announced in it’s November 2013 Economic Update that they intend on raising the personal tax rates on certain types of dividends received from Corporations in 2014.   Small business owners may pay higher personal taxes simply because they take a dividend from their company on January 1, 2014 instead of December 31, 2013.

Every year it is important for small business owners to re-visit their remuneration strategy before the year starts (i.e. pre-planning for next year), during the year and prior to the end of the calendar year...

Many Canadians families either currently own or are considering the purchase of a cottage property. Normally they would simply pay for the cottage and register the title in the purchasers’ individual names. In many areas, due to limited supply of waterfront property and increasing demand cottage properties can have significant increases in value over a number of years.

When the original purchasers pass away or want to transfer or gift the property to the next generation there is a significant capital gain on the transaction. In Canada, the capital gain also means a significant cheque payable to the Receiver General to pay the taxes on the disposition.

A flexible alternative to holding the cottage property title may be a Family Trust.

What is a Family Trust?
A trust can be a useful estate p...