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As a master sommelier, Elyse Lambert could usually be found on the floor of her restaurants, meeting with patrons and helping provide unforgettable food and wine experiences. But Lambert remembers the interactions were often hurried, with little time to really engage with clients and share the breadth of her expertise. That’s one of the reasons why the professional wine steward decided to break out on her own and develop her own business where she could immerse herself, and her clients, in everything wine.

Lambert says that having a great team behind her providing business and financial advice has been a key to her success growing the business. When her advisors said it was time to consider incorporating the business, not only as an efficient tax strategy but because it could help facilitate some opportunities for growth, she listened intently.

“The decision [to incorporate], was one that was led by financial advice,” Lambert says. “Yes, tax was very important, but it was also about building a future for the business and planning for my retirement.”

Incorporation isn’t right for every professional, says Annie Boivin, a Tax and Estate Planner with TD Wealth. Incorporation may offer some protection from creditors and liability as your company becomes a separate entity from you. With the right planning, it may also offer some tax advantages, ways to save for retirement, and help turn your company into a valuable asset that can grow and be sold down the road.

Boivin offers a few scenarios that may signal it could be time for a business owner to consider incorporating.

Consideration No. 1: When you have maxed out your registered accounts

If your debts are paid, your Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA) are maximized, and you are starting to accumulate savings, this can be a good time to consider incorporation. “When you have taken advantage of tax-efficient investment options, a corporation may help you become tax efficient with the rest of your income,” Boivin says. “The tax rate for active business income, earned within a corporation, can be lower than personal tax rates.”

Consideration No. 2: When you don’t need all your income to cover your costs of living

One key thing to consider when incorporating is that the money the company earns will belong to the company — it won’t become available for your use until you withdraw it from the corporation by either paying yourself a salary or declaring corporate dividends. Income withdrawn as salary or dividends will be taxed at your personal income tax rate. However, if you do not need all of the corporation’s income to satisfy your living costs, excess funds can be kept within the company, thereby deferring personal taxes until a later period, possibly until retirement. If your income in retirement will potentially be lower than in current years, amounts withdrawn from the corporation may potentially be subject to a relatively lower tax rate at that time.

Consideration No. 3: When your business income brings you to the highest tax bracket

Incorporating could offer some significant advantages, Boivin says, such as lowering your overall tax bill. This may become advantageous when your business begins doing well and you are netting approximately $210,000 after expenses, or when you hit the top tax bracket.

Boivin says that while there are advantages to incorporation, there are also drawbacks. It can be expensive to incorporate, for example, due to accounting and legal costs. As well, there can be an increased administrative burden, as a corporation requires annual legal and tax filings to remain in good stead with authorities. Incorporating is a big step and certainly introduces new complexities around taxes and managing your finances. As such, it should be done with the help and guidance of financial professionals.

| Denise O’Connell

It took 14 years of school for Dr. René Caissie to earn his medical degree, but he admits now that he wishes he had stayed a little longer to learn the business side of things.

“If I could go back in time, I would say ‘let’s go back for another year or two to get an MBA,'” he says.

A business degree certainly could have better prepared him to navigate the medical device industry he was launched into when he began creating his own reusable masks at the beginning of the COVID-19 pandemic. Back then, he wasn’t thinking about starting a business — he just wanted to help his frontline colleagues who were dealing with a frightening shortage of personal protective equipment.

Months later, Dr. Caissie is now the CEO of Dorma Filtration, the company he founded to manufacture his own line of injection-molded, Canadian-made, reusable masks for healthcare providers.

If you are just starting a business, like Dr. Caissie, you may not have the time or resources for an MBA to gain your business know-how. Annie Boivin, a Tax and Estate Planner at TD Wealth, and Eric Partee, Account Manager, Small Business at TD, offer these helpful ideas for entrepreneurs who want to improve their business acumen:

1) Assemble a solid team

“To support your project, to help grow your business, and to help you realize success, it can help to have a panel of qualified financial and business professionals,” says Boivin. Most businesses need financing, accounting help and good tax advice, and having a good team may help you become profitable faster and keep more of your money at tax time. “Find your trusted advisors and make sure they have an extensive overview of your entire situation,” says Boivin. And, she says, don’t forget to ask lots of questions and seek out information as much as possible.

2) Research your industry

Understanding the industry you’re operating in is one of the most important things you can do as a business owner, and there are many free resources online that detail economic outlooks and trends across different businesses. “Knowing where your industry is headed when it comes to new developments or technology enhancements will help prevent your business from becoming outdated and left behind,” says Partee. He also recommends paying close attention to your competition, their strengths and, just as importantly, where they may be falling behind. This can help a business owner to identify the niche that their business fits into, and potentially uncover an under-served client base.

3) Continue your education

You don’t need a MBA but many community or local organizations offer affordable introductory business classes outside of regular business hours. Gaining a working knowledge of basic business principles (e.g. accounting, human resources, leadership) may pay dividends over the long term. “Having a basic knowledge of accounting, for example, will enable you to better converse with your accountant,” says Partee. “It would enable you to ask relevant questions and better strategize your business growth.”

4) Grow your network

Formal and informal networking can be a boon to any new business owner and many business associations exist across the country where you can meet fellow business owners and entrepreneurs. “These associations can be a source of knowledge where a new business owner may glean advice from those who have already been there,” says Partee. He adds that you may also work your networks for referrals to trustworthy professionals, such as accountants and lawyers, which your business may require.

5) Plan and Protect

Starting a business comes with a lot of blood, sweat and tears. It can be important to plan for the possibility of downturns, as well as a time when you may be unable to run the business. “Putting partnership agreements in place, making business contingency plans, revising your personal estate plan and having powers of attorney can be done early on in a business,” says Boivin. “If you don’t have these in place when the time comes, your hard work could go down the drain.” Again, good advisors can help you to determine what you need. Keep in mind that this planning is fluid and can change, so ensuring you update these plans on a regular basis is also important.

You don’t need a business degree to start a business. You need to ask questions, be surrounded by professionals in different areas and hopefully you can learn from them in the process.

– Denise O’Connell, MoneyTalk Life

When maxillofacial surgeon Dr. René Caissie saw the lack of personal protective equipment available at the beginning of the pandemic, he took matters into his own hands. Today, as CEO of his own medical device company, he’s getting a crash course in what it takes to run a successful business. Annie Boivin, Tax and Estate Planner, TD Wealth, joins Kim Parlee to talk about how business owners like Dr. Caissie can increase their business acumen without going back to business school.

If you are an incorporated business owner, you may know that recent tax changes have made it more difficult to save for retirement. But there is a saving option called an IPP or Individual Pension Plan. Annie Boivin, Tax and Estate Planner at TD Wealth talks to Kim Parlee about how an IPP works.