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SMALL BUSINESS MANAGEMENT

SMALL BUSINESS MANAGEMENT. Chapter 13 Tax Management. 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.

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SMALL BUSINESS MANAGEMENT

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  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 1st $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

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