6 Financial Considerations When Growing Your Business

6 financial considerations when growing your businessTaking the next step with your business can be just as vital to its success as your first day of operation. As any owner knows, finances are central to commercial viability– but there is much to consider when growing your business. Keep reading for Liu & Associates’ introduction to the complex financial needs of business growth.

#1: Does your business have the appropriate funding?

Unless you have considerable savings or borrowing power, growing your business requires a considerable influx of capital. If you are searching for investors or elsewhere for funds, make sure they honour your values and share the same vision of the future. Once acquired, every dollar should be accounted for and put to work efficiently in the most impactful areas.

#2: What is your business reputation with its clients?

If you are considering growing your business, it is important to have a strong relationship with your customers. Sales, retention, quality assurance– these are just some of the important aspects of customer service that you should prioritize before expansion. Often, good client relationships will naturally help indicate when your business may be ready for growth.

#3: Does your business have a “brand?”

You may have the funds and a solid customer base, but it is extremely difficult to attract new business without recognizable branding, attractive design and a healthy social media presence. While unique products and services are important, clients are human– they are more likely to choose options with clean and clear design. Also, modern customers favour brands with engaging, non-repetitive online content that is updated regularly.

#4: Is your business ready to evolve?

If you want your business to stick to what it does best and keep doing it well, growth may not be the most prudent option. Businesses only thrive when they are equipped for the demands of their industry– refusing to change means you are more likely to be left behind. Remember: you don’t know what you don’t know! Consider speaking with financial professionals, industry consultants and even other business owners.

#5: Do you want your business’s scope to widen, narrow or remain consistent?

Growing your business does not always mean changing what you do, but it usually changes how you do it. If you plan on taking the next step, consider whether you want to increase your business’s market share or diversify its services. Each has advantages and disadvantages, but your success relies on how ready your business is to tackle the new challenges. If you want to maintain the scope of your products or services, you may want to delay plans for expansion.

#6: What is your business’s long-term goal?

Look ahead five or ten years– where do you see your business? Is it neck-and-neck with competitors? Do you hope to acquire other businesses? Would you rather sell it off and move on to your next project? Each answer to these means a different strategy and plan for growth, but all are attainable with a well-organized, detailed business plan.

The considerations above are only a brief summary of the reality of growing your business. Each point introduces a change that comes with growth– for a comprehensive discussion of their financial consequences, contact or visit Liu & Associates today!

COMPANION CREDIT: Can Pet Expenses be Tax Deductible?

can pet expenses be tax deductibleEveryone thinks their pet is the best… and they are right! This is common knowledge for most animal lovers and owners, but can your animal companion actually earn you tax credits? The short answer is no: Bella, Fluffers or Mr. Pickles likely does not qualify, no matter how good they are at cuddling or looking cute. Still, there are some cases where a portion of buying, training or feeding an animal can be used as a deductible. Keep reading for Liu & Associates’ guide to some of these benefits!

ANIMAL THERAPY OR SERVICE ANIMALS

Usually listed under medical expenses on income tax forms, you may qualify for benefits or credits if you or a dependent requires the assistance of an animal. Consider submitting the necessary receipts if you pay for regular animal therapy or the purchase, training and upkeep of a service animal.

FARM ANIMALS

If you own livestock, herding animals or guard animals in order to operate a business, you very likely can claim a portion of their initial purchase as well as costs of caring for them. Optimizing your tax return is vital for the successful operation of ranches and farms of any size or scale, so do not overlook the benefits and credits available to you.

ANIMAL TRANSPORTATION

Moving residences is one of the rare cases where your family pet(s) could earn you an income tax credit. Since moving means your pet(s) and the necessary supplies need to come with you, there are some accommodations for reporting any related costs. Also: if your business relies on transporting your animals, a portion of your fuel and maintenance costs should always be claimed as deductible.

CHARITABLE DONATIONS

If you give to shelters, rescues or other non-profit animal welfare organizations, always request a tax receipt when eligible. A charitable donation is one of the easiest ways to express your love for domestic animals while earning income tax credit. Costs related to fostering and sponsoring animals for certified organizations may also qualify.

JOBS WITH DOGS

Not just limited to dogs, animal ownership is a multibillion-dollar, worldwide industry– there are countless industries and professions that thrive within it. Always claim any eligible expenses directly related to your job! For example: a dog walker can claim a portion of their fuel and maintenance costs, if they use their personal vehicle to transport dogs to and from their clients’ homes.

The five scenarios outlined above are only some of the ways owning or caring for an animal could lead to income tax deductions, credits or benefits. For a full understanding, contact or visit Liu & Associates today with any issues, complications or concerns!

Family Trusts 101

One of the most common misconceptions people have about family trusts is that they’re only for incredibly well-off families. That couldn’t be further from the truth. Keep reading for our introduction to family trusts and how they can be beneficial to you!

What is a family trust?

A trust fund or family trust is a legal agreement two parties in regards to assets to be passed on. A trust can contain money, stocks, real estate, and/or other assets.

There are three parties involved in establishing a trust fund:

  1. The settlor or trustor – this is the person or entity who establishes the trust fund with the initial contribution. This can be a company, family member, or even a family friend.
  2. The trustee(s) – the person, people, or entity responsible for the management and administration of the trust fund. Typically this is a financial institution or legal entity, though in some cases it may be a family member.
  3. The beneficiary/beneficiaries – The person or people that will receive the benefits of the trust, usually children and/or grandchildren of the person who established the trust.

While the specific roles of each party will vary between different types of trust funds, they are required in every situation. There is a huge variety in the types of trusts available, including living trusts that become effective right away, revocable trusts that allow you to keep control and ownership of your assets, and irrevocable trusts which allows you to transfer ownership and control of assets over to the trustees.

What are the benefits?

There are a number of different benefits for setting up a family fund for both the settlors and the beneficiaries. For certain types of trusts, once an asset is placed in the trust it no longer belongs to the settlor. This means that the settlor would not be required to pay income tax on money made off of those particular assets. For beneficiaries, there is a similar benefit. Since assets within the trust do not belong to them, beneficiaries would still be eligible for things such as student aid.

One of the greatest benefits may be a sense of security for the beneficiaries. As opposed to handing out a single payment that could be wasted and spent irresponsibly, a trust can be set up with certain stipulation for beneficiaries. For example, you can dictate that the beneficiaries may receive a monthly or yearly payment as long as certain conditions are met. Furthermore, you can make specific guidelines on how the money can be spent (education, investments, etc.). A family trust is a great way to ensure that your children and grandchildren receive the maximum benefit from what you’ve passed on to them.

Is it right for me?

As mentioned earlier, trust funds are not exclusively for those who are well-off. Anyone who has assets that they would like to protect for future generations would benefit from at least exploring the option of a family trust. There are limitless options for family trusts, allowing you to choose something that best meets the needs and wants of you and your family. Don’t be afraid to explore your options!

For more great advice on family trusts and estate planning, contact the team at Liu & Associates today!

7 Most Forgotten Tax Credits, Benefits and Deductions

7 most forgotten about tax credits and deductions

 

While freelancers and business owners may be quite familiar with tax credits, benefits and deductions– it is no guarantee that you are getting everything that could be owed to you. Also, these opportunities often apply to anyone filing taxes… even if they did not earn any professional income in a given year. Keep reading for our top seven most forgotten and overlooked tax credits, benefits and deductions!

 

#1: Income-related costs

No matter how you earn your living, if you make taxable income– you are eligible to claim certain costs incurred in pursuit of it. While self-employed taxpayers are familiar with the many ways to claim a tax credit, you should not overlook them if you work for an employer. Commuting costs, business lunches and qualified expenses are just some the more commonly claimed credits.

#2: Mandatory expenses

If your profession requires you to pay for certain privileges or qualifications, you may very well be able to claim all or a portion as an income tax credit. Examples of such expenses are union dues, licensing exam fees and professional certification payments.

#3: Interest paid on student loans

This one is easier to remember, as the national and provincial student finance authorities issue tax forms to anyone paying back student loans. To make sure you do not miss out on these deductions: always keep your current mailing address and contact information on record.

#4: Credits for parents

Parents are busy people! It is understandable why taxes are not at the front of your mind, but credits and benefits can mean more money to raise your family. Always file your taxes to qualify for annual benefits for dependent children and be sure to review eligible credits related to childcare expenses.

#5: Medical costs

Tax credits can be earned through your own disability, the disability of a dependent, injury or illness, dietary requirements and many other conditions. Your health should be your first priority, so make sure you file your income tax by the deadline every year. The burden of your medical costs can be reduced by keeping your information current and providing the required documents.

#6: Moving deductions

Have you moved this year? Did you hire movers, rent a truck or use your own vehicle to transport your belongings? You are likely eligible to claim income tax credits for a percentage of your expenses– businesses may also qualify!

#7: Homeowner credits

Owning a home means you have a lot of responsibility, but just like maintaining and up keeping the property: your finances should always be in order. This does not mean paying your mortgage in record time, but it does mean taking advantage of every credit and benefit available to you. There are government programs that reward first-time owners, as well as those renovating or upgrading their existing homes.

The seven tax credits, benefits and deductions above are just a few of the most commonly forgotten– contact or visit Liu & Associates today for a comprehensive review of your eligibility.

What’s in a Year: Fiscal vs Calendar Years

fiscal vs calendar yearWhen it comes to running a business, a new business owner may overlook the fiscal year or tax year. While many business owners may default to utilizing the calendar year as their fiscal year, there may be advantages to choosing a different time period.

What’s the difference

A calendar year is relatively self-explanatory: January 1 to December 31. A fiscal year be any chosen start and end date within the calendar year as long as it is no longer than 53 weeks or 371 days. For example, a business that incorporates on July 1, 2018 could choose a year end of any date within the following 53 weeks. Once the year end date is chosen, it will remain the same year-to-year.

Taxes for businesses using the calendar year are due on April 30. Taxes those operating on a fiscal year are due 6 months following year end.

Typically sole proprietorships or partnerships utilize a calendar year, though they can request to use a different fiscal year in some cases. Corporations are always able to select a fiscal year if they so choose.

Pros and Cons

Arguably the greatest advantage to using the calendar year as your fiscal year is simplicity. It’s fewer random dates to keep track of amid meetings and bill payments. The calendar year is simple and it’s commonly used by the majority of businesses.

However, businesses who do choose to utilize the fiscal year generally do so for a strategic reason. For example, seasonal businesses may choose to shift their year end to reflect their busiest time of year. This is common with large retailers who benefit from the Christmas season. Deferring their year end by a month or two really allows them to judge how successful the holiday season was for them.

Another possible reason to utilize a fiscal year comes down to balancing income and expenses. This is particularly beneficial for businesses who have received a capital investment or some other source of funding. Ensuring that you receive and spend these investment within the same tax year ensures that you don’t find yourself in a bind come tax season.

Whether or not a fiscal year is a good option really comes down to two different factors: the type of business you run, and your own personal preference. For expert advice and financial planning for your business, contact or visit Liu & Associates today.

RESPs: What you should know

what you should know about RESPsIt’s no secret that the cost of a university education continues to increase every year. Planning for your child’s education now allows you to save as much as possible to give them a step up when it comes to post-secondary costs.

What is an RESP?

RESP stands for Registered Education Savings Plan. These are plans that allow parents to put aside money for their child’s education. RESPs aren’t limited to just a child’s parents. Any adult is able to open up and contribute to an RESP on behalf of a child.

The first iteration of an RESP dates back to 1974. The program was overhauled in 1998, with the Canadian government now contributing to RESPs as well through the Canadian Education Savings Grant (CESG). Some provincial governments also contribute to RESPs through various savings grants.

You can open up and RESP through most financial institutions and some scholarship dealers as well.

Are there any restrictions?

As mentioned above, anyone is able to open and contribute to an RESP. However, there is a lifetime contribution limit of $50,000. While there is no annual contribution limit, CESG can only be received on the first $2,500 contributions per year.

These are some of the general restrictions that apply to all RESP accounts. Individual RESP providers may have different requirements, so be sure to do your research when choosing a provider.

When should you start saving?

As with any type of financial planning, the sooner you start saving the better! Contributing to an RESP early on will ultimately lead to your child having more money saved up for their education. You can contribute to an RESP for up to 31 years after it’s been opened, providing plenty of time to accumulate savings.

There’s no time like the present to start thinking about saving for your child’s education. Liu and Associates offers personal financial planning services to help you reach your goals in a timely and efficient manner. Make an appointment with one of our accountants today!

Working from Home: What can you claim on your tax return?

what can you claim on your tax return when working from homeNowadays, business and their employees are connected more than ever– allowing increased flexibility when, where and how people complete their work. Also there is a rising number of people whose main income is self-employment, which has blurred the lines between are personal spaces and the workspace. Income tax law has always accounted for those that make their living from their living room… or anywhere else in the home for that matter! If you work from home or are self-employed, do not overlook the credits you can claim on your income tax return. For more information, read on for four fantastic facts from Liu & Associates!

#1: Self-employed vs. “Working from home.”

If you work for a business and they allow you to complete your work remotely– you are not self-employed and do not qualify for the same tax benefits unless your employer signs the appropriate form. Self-employed individuals are eligible for a much wider range of claims and credits, so it is important to distinguish between the two circumstances.

#2: Automobile costs.

In modern business, being mobile can be extremely important– which means you may use your personal vehicle for work purposes. When this happens, you are entitled to claim the cost you incurred for these specific uses. This means calculating how much gas you used, as well as the ratio of how much you use the vehicle for work versus how much you use it personally. Once totaled for the year, you may claim a percentage of these costs as a credit against your income tax.

#3: Pro-rated expenses.

Like we mentioned in the tip above, the ratio of personal and work use can be applied to many expenses. This process is called “pro-rating” the cost over time to fairly represent how much money is spent on each item over the tax year. Some categories of these expenses include: insurance premiums, mortgage interest payments, property tax payments, utilities, furnishings or equipment– refer to the Government of Canada’s guidelines for a more comprehensive list of options.

#4: Carryforward.

One of the best results of claiming your “business use of home” costs is even if you do not need the credits, they can be rolled over to the next tax year. This carryforward provision is especially useful for self-employed people who are only just starting out. They may not make enough income to require tax relief, so they can defer the benefits to a more profitable year.

The four tips above are only a sketch of the diverse and complex reality of income tax law. If you have questions or concerns about your situation, contact or visit Liu & Associates today!

ASK AN ACCOUNTANT: 4 Common Cryptocurrency Questions & Concerns

4 common cryptocurrency questions and concerns

 

Bitcoin, Ripple, Dogecoin, Etherium, Litecoin, Tether– in most cases you will either know all of these titles… One of them… Or none at all! Most people have at least heard the term “cryptocurrency,” but their grasp on the real definition might be limited. It is complex at first glance, but the cryptocurrency market works most like investing in a stock market. If you have questions or concerns about “crypto,” read our FAQ below and then contact or visit Liu & Associates!

 

Q: “Do I have to claim cryptocurrency earnings on my income tax return?”

A: Yes; the Canada Revenue Agency treats cryptocurrency as property, just like any other investment portfolio. Depending on your gains or losses, your cryptocurrency investment will be taxed as income or capital gains (see below). If you invest in high volume and trade on a daily basis, you may have to report your cryptocurrency earnings as business income.

Q: “Are investments in cryptocurrency taxed as capital gains?”

A: Yes, any added value earned through investing in cryptocurrency qualifies under the CRA’s definition of capital gains. This typically means you will pay taxes on an amount equal to 50% of these earnings at the same rate as your income. As stated above, high volume investors or “day traders” may be subject to different regulation and taxation.

Q: “Can you refer me to an accountant that specializes in cryptocurrency?”

A: There are very few financial professionals who practice exclusively in cryptocurrency, but it is indeed a budding industry. A service that advertises cryptocurrency specialty more than likely has the same amount of experience as any other modern accountant– regardless, it is always wise to verify these claims with practical solutions. Liu & Associates is happy to handle investment portfolios of all varieties, including those that include cryptocurrencies.

Q: “Cryptocurrency is anonymous, why should I report my investment?”

A: Cryptocurrency is a secure, anonymous investment in most cases, but each source has a finite amount that influences its trading value. In order to benefit from a high valuation, you have to withdraw some or all of your investment– converting it into dollars or another chosen currency. At this point, the anonymity is over and the CRA has every right to seek out these records to prove a case of tax evasion against you. Liu & Associates says… Always report all of your investments!

The four questions above are some of the most commonly asked of financial professionals operating in Canada today. We here at Liu & Associates are on the bleeding edge of business management and financial investment, so you can rely on our ever-growing expertise for your cryptocurrency needs. Make an appointment today!

How Your Business Can Benefit from a Bookkeeper

how your business can benefit from a bookkeeperBookkeepers and accountants are similar but they have different duties, even though the terms are often used interchangeably. Qualifications and education aside, just how much the two professions handle the scope and complexity of a business’ finances is the main division between them. If you are unsure if you require the services of an accountant or a bookkeeper, refer to Liu & Associates’ related articles to find out more. Once you have identified your business and financial needs, refer to the information below to learn how your business can benefit from a bookkeeper.

 

BOOKKEEPING COSTS

Only you can decide what your time is worth– that is why many struggle with the decision whether or not to hire a bookkeeper. Usually this indecision happens when a business reaches a level of revenue too complex for current employees to track, but also not varied enough to warrant an accountant. The following are some of the costs you can expect to incur when hiring a bookkeeper:

  • Accounting or bookkeeping software subscription;
  • Hourly or monthly fees (outsourced);
  • Benefits and annual salary (in-house);
  • Work-hours for recruitment, training and regular meetings.

BOOKKEEPING BENEFITS

No business owner succeeded by taking on unnecessary costs, but if you need bookkeeping services: it could end up saving money! Hiring a professional almost always means you believe that cash flow, investment strategy or other financial realities could be performing better. The next list outlines the most common benefits of bookkeepers:

  • Time and effort saved for other work;
  • Improved invoicing, collecting and record-keeping;
  • Lower likelihood of avoidable financial errors;
  • Choosing between outsourced or in-house adds flexibility.

Also known as doing a “benefit-cost analysis,” only someone who is very familiar with you or your business’ needs can know for sure if a bookkeeper is the right choice. If you are unsure, take time to review your finances or have it done by a reputable professional. Once you know the lay of the land, financially-speaking, you can move forward confidently when choosing whether or not to hire a bookkeeper. Questions? Concerns? Contact us here at Liu & Associates today for a wide range of financial services.

3 QUESTIONS: So You’ve Been Selected for a Tax Audit

3 questions: so you've been selected for an audit

 

As you may know, sometimes individuals or businesses are selected for an audit by the Canadian Revenue Agency (CRA). What you may not realize are the varied consequences that can occur should you not be adequately prepared. For a start, consider Liu & Associates’ three most common questions about tax audits. After that, bring your questions or concerns to one of our financial professionals today!

 

“How was I selected for an audit?”

CRA agents do not select audit candidates at random, they use a system of risk assessment that identifies returns that could be considered “high risk.” Some reasons you or your business may be selected for an audit are:

  • Finances unlike people or businesses in similar location and industry;
  • Return is meant to circumvent or avoid taxation;
  • Business always reports a loss;
  • Return has errors or instances of poor comprehension.

“What is expected of me in an audit?”

If you are selected, the law does require you to cooperate with your auditor– part of this is always keeping adequate financial record, whether you are chosen or not. Read your initial notice carefully and collect any records request of you, filling in any holes with supporting documents such as account statements. Always be familiar with your rights as a taxpayer and consider the appeals process carefully after your final assessment.

“Do I need to hire a professional?”

You may be skeptical about taking an accountant’s opinion, but we cannot stress the advantage you gain by employing a financial professional during an audit. Your ideal candidate should be deeply familiar with taxation and the associated laws– they should also be able to outline both best and worst case scenarios. If you are concerned with being able to afford an accountant with CRA fees and penalties on the horizon, proper organization and experience can actually save you money in the long run.

The above three questions are only a brief introduction to the world of tax audits and their consequences. If you or your business have been selected by the CRA, do not hesitate to contact Liu & Associates!