Ed Rempel CFS

Ed Rempel Top Key Note Speaker at The Canadian Financial Summit

Ed Rempel is a well known Canadian “Financial” Keynote Speaker and shares his enthusiasm and many years of experience to primed financial audiences that want, need and deserve more and better insight and information. Join Ed Rempel a senior financial industry expert with a host of other top speakers at the Canadian Financial Summit. www.canadianfinancialsummit.com September 13-16 Online Event.



How Self-Employed Workers Can Deduct Phone Costs on Their Tax Returns

Most entrepreneurs today will tell you how important it is to have a smartphone for your business. What they may not tell you is that you may be able to write off phone expenses every year on your taxes. Here’s how to deduct your cell phone bills when filing taxes.

Calculating Your Deduction

cell phone bill

Image via Flickr by TheBetterDay

You can deduct your cell phone bills from your taxes if you file as self-emloyed or if your total business expenses combined with other specified deductions exceed 2 percent of your total gross income. If you want to take this deduction, it’s essential to know exactly how much time was actually used for your business from your phone. It’s likely that less than 100 percent of your cell phone time was used for business purposes, so the IRS will not allow you to deduct your entire phone bill.

Because of this, you can only deduct the percentage of your bill that represents how much your phone was used for your business. For example, if 60 percent of your phone time was spent talking to clients, then the IRS will allow you to deduct 60 percent of your annual phone bill from your taxes. Many times the numbers won’t be so cut and dry, so when in doubt, underestimate the percentage. Unusually high amounts can result in an audit.

Keep Phone Records

In case of an audit, it’s important to retain copies of your itemized phone bills. The IRS will need to be able to see who you called and for what purpose as well. Keeping detailed records on a calendar or in a spreadsheet will go a long way in making sure you get the deduction you’re due.

When the tax year is over, don’t be quick to throw out your records. The IRS can audit anyone up to seven years after any tax year, so if you’re subject to an audit five years down the line, being ready with those old records will help.

Deducting With a Family Plan

While it may seem like a hassle to deduct your bill if it’s part of a family plan, the process is actually simple. Determine how much of the bill per month is yours, which is especially easy with a carrier like T-Mobile, which simply divides the total cost of the monthly bill by how many lines are in use. Check your carrier for plan details so that you can accurately report and deduct your phone bill on your taxes.

Having a Separate Phone for Personal Use

While not practical for everyone, having two separate phones, one for your personal use and one for business is beneficial to some. The IRS will even allow you to deduct the entire cost of the phone – the initial purchase and the monthly bills – if the phone was exclusively used for your business. The LG V20 is a high-end smartphone with the latest technology and a large screen that makes it great for self-employed entrepreneurs who need to keep in contact with clients through emails and phone calls.

Where to Claim Deductions
When tax season comes, it’s important to know exactly which forms to fill out. It can be easier if using a service like TurboTax or H&R Block, as they’ll walk you through the steps and show you at every step how to get the biggest refund. If you’ve decided to do your taxes yourself, however, make sure you fill out Form 1040 and Schedule A if you’re filing as an individual or fill out Form 1040 and Schedule C or Schedule C-EZ if you’re filing as self-employed.

If using Schedule A, you’ll also need to fill out Form 2106 or Form 2106 EZ, which will document your itemizations. Be warned that if filing this way, the government will only allow you to deduct the amount of your bill that exceeds 2 percent of your total yearly income. It may be safer in this case to take a standard deduction or to file as self-employed.

If filing as self-employed, simply fill out line 48 on Schedule C or C-EZ and write in the total amount on line 27. No further paperwork is required.

Deducting your cell phone charges has never been easier for today’s self-employed. Simply follow these guidelines and you’ll be on your way to a bigger deduction.


Employee versus Independent Contractor

“The difference between slaves in Roman and Ottoman days and today’s employees is that  slaves did not need to flatter their boss.”
 – Nassim Nicholas Taleb, BS, MS, MBA, PhD is a scholar, statistician, and author of the book, “The Black Swan”


Written by Steve Nyvik, BBA, MBA, CIM, CFP, R.F.P.
Financial Planner and Portfolio Manager, Lycos Asset Management Inc.


The exploitation of labor conjures up images of workers laboring in sweatshops for 12 hours or more a day, for pennies an hour, driven by a merciless overseer.  Employment in Canada has evolved – some might argue just enough to keep abreast of changes in provincial employment standards, where the payer offers low wages and has control over how you work.

When starting one’s career, one likely has to take whatever they can to make money and to gain work experience.  But for highly educated or experienced workers, there exist some types of work where the payer doesn’t control every aspect of what to do and how to do it.  It is in these types of roles where respect and satisfaction are more likely to be found and where one is treated as a professional.

Where one can be considered as an independent contractor, such status can come with valuable tax benefits of being able to deduct a wide range of business expenses and taxable income being subject to the small business tax rate (for 2016, the combined federal and BC corporate tax rate on the first $500,000 of active business income is 13%).

So, if you are the type of person that wants to be in business as opposed to working for someone, let’s look at some of the obstacles you’ll need to navigate.


Personal Services Business

To be able to claim a wide range of business expenses and enjoy the small business tax rate, your business cannot be considered to be a Personal Services Business (“PSB”) under 125(7) of the Income Tax Act.

A Personal Services Business carried on by a corporation in a taxation year means a business of providing services where:

  • an individual who performs services on behalf of the corporation (an “incorporated employee”), or
  • a person related to the incorporated employee

is a specified shareholder (i.e. owns 10% or more of the company) of the corporation and the relationship between the provider of the service and the entity receiving the service could reasonably be regarded as an employee/employer relationship.

As most consultants will own more than 10% of their company, the issue is that of whether you are in an employee / employer relationship.


Are you an Employee or Independent Contractor?

There is no one, definitive test of whether a worker is an employee or an independent contractor.  Such a determination requires consideration of a wide variety of factors and each situation requires an independent assessment.  The key is determining whether the worker is performing services as a person in business on his or her own account or as an employee.

The Canada Revenue Agency guide, “RC4110 Employee or Self-employed?”, tells you the process that the CRA goes through in making an assessment.  They look at several elements to determine whether the responses better reflect a contract of service (employee) or a contract for service (independent contractor) for tax purposes:

1. Intention of the parties

– whether the parties intend the relationship to be one of employer / employee or independent contractor.

To decide the parties’ intentions, the CRA examines a copy of the contract and receive testimony from both the worker and the payer to ascertain the actual nature of the working relationship.


2. Control

Control is the ability, authority, or right of a payer to exercise control over a worker concerning the manner in which the work is done and what work will be done.  When examining the factor of control, it is necessary to focus on both the payer’s control over the worker’s daily activities and the payer’s influence over the worker.  It is the right of the payer to exercise control that is relevant, not whether the payer actually exercises that right.

Indicators of an employment relationship

  • The relationship is one of subordination. The payer will often direct, scrutinize, and effectively control many elements of how and when the work is carried out.
  • The payer controls the worker with respect to both the results of the work and the method used to do the work.
  • The payer chooses and controls the method and amount of pay. Salary negotiations may still take place in an employer-employee relationship.
  • The payer decides what jobs the worker will do.
  • The payer chooses to listen to the worker’s suggestions but has the final word.
  • The worker requires permission to work for other payers while working for this payer.
  • Where the schedule is irregular, priority on the worker’s time is an indication of control over the worker.
  • The worker receives training or direction from the payer on how to do the work. The overall work environment between the worker and the payer is one of subordination.

Indicators of an independent contractor relationship

  • A self-employed individual usually works independently.
  • The worker does not have anyone overseeing his or her activities.
  • The worker is usually free to work when and for whom he or she chooses and may provide his or her services to different payers at the same time.
  • The worker can accept or refuse work from the payer.
  • The working relationship between the payer and the worker does not present a degree of continuity, loyalty, security, subordination, or integration, all of which are generally associated with an employer-employee relationship.


3. Ownership of tools

– generally independent contractors provide their own tools and equipment to accomplish that work. If the payer provides a furnished office and a computer, it may point to an employment relationship.  Contractual control of, and responsibility for, an asset in a rental or lease situation is also considered under this factor.

What is relevant is the significant investment in the tools and equipment along with the cost of replacement, repair, and insurance. A worker who has made a significant investment is likely to retain a right over the use of these assets, diminishing the payer’s control over how the work is carried out. In addition, such a significant investment may place the worker at a risk of a financial loss.

Indicators of an employment relationship

  • The payer supplies most of the tools and equipment the worker needs. In addition, the payer is responsible for repair, maintenance, and insurance costs.
  • The payer retains the right of use over the tools and equipment provided to the worker.
  • The worker supplies the tools and equipment and the payer reimburses the worker for their use.

Indicators of an independent contractor relationship

  • The worker provides the tools and equipment needed for the work. In addition, the worker is responsible for the costs of repairs, insurance, and maintenance to the tools and equipment.
  • The worker has made a significant investment in the tools and equipment and the worker retains the right over the use of these assets.
  • The worker supplies his or her own workspace, is responsible for the costs to maintain it, and does substantial work from that site.


4. Subcontracting work or hiring assistants

Indicators of an employment relationship

  • The worker cannot hire helpers or assistants.
  • The worker does not have the ability to hire and send replacements. The worker has to do the work personally.

Indicators of an independent contractor relationship

  • The worker does not have to carry out the services personally. He or she can hire another party to either do the work or help do the work, and pays the costs for doing so.
  • The payer has no say in whom the worker hires.


5. Financial Risk taken by the worker

– Employees usually don’t have any financial risk as their expenses will be reimbursed, and they will not have fixed ongoing costs. Self-employed individuals may pay fixed monthly expenses even if work is not currently being done.  Both employees and self-employed may be reimbursement for business or travel expenses so they consider only expenses that are not reimbursed by the payer.

Indicators of an employment relationship

  • The worker is not usually responsible for any operating expenses.
  • Generally, the working relationship between the worker and the payer is continuous.
  • The worker is not financially liable if he or she does not fulfil the obligations of the contract.
  • The payer chooses and controls the method and amount of pay.

Indicators of an independent contractor relationship

  • The worker hires helpers to assist in the work. The worker pays the hired helpers.
  • The worker does a substantial amount of work from his or her own workspace and incurs expenses relating to the operation of that workspace.
  • The worker is hired for a specific job rather than an ongoing relationship.
  • The worker is financially liable if he or she does not fulfil the obligations of the contract.
  • The worker does not receive any protection or benefits from the payer.
  • The worker advertises and actively markets his or her services.


6. Responsibility for investment and management

– Is the worker required to make any investment in order to provide the services? A significant investment is evidence that a business relationship may exist.  The CRA will also consider if the worker is free to make business decisions that affect his or her profit or loss.

Indicators of an employment relationship

  • The worker has no capital investment in the payer’s business.
  • The worker does not have a business presence.

Indicators of an independent contractor relationship

  • The worker has capital investment.
  • The worker manages his or her staff.
  • The worker hires and pays individuals to help do the work.
  • The worker has established a business presence.


7. Opportunity for profit and risk of loss test

– employees generally don’t have an opportunity to earn profit (beyond their normal salary), nor do they risk a loss. If fewer clients come in, they generally still get a paycheque.  Contractors on the other hand, have both the opportunity for profit, and the risk of loss.  They have to pay for overhead expenses, and may not earn enough income to cover those expenses.

Self-employed individuals have the ability to pursue and accept contracts as they see fit.  They can negotiate the price (or unilaterally set their prices) for their services and have the right to offer those services to more than one payer. Self-employed individuals will normally incur expenses to carry out the terms and conditions of their contracts, and to manage those expenses to maximize net earnings.  Self-employed individuals can increase their proceeds and/or decrease their expenses in an effort to increase profit.

The method of payment may help to decide if the worker has the opportunity to make a profit or incur a loss.  In an employer-employee relationship, the worker is normally guaranteed a return for the work done and is usually paid on an hourly, daily, weekly, or similar basis.  Similarly, some self-employed individuals are paid on an hourly basis. However, when a worker is paid a flat rate for the work done, it generally indicates a business relationship, especially if the worker incurs expenses in doing the work.

Indicators of an employment relationship

  • The worker is not normally in a position to realize a business profit or loss.
  • The worker is entitled to benefit plans that are normally offered only to employees. These include registered pension plans, and group accident, health, and dental insurance plans.

Indicators of an independent contractor relationship

  • The worker can hire a substitute and the worker pays the substitute.
  • The worker is compensated by a flat fee and incurs expenses in carrying out the services.



Being an independent contractor as opposed to an employee takes a greater amount of risk.  There could even be times when you have little or no work.  And when the tough times come, you may be more vulnerable to your services being terminated and may be the first to be let go.  But with that greater risk comes the greater flexibility in doing the work the way you think it should be done.  As a result you might have greater job satisfaction.

You may have to invest in training to keep up-to-date and you have to secure your own benefits.  You may need to spend time marketing your services to secure new business.  And of course, being independent can result in significant tax savings.

To give up such lucrative tax status, freedom as to how you work, and be labelled as an employee, one should receive valuable training and skills development, have opportunities for advancement, and be entitled to employment benefits, paid time off and statutory holidays, and possibly accrue pension benefits.

An employee also has one additional advantage when it comes to their job coming to an end (other than for cause).  An employee will have an entitlement to severance or notice in lieu of severance.  An independent contractor has no such entitlement – their role can end at any time.

I hope that this article has been insightful to help you determine the type of role that makes best sense for you.  If you are interested in working with an investment adviser that you can talk to about your work, benefits, pensions, and quality of work life issues, then please call me, Steve Nyvik, at (604) 288-2083 Extension 2 or email me at: Steve@lycosasset.com.

Managing Company Income

“You must pay taxes. But there’s no law that says you gotta leave a tip.”

–Morgan Stanley advertisement


Written by Steve Nyvik, BBA, MBA, CIM, CFP, R.F.P.
Financial Planner and Portfolio Manager, Lycos Asset Management Inc.

Understanding how different types of income are taxed is the starting point to learning how to manage tax on your income and reduce overall family taxes.  In this article we’re going to look at personal and corporate income tax rates and then make some observations which you might discuss with your tax accountant to see if there are opportunities to improve your tax planning.

Income Earned Personally

Generally speaking, as an individual, your income and dividends from a private corporation are taxed in one of the four categories below:

  • Dividends from public corporations (such income is considered as Eligible Income for the preferred dividend gross-up and tax credit),
  • Dividends from a Canadian private corporation (such income is considered as Non-Eligible Income subject to a different gross-up and dividend tax credit resulting in a higher amount of taxes),
  • Ordinary income (this includes wages net of CPP and EI, interest income and foreign dividends although any tax withheld may be partially offset by a foreign tax credit), and
  • Capital Gains (where only one-half the gain is included in your income which is taxed as Ordinary Income; the other half is a tax-free gain)




Income Earned through a Canadian Private Corporation (a “CCPC”)

Income earned in a private corporate is typically classified as being either: (i) Active Income, or (ii) Passive Income – this generally being your portfolio income.

Active Income is then characterized based on whether it qualifies for the Small Business Deduction (the first $500,000 of taxable income) or not.

Passive income is divided into:

  • dividends from Canadian corporations,
  • interest income, and
  • capital gains (where only one-half the gain is included in your income; the other half is added to your Capital Dividend Account where an election can be made to pay out to your personally a non-taxed capital dividend)





Number 1:          For all passive income, the corporate tax rates are higher than the highest personal tax rate for each type of income.

This higher tax on passive income is punitive, so we need to either:

  • find a deduction against such income and avoid that high tax, or
  • pay out a dividend of the after-tax income assuming that the company tax less any dividend tax refund plus personal tax becomes competitive to the personal tax rates.

Number 2:          Active Business Income that qualifies for the Small Business Deduction is taxed at a lower rate than all personal marginal rates of income if earned personally (see Exhibit 3 below as to the Ordinary Income compared to the 13% corporate tax rate on Active Income).

The difference in tax ranges from 7.06% to 34.7% (see Exhibit 2 as to the 13% tax rate on active income qualifying for the Small Business Deduction and Exhibit 3 as to the tax rate on Ordinary Income – which includes business income earned personally).  This is a tax deferral as we have to pay tax when we take that after-tax income out of the company.

Company Active Income is taxed preferentially to incentivize people to create and grow small businesses which are responsible for most of our country’s jobs.

Once we take out this income, the tax deferral ends.  If we pay a dividend out equal to the after-tax income, our total income tax burden (personal tax plus corporate tax) is slightly more than if we had earned the income personally (see Exhibit 4 and compare to Exhibit 3).







Offsetting Income

If a company earns both passive income and active income, any bonuses or employment income taken goes first to offset active income.  Once our active income is used up, then the remaining salary is offset against our passive income.  This is exactly the opposite of what we desire.  So, if we have both active and passive income in the same company, a bonus doesn’t achieve our goal to minimize tax.

But what if we dividended out the after-tax passive income?  Exhibit 5 shows that the result is a marginal tax rate ranging from 12.70% to 47.79%.  In effect, the marginal tax rate difference varies with taxable income.  In the lower tax rates, dividending out passive income results in lower tax (eg. 12.70% versus 20.06% for taxable income to $38210) and at the high tax rate results in slightly higher tax (48.33% versus 47.70% for income over $200,000).  So one corporation can serve your needs.



Having two corporations – one for active income and one for passive

An alternative way of doing things is where all after-tax passive income is dividended out to an investment holding company.

The key reasons for this include:

  • To segregate your investment assets and any insurance from potential creditors of your business;
  • To maintain your corporation as a Qualifying Small Business Corporation. The principal advantage of this is access to the Small Business Capital Gains Exemption through time.
  • It makes it easier for a banker or investor to gauge the performance of the active business through time (and you then have financial statements and tax returns to back this up). And if you take on a partner in your active business, they don’t inadvertently become partners in your other assets.



This article has explored the tax rates of various types of income to help give you some insight to how you might manage income and whether to incorporate an investment holding company.  Your next step might be to talk with your tax accountant to see if you are managing your company income tax efficiently.  It also makes sense to review with your financial planner and portfolio manager so that they understand the tax planning in place, tax carryforward info (unusued contribution room, capital losses carryforward), and taxation of your income (like your marginal tax rates) so they can help you create a tax efficient portfolio.

If you are interested in having an investment adviser knowledgeable about taxes, then please call Steve Nyvik at (604) 288-2083 Extension 2 or email him at: Steve@lycosasset.com.

Chinese Money Exodus

“A fool and his money are soon parted”
– Dr. John Bridges’ Defence of the Government of the Church of England, 1587


Written by Steve Nyvik, BBA, MBA, CIM, CFP, R.F.P.
Financial Planner and Portfolio Manager, Lycos Asset Management Inc.


If I were a Chinese national, I might worry about myself and my family as my basic human rights and freedoms are not protected.  I might want my children elsewhere so that they can have a better future.  And I might also be worried about the possibility of the confiscation of my wealth.  These kind of worries likely explains the emigration of Chinese people and the emigration of their money.  If I don’t try to get my money out and the Yuan devaluates, my wealth in foreign currency terms evaporates.  If I let that happen, then I am the fool – hence the quote!

Last year, Chinese millionaires maxed out the quota for EB-5 visas under the U.S.’s Immigrant Investor Program, and recently it was reported that 90% of Australia’s Significant Investor visas were given to Chinese nationals. All over the world, immigrant investor programs are being flooded with applicants from China.

China imposes restrictions on the ability to convert one’s Yuan to a foreign currency.  Source: http://www.eb5investors.com/blog/spotlight-on-chinese-currency-restrictions

This currency restriction protects China’s foreign currency reserves and avoids the potential for hyper-inflation.  We can go back in history and see many examples where hyper-inflation has occurred in currency restricted countries – take alook at Venezuela, Iran and Jamaica.

There are exceptions to this foreign currency restriction, like for overseas property purchases and emigration and such conversions do not constitute money laundering.  Such exceptions may explain why specifically real estate property values in cities like London, Sydney, San Francisco, Singapore, Vancouver and Toronto have skyrocketed.  As a result, property is becoming unaffordable for many middle income people and rental vacancy rates in Vancouver are now under 1% resulting in rental price rises.

With significant pressure to do something, the British Columbia government has recently announced a new “Additional Property Transfer Tax” effective August 2nd, 2016.  Source: http://www2.gov.bc.ca/assets/gov/taxes/property-taxes/property-transfer-tax/forms-publications/is-006-additional-property-transfer-tax-foreign-entities-vancouver.pdf

In addition to this tax, there is the possibility that the City of Vancouver will implement a vacancy property income tax.

I can appreciate the good intention of the BC provincial government and City of Vancouver to introduce such laws.  However, as a financial planner, I believe that the laws being put in place may not achieve the intended results.  Furthermore, I don’t think introducing these type of taxes considers the bigger picture.  My question is, “Can the immigration of wealthy and educated people to Canada and the “housing of part of their wealth here” not generate positive economic benefits for the Canadian people?”

If any type of tax were to be structured with the goal of benefiting Canadians that also recognizes the plight of the Chinese resident, a win-win situation could be achieved.

A vacancy tax is an interesting idea, but it is not easy to prove that a property remains vacant.  And in many cases, I believe such a tax could be easily avoided.  (I personally like the idea of a higher tier of property tax – could be say three to five times the amount of current tax for those who are non-residents; this way they are contributing to the expenses of the city).  I would also encourage hiring more city workers to help get building applications approved much more quicker so more housing units may be built.

I challenge our government to develop tax measures that (i) are beneficial to Canadians – homeowners and those that are not, (ii) are effective and have a likelihood of generating significant tax revenues, (iii) treat our Chinese brothers and sisters well and welcome them and their money to Canada.  Let’s help keep Canada as the best country in the world to live in!

So let’s get back to our Chinese national and see how he will likely get around the new Additional Property Transfer Tax:

1. Make the owner a Canadian resident or Canadian citizen

  • A pregnant Chinese national might come to a hospital in Richmond, BC to have her baby –  the child can now be a home owner without being subject to the tax.  This also opens the door for the wife and children to immigrate;
  • have a Canadian buy the property, put into a corporation and then at some point sell the shares to you (we have to be mindful of the possibility of anti-avoidance tax provisions);
  • make the property owner an entity that is not a ‘Foreign Entity’
    (i)  have a Canadian Trustee of a Canadian Trust which owns a Canadian corporation that buys the real estate;
    (ii) Canadian corporation that buys the property is owned by a second Canadian corporation (holdco) that is owned by a Canadian Trust which might have a foreign person controlling it or is a beneficiary.

2. Buy property that is exempt from the tax

  • buy non-GVRD real estate or property in Tsawwassen, Whistler, or the Okanagan – who cares where if it helps you get your money out.  You can always switch to GVRD residential property once you become a Canadian resident;
  • buy property that is non-residential property and seek other avenues to convert your Yuan to foreign currency; eg. You might then be able to buy office property, industrial / commercial property, agricultural land – maybe the property has the ability to rezone to residential.

You can expect wealthy Chinese nationals, who have been smart enough to figure out how to get their money out of China, are more than capable to get around these new tax measures.  See: http://articles.economictimes.indiatimes.com/2015-11-09/news/68134067_1_mongkok-hong-kong-chinese-customs

Will we soon see a correction in real estate prices?

When we look at housing affordability, I don’t expect housing to get any cheaper in terms of Market Price to Household Income, Market Price to Rent or Market Price per square foot.  It is just as likely to get even more expensive if the flow of funds from China continues.  It is unlikely for prices to really drop until flows from China subside, a significant rise in interest rates, or a depression occurs (a recession might not do the trick as there are likely renters or people outside Vancouver who would buy on any weakness).

I still remember during my MBA studies speaking with Germans who told me they never dream of buying a home but instead buy nice clothes, have fun and go on nice vacations.  Don’t forget Vancouver is a highly desirable city in terms of climate, location, safety (you can still walk almost anywhere and feel relatively safe), protection of human rights and freedoms, low pollution, good educational system, and tax free gains on Principal Residence.  Renting should only be considered for short periods of time.  Renting is really throwing away your money.


If you are new to Canada, considering moving to Canada or considering housing some of your wealth here, and you’d like to work with an advisor that is respectful and capable, please call me: (604) 288-2083 Extension 2 or email me: Steve@lycosasset.com.


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Reduce your taxes

“Every man is entitled, if he can, to order his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be”
– Lord Tomlin in IRC v. Duke of Westminster, 1936.

Written by Steve Nyvik, BBA, MBA ,CIM, CFP, R.F.P.
Financial Planner and Portfolio Manager, Lycos Asset Management Inc.

Tax is a significant expense.  Wherever we can reduce or defer your taxes, we have the opportunity to put more monies to work in order to grow and get retired earlier or provide a larger legacy to your children.  Reducing or deferring taxes is generally not something that’s done at the last minute.  Your most significant tax savings typically will involve structural changes so that income gets generated and taxed at the lowest tax rates.

The Five Principles of Tax Planning

While it would be impossible to summarize all of the opportunities to reduce or defer taxes, we’ll talk about the general principles of tax planning and provide some examples of these techniques.

1. Income Splitting

Income splitting involves taking an income and spreading it among several taxpayers; or having the income taxed in the hands of a lower income taxpayer.

For example, due to our graduated tax rates, your family pays less tax where two people (say a husband and wife) pay tax on incomes of $50,000 each versus one person having to pay tax on an income of $100,000.

Similarly, it might make better sense to arrange for your inheritance to be received by a Testamentary (Will) Trust with multiple beneficiaries, than for you to receive your inheritance personally.  That’s because the Trust might be able to spread its income among lower taxed beneficiaries (and also have some income taxed in its hands at its low tax rate), resulting in a lower level of family tax.

For professionals or business people earning more money than they spend, it might make sense to incorporate and subject that income to the small business company tax rate.  In addition, there’s an opportunity to income split and pay reasonable salaries and/or dividends to family members based on their duties, responsibilities and share ownership.   This could save you 30% or more in taxes.

Other opportunities to split income among family members include:

  • granting a fair market interest investment loan to a lower income spouse who in turn invests in a portfolio to generate a high level of income;
  • giving a business loan to a lower income spouse to generate business income; and
  • contributing to a spousal RRSP or giving money to your spouse to contribute to their Tax Free Savings Account (TFSA).

Unfortunately, you cannot arbitrarily decide who’s going to claim what amounts for income; otherwise everyone would try and split their income.  So strategies to split income must be structured correctly and used with great care.

2. Income Shifting

Income shifting involves strategies that result in income that would otherwise be taxed in a high tax rate year to be taxed in a low tax rate year.  Income may be shifted by changing the timing of deductions or choosing the timing of income realization.

For example, let’s say you plan on selling a rental property in a year or two with a large gain that would be taxed at a high tax rate.  Rather than making your full RRSP contributions when you’re in a lower tax bracket, you may defer making contributions until the year of the sale.  Or, where cash is not needed right away, you might be able to create a capital gains reserve in order to spread the gain at the time of sale over a five year period (this involves the receipt of a Promissory Note instead of cash).

Income shifting also includes deciding how to raise cash to meet your immediate needs while trying to minimize the family’s long-term taxes payable.

For example, if you have money in your holding company, this might involve remuneration planning (deciding on the mix of salary and dividends) to withdraw monies from your corporation.  Or it might involve deciding whether to take early RRSP withdrawals.  (Caution: One should not normally take income early without having done some future retirement cashflow projections.)

3. Investment Selection

Investment selection involves choosing different types of investments that are eligible for full or partial tax exemption.  Examples include:

  • boosting returns on your bonds by buying a tax-preferred Prescribed Annuity;
  • holding bonds in your RRSP/RRIF and holding equities personally;
  • exempt insurance policies (these are permanent insurance policies whereby the excess amount of premium not needed to pay the current insurance expenses is invested within the policy and grows within the policy tax-deferred);
  • $813,600 Small Business Capital Gains Exemption; and
  • owning real estate that qualifies for the Principal Residence Exemption).

Investment selection might also include putting in place a Buy-Sell agreement for your private corporation funded with exempt life insurance in order to minimize taxes on your death.  Here some of your corporate owned assets are converted to an insurance asset that can be paid out of the company tax-free on your death.

4. Tax Deferral

A tax deferral strategy attempts to delay when tax will be paid.  Deferring tax means you might eliminate the tax this year, but you may have to pay eventually.  Generally tax deferral has two advantages:

  • It’s better to pay a dollar of tax tomorrow than it is to pay a dollar of tax today – that’s because you can invest those monies today to grow to meet your needs; and
  • tax deferral typically puts the control of when to pay the tax in your hands. As a result, you may be able to choose to take the income in a year when you are in a low tax bracket (like deferring the income to a year when you are retired or to a period when you become a non-resident).

Examples include the use of RRSPs/RRIFs, Registered Education Savings Plans, Individual Pension Plans, Retirement Compensation Arrangements (RCAs), and Deferred Profit Sharing Plans.

5. Tax Shelter Investments

Here one invests in specific types of investments that generate substantial deductions or credits to minimize taxes.  In some cases, these investments have little investment merit but simply provide a mechanism to defer tax.  The idea is that the generated tax savings is treated like an interest free loan providing cash for investing.

Examples include:

  • Film and software shelters;
  • Oil and gas and mining flow-through shares;
  • venture capital corporations;
  • leveraged real estate and real estate limited partnerships.

In my experience, with the exception of leveraged real estate and real estate LPs, few tax shelters have worked well due to Canada Revenue Agency aggressively attacking these investments.

Don’t Overlook Tax Deduction Opportunities

Whenever you’re contemplating a major change to your financial affairs, it’s a good idea to discuss this with your tax accountant to ensure that your plans are done tax effectively.  For example, let’s say you’re planning to buy a home.  If you borrow to buy the home, then the resulting interest expense is not generally deductible as the borrowing was for a personal purpose.  If however, you liquidate your personal investment portfolio, buy the home with the cash proceeds, and then borrow money to replace your investment portfolio, then you’re borrowing for investment purposes.  As such, the interest expense, or a portion thereof, may be deductible.  The difference can mean thousands of dollars of tax savings each year!

Where we fit in

Although we are not tax experts, our training, education and dealing with affluent families may assist us in spotting opportunities to help you reduce tax.  Should we see an opportunity, we would look to discuss the situation with you or your tax accountant.  Your tax accountant is the person who is trained in tax and would be in the best position to help you minimize taxes.

Where you don’t have a tax accountant or need tax advice, you might speak with Steve Nyvik.  Steve can provide you with referrals to tax professionals that our clients have had satisfactory experiences with who are proactive and do planning to help reduce your family tax bill over your lifetime.

Plan Your Business Exit

Do you have a plan in place to ensure you get a great price for your business should you become sick, disabled, die or when you decide to retire?


Why you need to plan ahead

If you own a business that’s growing or at least making you a decent living, chances are it may be worth a fair deal and quite possibly represents one of your most valuable assets.  So to ensure you get paid what it’s worth if you intend to sell it, or to minimize taxes on passing it to one or more of your children, you need to plan ahead for that day.

And since your ‘exit’ may not be at the time of your choosing – should you become sick, disabled or die, you need to plan now!

Without a succession plan secured with a Buy-Sell Agreement or a Shareholders’ Agreement, your business might:

  • not survive your death,
  • survive but be worth substantially less as your intended successor chooses not to pay a ‘high price’ for your business,
  • survive but materially hurt as customers are taken by competitors or ‘stolen’ by disenfranchised employees.

Your planning should consider the business acumen/capability and desires of your family members and employees in addition to your needs.  This can affect who you might sell to – be it family members, a partner, key employees, or even a supplier, customer or competitor.

You might even find that the most profitable solution might be to “grow” your own successor.  By hiring a younger person with the right skills, similar integrity as yours, and working closely with them for a few years, you’ll increase the odds that you can dictate a premium price.

The more time you have to plan, the greater the chances you’ll get more money after tax.  It takes time (read years) to find the best successor who is willing to pay the price you want, establish a Buy-Sell Agreement or Shareholders’ Agreement, fund the agreement to guarantee payment to your family should you die, get the successor up to speed with your business so that he or she has the skills needed, and ensure the structure will qualify for a tax effective transfer.

Selling assets or selling shares?

When you sell your incorporated business, you’ll have to decide between two general approaches.  Either you can have the corporation sell assets of the business, or you can sell shares of the corporation.

1. Taxation on the Sale of Shares to an Arm’s Length Party

If you sell the shares of the operating company, the disposition of shares results in a capital gain or loss.  The amount by which the proceeds of disposition exceed the Adjusted Cost Base of the shares is a capital gain; one-half of the capital gain is a Taxable Capital Gain (and this amount is taxed like investment income).

If your shares are held by you personally and are considered “Qualified Small Business Corporation Shares”, “Qualified Farm Property” or “Qualified Fishing Property”, up to $813,600 of your gain may be exempt from tax.  If your Family Trust holds these qualifying shares, it may be possible to multiply this exemption by allocating capital gain proceeds amongst beneficiaries such as you, your spouse, adult kids, and parents.

Your capital gains exemption is reduced, however, by investment losses.  The amount that your exemption is reduced by is the Cumulative Net Income Losses (CNIL) over all previous years.  The CNIL itself is increased by these amounts: interest costs on investment loans, carrying charges and interest on any business that you do not have direct control over, losses on partnerships or co-ownerships, rental or leasing losses and capital losses deducted versus capital gains that aren’t eligible for the exemption.  The CNIL balance is reduced by investment income you have received over the years including interest income and dividends.  So, you might plan to clean this up by taking relatively low cost dividends over a few years.  The exemption may also be restricted if you ever claimed an Allowable Business Investment Loss (ABIL) in which case you need some capital gains that are taxable.

 2. Taxation on the Sale of Assets to an Arm’s Length Party

No capital gains exemption is available if you sell business assets.  So from your point of view, it’s better to sell company shares.  If you sell the assets from your company, the proceeds from the sale are taxed inside a company.  You’ll also have GST/HST sales tax on asset sales.  You then have to pay tax a second time on withdrawals from the company.

How the proceeds are taxed depends on the type of assets sold and the income generated.  If you are selling depreciable assets, such as equipment, this results in recaptured depreciation if the sale proceeds exceed the Undepreciated Capital Cost (“UCC”) up to the original purchase price, thereafter you’ll have a capital gain.  Recaptured depreciation is included in income and taxed as active business income.  If sold for less than UCC, one has a deductible terminal loss.

The sale of non-depreciable non-inventory assets, such as land and building or shares of an operating company, result in a capital gain equal to the sale proceeds less Adjusted Cost Base.  One-half of capital gains is included in income and taxed as investment income (assuming it is on account of capital and not as an inventory item being sold).  The non-taxed half is added to the Capital Dividend Account where one might elect to pay out a non-taxed capital dividend.  The sale of land may result in land transfer tax.

Gains on the sale of intangibles and goodwill are also included in taxable income at a 50% inclusion rate; the taxable portion is taxed as active business income as opposed to investment income.

The type of income (i.e. active business income versus investment income) and type of corporation (for example, a Canadian controlled private corporation (“CCPC”) versus a non-CCPC) determine the corporate tax rate.

If you are trying to sell your business, the buyer may prefer to purchase assets which is usually much cheaper.  The buyer gets a higher cost on depreciable assets which will help generate more Capital Cost Allowance (CCA) or tax depreciation to offset future income.  Buying assets and not the shares is less risky to buyer as it doesn’t include your business liabilities or tax risk of potential future reassessments.

Preparing your business for sale

Having your accountant structure your ownership and cleaning up the company for sale at least 24 months in advance so it qualifies for the qualified small business capital gains exemption is just one aspect of preparing your business for sale.

You might also take steps to prepare your business so it’ll command a higher price.  For example, all of your client knowledge and details in running the business smoothly needs to get put on paper (or even better into a computer database).  If your business can be run with little or no involvement by you, then the business is worth more as there’s less key person risk.

You might also be able to increase your sales price if you strengthen its competitive position (or competitive advantage) – like operating profitable business niches with little to no competition or developing the business so that it is the lowest cost competitor.  In addition to the niche business potentially being very profitable, it might also have higher odds of transition success – where customers have little other choice to buy products or services from your business.

If your family business has more than one range of business operations, you might find that splitting it into logical focused businesses and selling each piece to the highest bidder might be more profitable than selling the whole pie to just one buyer.

When to sell?

Deciding on the best time to sell your business can be difficult.  But generally you should be able to command a significantly better price if you sell when business prospects are good and you’ve got a few years of great historical financial results.

For example, if you forecast growth of 20% and can show for the last three years 20% year over year growth, you have a good case for a premium price that reflects the prospect of future growth.

Another option might simply be for you to hold onto your business as long as you can manage especially if multiples for your industry are low.  But if this means the business isn’t well looked after and customer service deteriorates, your selling price could be accordingly affected.  So, you might end up working a few extra years and not be ahead financially.

The price

One common problem small business owners have is that of not being able to objectively arrive at a fair price.  That’s because there may not be a “stock market” or commonly known industry rules of thumb to tell them the value of their business.  So any offer that isn’t a premium offer for their baby may seem too low.

Rules of thumb used in your industry, if available, may be a helpful starting point to get some ballpark basis of worth.

A business valuator might be able to improve on this rule of thumb estimate or might possibly help bring the buyer and seller together to agree on valuation principles.  Four common valuation techniques used are:

  • Comparable Company Analysis – this is an attempt to measure value by employing the market values of public companies possessing similar attributes to your business;
  • Comparable Transaction Analysis – this is similar to the previous technique except companies used as models are those that have been recently bought or sold;
  • Discounted Cashflow – here the worth of the company is based on the total amount of after-tax cash it can generate (usually the most expensive price); and
  • Liquidation Analysis – here the worth is derived through selling off assets less the cost of satisfying debts (usually the most cheapest price).

From the amount determined based on one or a combination of the above techniques, there may be one or more valuation discounts applied such as:

  • Lack of marketability discount – this applies to closely held businesses where there is virtually no market;
  • Minority interest discount – this applies to where a buyer purchases a minority interest (less than 50% interest) in the business and doesn’t end up with control;
  • Key-person discount – this applies where the company’s success is dependent on a key person and the loss of the key person would result in adverse consequences.

With a valuation, the assumptions used can have a drastic impact in the resulting estimate of value.  So it’s important that both the buyer and seller are in agreement with the assumptions or you might end up wasting your money on the valuation.

Earn-out Arrangements

Carefully structured, an earn-out arrangement can be a win/win in that the seller likely receives a higher value for the business while the buyer minimizes the risk of goodwill impairment and obtains favourable internal financing.

And if you don’t offer an earn-out, you’ll likely eliminate many prospective buyers who’d be more than willing to pay a premium.

Converting part of the business value to tax deferred proceeds

For a larger business, the use of an Individual Pension Plan (“IPP”) or a Retirement Compensation Arrangement (“RCA”), could help you save a substantial amount in taxes by spreading taxes out over several years or by being able to shift part of the company value to tax deferred assets.

An IPP can be thought of as a super RRSP.  In most cases, IPP contributions can be substantially higher than RRSP contributions – possibly more than double what you’d otherwise be able to save in an RRSP.

Should business liability be an issue for you, an IPP comes with creditor protection (note that there is some degree of creditor protection through provincial legislation for RRSPs and RRIFs).  Although an IPP has setup fees and maintenance costs, for some people, the added savings and creditor protection are well worth the costs.

An RCA might be used to spread proceeds over several years.  It might be especially of value where you are considering becoming a non-resident and take up residency in a lower tax jurisdiction.

Either or both of these techniques should be considered many years in advance (read more at least 10 years), in order for the real power of these tools to be spectacularly effective.

Spreading the gain over time – the Capital Gains Reserve

When you sell your business, you might find it tough to get all of your money up front – it might instead be spread over a number of years.

So you might consider offering the buyer financing that may be more attractive than might otherwise be available through traditional bank financing.  And in the process you might receive some tax relief through a capital gains reserve.

This reserve allows you to bring the capital gain into income over a maximum five-year period.  Without the capital gains reserve mechanism, you’d be liable for tax on the entire capital gain triggered by the disposition in the year of sale, even though you would not yet have received the entire sale proceeds.

Note that if you are selling the shares of a QSBC, qualified farm property, or qualified fishing property, you can claim a reserve over a 10-year period.  That might be just the thing to consider if selling to your children or grandchildren.

Buy/Sell Agreement

A Buy/Sell Agreement is a contract between two parties that defines how an owner will sell a particular business interest and how a buyer will buy that interest under certain situations.

A Buy/Sell Agreement may be general in nature to cover unplanned sales (in case of death or incapacity) or it may be very definite in nature tailored to a planned sale to a known buyer (in the case of a planned retirement).

Whether you leave by choice or by chance, a Buy/Sell Agreement ensures your business interest will be transferred at a guaranteed price and on guaranteed terms.

Having the agreement in place improves the odds of the business successfully transferring at a price that can provide adequately for your family and removing uncertainty to employees and partners that depend on the business.

Non-competition agreements

Whether you sell your company’s shares or assets, the buyer will likely want you to sign a non-competition agreement to protect the value of the business.  The payment you receive for signing this (or the implied value associated with this) may be fully taxed as regular income.  However, if requirements, such as filing an election with the CRA, are met, it may be taxed at a lower rate as a capital gain.

Maximizing after tax business proceeds on death

On the last to die of you and your spouse, shares of your incorporated business is deemed disposed at market value resulting in capital gains taxes.  Taxes are payable a second time where company assets are disposed of (creating taxable capital gains) and proceeds distributed to shareholders (which might be in the form of dividends subject to tax).  So, your company investments are subjected to double tax – once at your death and then again when realized and distributed.

If your company has surplus assets, it may be possible to reduce these taxes where the company owns an insurance policy on the life of the shareholder.  Here surplus company assets are used to pay insurance costs which reduces the pool of surplus assets.  What this does is convert surplus assets to a death benefit that can be excluded in valuing the company for tax purposes.  Most or all of this death benefit (above the policy ACB) is credited to the Capital Dividend Account that can then be paid to your heirs as a tax-free capital dividend.

The result is that through insurance you may be able to reduce capital gains taxes at death.  And this reduction in taxes can be greater than a plan to simply redeem company shares at death.  The sooner you plan for this, the cheaper your cost of insurance.

Are there holes in your business exit plans?

Below are some questions to help you begin thinking about your business planning and the status of your business succession.

  1. Have you thought about what will give you a full and meaningful life? Have you priced this out so you know when you can afford to retire?  If your business is worth more than what you need, why are you not planning your exit?  What are the costs to your spouse and family of working hard in the business versus retiring where they get to spend time with you?
  2. Have you thought through the implications to you and your family in the event of a serious illness, disability, or premature death? In such events, have you developed a disaster plan to ensure that you’ll get a good price for your business backed up contractually with a Buy-Sell Agreement or a Shareholder’s Agreement?  Or have you obtained sufficient disability, critical illness and life insurance to financially ensure you and your family’s well-being?
  3. Are you dependent on your business to meet your retirement cash flow needs? Are you growing your investment portfolio so that it will eventually be able to provide you with a satisfactory pension?
  4. Do you know what your business is really worth if it were sold tomorrow? (Have you had an independent person appraise your business so you know what a market offer looks like?)
  5. Do you have enough liquidity to avoid the forced sale of your business on death? Is there enough other assets available to satisfy the tax bill?
  6. Who will be taking over, or will you sell the business? Have you considered the importance of family involvement in leadership and ownership of the company?  If family is involved in leadership, have you thought through how to fairly deal with your family who are active and those that aren’t active in the business?
  7. Is selling your business to a successor (like a capable employee or employees) the best way to maximize the proceeds from selling your business? Do you have a successor in mind for your business?  Is the successor competent, honest and trustworthy?  Is your successor someone who would want to own your business?  Is the successor ready to succeed you – does he / she have the qualifications needed?  Is there an incentive plan for your successor with effective non-compete clauses?  Have you developed a training plan for your successor?  Have you put in place a Buy-Sell or Shareholder’s Agreement with the successor?  Is the agreement secured with resources or funded by insurance to guarantee cash will be available to be paid to you or your family on your planned or unplanned departure?
  8. Are you currently using techniques to reduce or eliminate income tax and estate tax?
  9. Are you planning to utilize the Small Business Capital Gains Exemption as a way to obtain tax-free proceeds on your business exit? Have you structured the ownership of your business so that the company qualifies?  Have you structured the ownership so that you’ll be able to multiply the exemption?
  10. Have you considered alternative corporate structures, stock-transfer techniques, IPPs and RCAs to reduce or defer taxes as part of your exit plan?
  11. Are you doing everything you can do to make your business more valuable to a buyer? Are you making yourself redundant so that it can eventually operate without your showing up to work every day? Have you looked at your staff to determine the effect should on or more persons leave?  Are your staff happy and properly compensated compared to your competitors?  Do you have a backup for each key staff person should someone leave so that your business can continue to operate?

The next step

If you’ve got a saleable business and would like to put together your exit plan, please call our financial planner, Steve Nyvik. Some of the things that Steve can assist you with include:

  • reviewing your current plans and provide some constructive comments;
  • preparing a financial roadmap (otherwise called a retirement projection) so that you can know when you can afford to retire;
  • structuring your investment portfolio to resemble a pension so that it can eventually replace the income provided from your business so that you are financially independent;
  • working together with you and your tax accountants, lawyers and pension benefits consultants to help you implement a tax effective plan backed with a Buy-Sell Agreement or Shareholder’s Agreement;
  • reviewing your insurance program to determine its adequacy to fully fund the buy-out in the event of your serious illness, disability or premature death.

Written by Steve Nyvik, BBA, MBA ,CIM, CFP, R.F.P.
Financial Planner and Portfolio Manager, Lycos Asset Management Inc.

Structuring your business

“The avoidance of taxes is the only intellectual pursuit that carries any reward.”  – John Maynard Keynes

Written by Steve Nyvik, BBA, MBA ,CIM, CFP, R.F.P.
Financial Planner and Portfolio Manager, Lycos Asset Management Inc.

If you are a Canadian business owner or have a professional practice, consider establishing a Family Trust as the owner.  The Trust might also include an investment holding company as a beneficiary.  Together, this structure provides significant tax benefits and flexibility in operating to achieve your financial goals.

Keeping After-Tax Funds in your Company

For professionals or business people earning more money than they spend, it makes good sense to incorporate and subject that income to the small business company tax rate which can be as much as 30% less than the personal tax rate.  By keeping funds within a company you have up to 30% more to invest to grow and help fund your future needs.  Note that this is just a tax deferral rather than a tax savings since once you withdraw money from the company, the taxes become payable.

But if your personal marginal tax rate drops, like maybe in your retirement years, you may realize an absolute tax savings when funds are withdrawn compared to having earned the business / professional income personally.

The Use of a Holding Company

The tax deferral sounds great as this can make a huge difference to your assets to support your retirement.  But what if there is any potential for business or professional liability?  By leaving funds within your company, are we simply leaving them for future creditors?

Where the liability has not yet occurred (and not foreseeable), it may make sense to have the after-tax funds “distributed” to a “holding company”.  This distribution puts your after-tax income out of reach of future creditors of your operating company and preserves the tax deferral.  Should funds still be required by the operating company, the holding company can loan money back to the operating company.

The Structure

1. The Traditional Structure

It has been common practice for a holding company to be incorporated that owns shares of the operating company.  This may permit payment of dividends on a tax- free basis from the operating company to the holding company.

The problem with this is that this structure can cause problems with regard to full access to the Small Business Capital Gains Exemption (now at $813,600 [as of 2015] per person) as the exemption is only available to individuals on their disposition of Common shares of a qualifying small business corporation.  In other words, the disposition of the shares by the holding company doesn’t qualify.

2. The Modern Day Solution

The modern day solution is to have a discretionary Trust created with possibly your children, you, your spouse and a holding company as beneficiaries.  The Trust owns all shares of your operating company for which the operating company pays all after-tax income to the Trust as dividends.

For funds required for living needs, the amount needed may be distributed by the Trust amongst you, your spouse and adult children.  Any remaining funds may then be distributed to the holding company as a tax-free dividend that preserves the tax deferral for the surplus amount received by the company.


To summarize, the modern day solution has maintains both key tax advantages:

1. Income Splitting

With the Trust owning the operating company, income splitting is preserved as the after-tax income is dividended by the operating company to the Trust.  The Trust then distributes cash needed for living needs amongst you and your adult family members and doing so in such amounts to manage  family member income levels and overall taxes payable.

Beneficiaries receive dividend distributions, when and if the Trustee decides.  Those distributions can vary from one year to the next and can be substantial in amount.  Dividend distributions are received by beneficiaries not in relation to any work that they perform.

2. Capital Gains Splitting and Multiplying the Lifetime Capital Gains Exemption

Should the business be sold, it may be possible to multiply the $813,600 Lifetime Capital Gains Exemption for “Qualified Small Business Corporation shares”.

On sale of the operating company Common shares by the Trust, it may be possible to split the capital gain amongst several adult beneficiaries where each individual may claim their lifetime capital gains exemption on the capital gain proceeds received.  For example, a Family Trust with 4 adult beneficiaries can receive up to $3,254,400 tax‐free (= 4 x $813,600) on the sale of shares that qualify for this exemption.

The Next Step

There are a host of issues to be considered before structuring your business or professional practice.  For a professional practice, one has to first consider the provincial statutes for your profession that have restrictions on company ownership.

If you are a U.S. citizen or U.S. resident, we then need to consider United States Income Tax and Estate Tax laws.

Even if you are only a Canadian, there are a number of potential Canadian tax issues to avoid like corporate income attribution and trust income attribution.  And there are requirements to ensure the operating company and holding company are considered connected for tax purposes to avoid of Part IV tax on the payment of the dividend by the operating company.  Finally, there is the “kiddie tax” for which we need to avoid income being received by minor children.

If you own a business or a professional practice, I would be happy to review your current situation, discuss how we might improve it, and quantify the potential tax savings, the costs of establishing a structure, and the annual costs.  Should you decide this is something to pursue, I can refer you to a tax accountant that my clients have satisfactorily dealt with to help you put in place an effective structure.  For clients of mine, financial planning is included as part of the service.


Find the right advisor!

“As a business owner or manager, you know that hiring the wrong person
is the most costly mistake you can make.”
– Brian Tracy (a leadership and sales coach and trainer)


Written by Steve Nyvik, BBA, MBA, CIM, CFP, R.F.P.
Financial Planner and Portfolio Manager,
Lycos Asset Management Inc.


For many people, hiring a financial advisor is the right thing to do.

Your financial future should not be placed in the hands of some nice guy, a family friend or former sports star, or an accountant who’s too busy and knows less than you about investments.  And you shouldn’t put your life’s savings in the hands of an investment or insurance advisor whose only qualifications are a license to sell you investments or insurance products.

A truly professional financial advisor takes a lifetime to build up their educational and professional credentials.  They’ve gone through a period of articling or training with seasoned financial advisors, they’ve seen hundreds of situations similar to yours, carry liability insurance, and adhere to a code of ethics and practice standards.

A professional financial advisor, of course, doesn’t work for free.  The payback comes through:

  • higher returns and/or lower risk by selecting the right asset mix, selecting good investments, sheltering income from taxation, controlling risk, and setting aside funds for anticipated needs (so you are not forced to have to sell investments when they are down). An experienced investment professional may also help you avoid making costly emotional or irrational investment decisions.
  • eliminating, reducing, and deferring income taxes so you’ll have more money growing faster to meet your goals;
  • protecting your family against devastating financial losses – like the death, disability or illness of the family breadwinner, property loss, theft or damage, and liability claims. Without such protection, your lifetime of savings could get wiped out; and
  • design an effective estate plan so your estate will be distributed according to your wishes, minimize tax and transfer costs, and protect your legacy from a variety of creditors.  This not only gives you peace of mind, but hopefully will ensure your life savings is there to take care of your loved ones throughout their lifetime.

Hiring a professional financial advisor doesn’t mean you have no involvement – it is your life savings, not theirs.  Your advisor is there to help you increase the odds of achieving your financial goals.

You could spend the time you need to educate yourself and dedicate the time you need to properly managing your investments, but maybe your time might be better spent bringing in the money, and then relaxing with family and friends.

Of course you want someone whose personality gels with yours who you can be comfortable with.  But you also want someone who:

  • has spent a lifetime building up their educational and professional credentials;
  • has gone through a period of articling or training with a seasoned financial advisor;
  • carries liability insurance; and
  • adheres to a code of ethics and practice standards.

You want a mature financial advisor with good judgment who:

  • you trust implicitly in their honesty;
  • provides advice that is always in your best interest and is sound where you know they are well-versed in the topics that he or she advises you in;
  • has many years of experience who has seen hundreds of situations similar to yours who has helped people solve their financial problems and put them on a path to achieving their goals;
  • has the strength to get you to stick to your plan in the tough times when they inevitably come.

Finally, you should consider the investment orientation, strategies and philosophy of the advisor:

  • What kinds of investments does the advisor invest in? – i.e. individual stocks, mutual funds, exchange traded funds?
  • How does the advisor manage risk?
  • How does the advisor decide on your asset allocation and when and how is your portfolio rebalanced?
  • Does the advisor believe the market is efficient and therefore invests exclusively in market index type investments?
  • What kind of strategies does the advisor utilize and what are the risks and returns of those strategies?
  • Does the advisor believe in employing (higher cost) fund managers in attempt to outperform the market (how does the advisor identify those managers that are skilled (versus just lucky) who have a good chance of continuing to outperform into the future)?
  • If you are investing more than $100,000, how does the advisor help you to reduce investment management fees so you keep more of your money working for you?
  • What can you expect with regard to reviews, service and financial advice?

I hope that this article helps you find the right advisor to help you achieve your financial goals.


Steve Nyvik, BBA, MBA, CIM, CFP, R.F.P.