How Canadian business owners can best prepare themselves for the year ahead


The Christmas tree is long gone, the holiday lights have come down and schedules are back to some semblance of normal.

It’s quite literally time to get down to business.

A partner with Manning Elliott LLP, Jennifer Phipps, CPA, CA, explains how to do just that for business owners preparing any number of vital plans or investment strategies for the year ahead.

The first step is to check in with your advisory team: your accountant, investment advisor, lawyer and banker.

Make sure that those that you surround yourself with know their stuff and that they know how to convey sometimes complicated information in understandable language.

“You need to know that these are people that you’re really comfortable and confident with,” Phipps says. “Look to them to do what their specialty is, in order to give you peace of mind so you can focus on doing what matters to you, which is running your business.”

During the first few months of the year, many business owners will be working with their accountants for assistance with corporate year-end work and personal tax planning. As for investment advisors, they’ll be helping business owners with reviewing investment strategies for the coming year.

“From an accounting perspective, as a business owner you want to make sure you are getting advice on how best to maximize the tax deferral on your business income, and, that you are discussing what the best compensation strategy is for you based on the stage of business and life that you are at,” Phipps says.

With tax season on the horizon, Phipps stresses the need for business owners to plan around some vital points: the stage and financial condition of your business,  your personal cash-flow needs and your retirement planning.

Consideration of  small business tax rates, personal living expenses and RRSPs need to be taken into account when considering withdrawing excess earnings versus leaving that money in your company.

“It doesn’t make sense necessarily to pull more money out of your company than what you need to live on, but that changes constantly,” Phipps adds. “There is no strategy that’s going to apply when you’re 35 and raising a young family in the same way as when you’re 45 or 55. Compensation strategies should be talked about with your accountant and tax advisor on an ongoing basis, every year.”

And like with most things in life, timing can be key. For business owners, that means specifically starting to think about what retirement might look like even if it seems to be years away.

To this point, Phipps recommends deferring to a professional investment advisor and a financial planner. Sure, there are DIY online financial planning and investment tools available, but the benefit of having skilled advisors allows the business owner to focus on what they know best – their business.

“You should have an advisor that you feel you can really trust. Someone who can explain things to you so you feel like you can ask all the questions and gain a sufficient understanding so that you can sleep at night,” Phipps says. “That way, you don’t have to worry about it. It allows you to stick to your skills and strengths.”

As for the passing of time, this is where Phipps underscores the importance of consulting with a lawyer to draft up your will – everyone should have a will, but the importance of doing so only increases as we age, get married, have kids and build businesses.

Throughout the process, business owners need to consider what happens to their business in the event of death. Would the business be sold? Who could run the business in the interim? Could the business be run by a manager and provide ongoing financial support for family? 

“This step sometimes gets overlooked, especially by younger business owners,” Phipps says. “Nobody likes to think that something is going to happen to them, but you need a plan so that if something does happen, you know that your business and family will be looked after.” 

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