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Calvin Carpenter - MNP LLP - Calvin Carpenter

Tax Changes Could Spell Trouble for Professional Corporations - Sponsored Article As a leading national accounting, tax and business consulting firm in Canada, MNP has been helping professional practices recognize the tax advantages available for professional corporations (PC) for more than 50 years. Some of these tax benefits however, may be curtailed significantly under proposed tax legislation currently being reviewed by the federal government. Although the rules vary by province, practicing members of most professions — such as law, medicine, dentistry or accounting — can choose to incorporate. Under such an arrangement, the professional is an employee of the PC, which carries on the business of the professional practice. Most provinces restrict the activities that the PC may carry on and limit the business of the corporation to the practice of the profession or activities ancillary to the practice. With that being said , the provinces generally permit surplus funds earned by the practice to be left in the corporation and be invested therein, providing a potentially significant tax-deferral advantage. There are various tax reasons why a professional may wish to incorporate, from the potential for significant tax savings or deferral, the various income-splitting opportunities with a spouse or adult children for certain professions or to take advantage of the lifetime capital gains exemption on the first $824,000 of gains on the sale of the shares of the professional corporation, assuming this is permitted and / or feasible in the professional's province. The use of a corporation has often been cited as a great tax deferral mechanism, provided the incorporated professional does not need…

Photo : Calvin Carpenter February 29, 2016

David Contant - Nelligan O'Brien Payne - David Contant

Court of Appeal Keeps It Rolling - Sponsored Article The Ontario Court of Appeal has recently provided important guidance in terms of when a claim is discovered for limitations purposes in the context of a continuing breach of contract. The recent decision of Pickering Square Inc. v. Trillium College Inc. dealt with a commercial leasing dispute between a tenant, Trillium College Inc. (“Trillium”), and its landlord, Pickering Square Inc. (“Pickering”).  Trillium leased space in a shopping centre for the period of June 1, 2006 until May 31, 2011. It agreed, in the lease, to pay rent, to occupy the premises, and to operate its business continuously.   In December 2007, Trillium gave notice to Pickering and vacated the leased premises. Although Trillium ultimately paid rent for the remainder of the lease, it failed to operate its business continuously from October 1, 2008 until May 31, 2011 (which gave rise to a claim for damages). Pickering only commenced its action for damages on February 16, 2012 - over four years after Trillium first gave notice of its intention to terminate the lease. A claim for damages in Ontario normally must be brought within two years from the earlier of the day that the claimant knew of the essential elements giving rise to a claim, or the day a reasonable person ought to have discovered them. Trillium argued that its breach of the lease was complete the first day that it failed to continue its occupation of the premises, and that each subsequent day added damages to that initial breach but were not themselves…

Photo : David Contant April 18, 2016

Paul Braunovan - Perley-Robertson Hill & McDougall LLP - Paul Braunovan

IP Protection at the Border - The Trans Pacific Partnership - Sponsored Article The Trans Pacific Partnership (TPP) is a trade agreement signed on February 4, 2016 in Auckland, New Zealand.  The TPP is not yet in force as it still needs to be ratified by the twelve member countries.  The TPP will expand the rights and responsibilities of customs officials with respect to identifying and detaining goods that infringe upon the intellectual property rights of others.  However, not everybody is in agreement that border officials have the legal background to be able to assess trade-mark infringement.  Others argue more broadly that the TPP will not benefit Canada’s economy and is designed to promote the interests of other countries such as the U.S. and China. As the TPP was being negotiated, in recent years the Canada Border Services Agency (CBSA) has established an intellectual property rights program for intellectual property rights holders in Canada.  Under this program, the CBSA has established a process whereby IP rights holders can file a Request for Assistance (“RFA”) asking for the CBSA to detain (temporarily) suspected counterfeit goods encountered at the border while the IP rights holder seeks legal redress.  If the CBSA identifies suspected counterfeit goods at the border, they can use the information contained in the RFA application to contact the IP rights holder and inform them of the details they need to allow them to pursue their remedies in the Courts.  Any criminal investigations relating to large scale commercial counterfeiting operations are handled by the Royal Canadian Mounted Police. The TPP would require Canada to enact further…

Photo : Paul Braunovan February 16, 2016

Catherine Tremblay - MNP LLP - Catherine Tremblay

Shareholders Beware: Does Your Buy-Sell Clause Set a Fair Price? - Sponsored Article Just as every apartment needs a fire escape, every shareholders’ agreement needs a buy-sell clause to set a price for the company’s shares on the occurrence of certain triggering events. A buy-sell clause outlines a process and pricing mechanism for the sale of the shares of a departing shareholder (e.g. upon death, disability, retirement, etc.) that necessitates a change in the ownership of a closely-held private company. The purpose of the clause is to provide a pre-determined procedure that ensures a fair price for all shareholders, while ensuring an orderly transfer of control to the remaining owners. Yet, in this author’s experience, these clauses can often create havoc if the pricing provisions are not properly thought out. This article provides an overview of some commonly used pricing mechanisms and discusses the pros and cons of each. Don’t use Book Value! The pricing mechanism in the buy-sell clause should be designed to ensure that both the buying and selling shareholders will be able to automatically transact at a price that is fair to all parties. One solution commonly adopted is for the shareholders to base the price on the net book value of the company. Net book value is simply the difference between the assets and liabilities reported on a company’s balance sheet at a point in time. The calculation of net book value is typically a straightforward mathematical exercise, but it may not result in a fair price. To understand why, consider the following example: - When ABC Corp. was founded, it issued 100 shares…

Photo : Catherine Tremblay February 16, 2016

Loren Kroeker - MNP LLP- Loren Kroeker

Federal Budget Highlights - Sponsored Article On Tuesday, March 22, 2016, the Honourable Bill Morneau, Minister of Finance, delivered the new Government of Canada’s first Federal Budget, Growing the Middle Class. According to Minister Morneau, “our plan will recapture the hope and optimism for the future that existed in previous generations, and put it to work for the next. Real change is not just about today or tomorrow. It is about revitalizing the economy in the years and decades to come, so that it works for the middle class and helps those working hard to join it.” Projecting a deficit of $29.4 billion in 2016-17 with a gradual decline to a deficit of $14.3 billion in 2020-21, Minister Morneau also announced the repeal of the balanced budget legislation enacted under the previous government. For the full document, click here To learn more, contact Loren Kroeker, CPA, CA, Senior Vice President, Tax, at 250.734.4330 or Loren.Kroeker@mnp.ca.  

Photo : Loren Kroeker March 30, 2016

Philip Aubry - Perley-Robertson Hill & McDougall LLP - Philip Aubry

Investor Crowdfunding Coming to Ontario - Sponsored Article The Ontario Securities Commission (“OSC”) announced last month (November 5, 2015) that it will join Saskatchewan, Manitoba, Quebec, New Brunswick and Nova Scotia in allowing businesses to participate in equity crowdfunding regulations.  Provided all necessary Ministerial approvals are obtained, investor crowdfunding will finally come into force in Ontario and other jurisdictions on January 25, 2016.   Although accredited investors have been allowed to participate in equity crowdfunding since 2013, the new regulations will allow all investors to participate, with restrictions on how much they can invest, as well as limits on what the company can raise in order to limit risk. Under the OSC’s new rules, businesses will be required to offer such equity stakes through registered crowdfunding platforms.  These crowdfunding platforms will be responsible for background checks and other due diligence on companies and investors. Other key conditions of the new OSC regulations include offering non-complex securities such as common shares and non-convertible preference shares as well as issuers will be required to complete a Risk Acknowledgement Form and an offering document.  In addition, businesses will have a limit of $1,500,000 in capital they can raise and investment limits for investors will be $2,500 per investment and in Ontario, $10,000 total in a calendar year per investor.  Accredited investors are limited to $25,000 per investment and in Ontario, $50,000 in total per calendar year. Although crowdfunding has many benefits including faster access to funding for start-ups and businesses, there are a few issues a business should consider prior to using the crowdfunding exemption. Some of the…

Photo : Philip Aubry January 07, 2016

Karin Pagé - Perley-Robertson Hill & McDougall LLP - Karin Page

Why You Need a Written Employment Agreement - Sponsored Article Perley-Robertson, Hill & McDougall LLP/s.r.l. has a long history of providing employment law advice to its diverse clientele. With our employer clients, we always recommend the preparation and implementation of written agreements for all of their team members whether they are employees, independent contractors, associates, or partners. Let us explain why. Certainty                                             The most important reason to have written agreements in place is to provide certainty regarding your expectations and to govern how you will interact during the relationship, but they are also critical to establishing your respective obligations on termination of the relationship. This certainty alone can provide considerable peace of mind and cost savings by avoiding disputes and unnecessary litigation. Minimize Liability Besides certainty, a written employment agreement can serve to minimize an employer’s obligations upon termination. Many employers are surprised to learn that without a written agreement to the contrary, an employee is entitled to “reasonable notice” on termination, and that such notice can be up to 24 months or more of the employee’s gross salary and benefits – an amount that far exceeds the notice required by Ontario’s Employment Standards Act. However, it is possible to craft an agreement that satisfies an employer’s obligations under the Employment Standards Act, but avoids the common law obligation to provide “reasonable notice” a concept that by its very nature is vague and uncertain. This is because what notice will be reasonable…

Photo : Karin Pagé November 12, 2015

Dale Barrett - Barrett Tax Law Firm - Dale Barrett

The Lifetime Capital Gains Exemption: Plan ahead - Sponsored Article People often ask me about the Lifetime Capital Gains Exemption (the “LCGE”), which for the 2015 tax year is $813,600, and many just assume that any capital gain can be covered under the exemption.   Actually, the LCGE allows one to dispose of Qualified Farm Property, Qualified Fishing Property, or shares of a Qualified Small Business Corporation and not pay any capital gains tax on the first $813,600.  And as the wording suggests, there are qualifications. In general only ½ of a capital gain is taxable, and with the LCGE, the 2nd half can be non-taxable too up to $406,800 (in 2015) – by virtue of a capital gains deduction. With many people either actively in the process of selling their business or planning for this eventuality, there is a great deal of confusion as to what kinds of sales would be subject to the LCGE, and thus many people don’t take the necessary steps to protect themselves, which can cost hundreds of thousands of dollars. The Qualified Small Business Corporation A gain from the sale of shares of a Canadian controlled private corporation can qualify for the LCGE if a number of conditions are satisfied; one of those being that at the time of sale, all or substantially all of the assets (90%+) of the business are used principally in an active business carried on primarily in Canada.    What this means in practice is that the in the course of an audit the LCGE could be at risk if the Canada…

Photo : Dale Barrett November 23, 2015

Gregory Sanders - Perley Robertson Hill & Mcdougall LLP - Gregory Sanders

The Use of Trusts - Sponsored Article Trusts have been around for six centuries.  In that timespan, their uses have evolved as circumstances have changed. Trusts were first used to distinguish between legal ownership and beneficial ownership.  Trusts evolved out of this environment to find equitable solutions to difficult problems.  Today the basic concept of a trust remains the same.  It allows one person to have legal ownership while another person has beneficial ownership. The use of trusts has evolved dramatically over the years and varies depending on the nature of the jurisdiction in which they are used.  For example, jurisdictions that have complex tax systems have developed trusts in order to provide for tax and estate planning.  However, in jurisdictions where tax is not a motivating factor, the use of trusts is a key ingredient in asset preservation. Trusts are not a static environment.  As circumstances change, the use of trusts in different jurisdictions continues to evolve and new and inventive uses can be applied. It has not been long since Leona Helmsley, heir to the hotel chain, decided that she needed to ensure her pets were cared for following her death and wanted to provide a fund for their care.  What better way to do that than through the use of a trust.  But how can you have a trust where the only beneficiary is a pet and, even more thoughtworthy, how can you ensure that the trustee use the proceeds of that trust for the benefit of the pets?  It’s not as if the pet can initiate…

Photo : Gregory Sanders April 18, 2016

Alicia S. Natividad - ASN Law Professional Corporation - Alicia S. Natividad

Are you really a shareholder? - Sponsored Article Incorporating online can be deceptively simple but fraught with danger.  Most entrepreneurs incorporate online without professional assistance. After receiving a Certificate of Incorporation, an incorporator considers that a corporation is ready to do business.  Simply put, the mere act of incorporating creates only the shell of a corporate existence. The shell must be filled in similar to a human body that has to have a brain, heart, organs, tissues, and so on.  Most incorporators omit to fill in the structure of a corporation and are unaware of the requirements of the Canada Business Corporations Act (“CBCA”) and the Ontario Business Corporations Act (“OBCA”) that mandate certain things to be done.  For example, by-laws are necessary to create a process for the corporation to do business; resolutions are needed to document what a corporation has done or will do; directors must be appointed by shareholders; directors must appoint or elect officers,  shares have to be subscribed for and paid for by shareholders; directors have to approve the issuance of shares.  More importantly, incorporators do not know that private corporations are exempted from having an audit that must be documented annually in advance, or that, before dividends are paid to shareholders, directors have to declare payment of dividends by resolutions. Both the CBCA and OBCA require some type of record keeping, either by written resolutions or other documents kept in a looseleaf book called “minute book” or by any system of mechanical or electronic data processing or any other information or storage device.  The key…

Photo : Alicia S.  Natividad March 07, 2016

Shann Bosnell - TUC Managed IT Solutions - Shann Bosnell

When Lightning Strikes – Why Business Continuity is Critical! - Sponsored Article On August 20, 2015 a Google Data Center serving European customers in Belgium experienced something out of the ordinary.  It was struck by lightning.  Not once.  Not twice.  But 4 times in succession.  Whoever said “lightning does not strike the same place twice” was sorely mistaken.  Although the data center systems were built to redundancy, the lightning still ended up causing damage.  That damage resulted in the loss of customer data that is not recoverable.  In the grand scheme of things, the data lost accounted for only 0.000001% of a percent of all the data stored.  Sounds like a small percentage, right? But, what if you were one of the companies whose data was affected? What if that data was critical to your business?  I’m thinking you wouldn’t care about percentages. Statistically, data is far more secure and available in a data center than in nearly every businesses’ server room.  Ultimately, most companies don’t have the capital and experience to build a data center to match a professional facility.  But, what the example above has shown, is that even massive data centers provided by companies like Google are still susceptible to failure and disaster.  Most people think that because they move their solutions and data “to the cloud” they don’t have to worry about data loss.  Statistically speaking, moving to hosted solutions absolutely helps ensure data availability and backup, yet no solution is perfect.  Despite the Google example above, not all failures happen due to natural disasters.  What’s worse than a tornado or…

Photo : Shann Bosnell September 14, 2015

Lorraine Mastersmith - Perley-Robertson Hill & McDougall LLP - Lorraine Mastersmith

“SAFE” Capital Raising for Emerging Companies - Sponsored Article One of the biggest challenges facing emerging growth companies is raising capital to fund growth. Depending on the stage of the company’s growth, funding can come from a myriad of sources, from friends & family, angel investors, government programs, venture capital and private equity through to accessing the public markets. In the early stages of pre-revenue product development, establishing a value for the company at which to price equity investments can be difficult. To facilitate access to capital in this early stage, a relatively new alternative that is gaining in popularity is the Simple Agreement for Future Equity or “SAFE”. First introduced in late 2013 by the Y Combinator accelerator in Silicon Valley, the SAFE (followed by a similar agreement dubbed the “Keep It Simple Security” (“KISS”) by another accelerator, 500 Startups in mid-2014) presents start-up companies with an alternative to equity or convertible debt financing. These documents are short (usually only 5 pages) and flexible agreements, designed to be simple to understand, negotiate and administer. In exchange for providing cash to the company, investors obtain a contractual right to receive the company’s equity at a future date, at a price to be determined at that later date. Similar to convertible debt or debentures, this alternative is a quick and relatively simple way to provide companies with cash in exchange for a promise of future equity, with a significant difference in that these instruments typically do not accrue interest and do not have stated maturity dates. The SAFE (or KISS) is essentially an…

Photo : Lorraine Mastersmith September 14, 2015

Solomon Gold - Perley-Robertson Hill & McDougall LLP - Solomon Gold

What Information Does an Applicant Have to Include When Filing A Patent Application? - Sponsored Content You’ve decided that you want to file a patent application for your invention.  What information about the invention do you have to disclose in your application? The Canadian Patent Act states that an application must correctly and fully describe the invention and its operation or use as contemplated by the inventor.  To meet this requirement, the application will include a written description of the invention, supported by drawings, where appropriate.  The application will also include at least one claim which defines the scope of the applicant’s invention.  Care is usually taken when consulting with a patent professional to craft claims that best capture the invention by including components that define the invention while at the same time differentiate from what has come before.  While the scope of the claims has traditionally been seen as the most important part of the application, courts in Canada and in the United States have recently been considering what constitutes an adequate description as well. A patent is often thought of as a bargain between an applicant and the government granting the patent.  In exchange for the applicant’s disclosure of the invention in the application, the government grants a patent for an invention meeting criteria for patentability, the patent giving the patentee exclusivity in what it has claimed for the term of the patent.  The application will be published eighteen months following filing, and the description must be sufficient to enable anyone to practice the invention once the period of exclusivity expires. Therefore, what is set out in…

Photo : Solomon Gold August 14, 2015

Warren Creates - Perley-Robertson Hill & McDougall LLP - Warren Creates

Federal Express: New Immigration Program, One Year In - Sponsored Article On 1 January 2015, the federal government launched a revamped ‘Express Entry’ system for economic immigration to Canada. Before this new program, potential economic immigrants to Canada followed a straightforward application process with a predictable outcome. So long as an applicant met the qualifying criteria, included the right documents, and applied before the yearly application quota was met, the application would eventually be approved. Though the wait was often very long, each applicant was ensured an eventual decision on their application. The new system is designed to eliminate backlog and ensure swifter processing times. Under the new system, each prospective economic immigrant fills out an online profile. Once complete, the electronic database assigns a points total based on a “Comprehensive Ranking System”. Points are awarded for factors such as Canadian work experience, education, and language skills. A profile will only remain in the system for 12 months, after which it is removed and the individual must reapply. Candidates who meet the requirements of one of the four federal Express Entry programs are accepted into the Express Entry Pool. From this pool, the federal government periodically picks the top-ranked candidates and invites them to pay the processing fee and submit a formal application for permanent residence. Ontario Express Entry In June 2015 the Ontario government launched two Express Entry streams under the Ontario Immigrant Nominee Program (OINP). These streams allow the province to nominate candidates from the federal Express Entry pool who meet certain education, skilled work experience, and language ability standards and who…

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Photo : Warren  Creates January 18, 2016

Michael Citrome - Barrett Tax Law Firm - Michael Citrome

Bad Debt? Could Be Worse - Sponsored Article The Income Tax Act is the Federal legislation that governs income tax in Canada. It’s a big, complex piece of legislation that is constantly being updated, not in the least because it is one of the government’s most important tools for steering Canada’s economy. Want Canadians to save for their retirement, buy homes or replace their computers? The Income Tax Act is there to promote it. Investing? Know Your Rights  One of the policy objectives of the Income Tax Act has historically been to encourage Canadians to invest in small business. The lifetime capital gains exemption for small business corporations is a well-known example of the Income Tax Act making it possible to profit from the sale of your business to the tune of over $800,000 of tax-free capital gains. But what about the dark side of business investments – when you lose money? The Income Tax Act has created a special category of loss, called an Allowable Business Investment Loss or ABIL (pronounced like “able”), that makes the loss of certain investments a little more bearable, if you fit into the category.  Not All Losses Created Equal So first of all, what’s a loss? Logically, you’d think it means the opposite of income. But in Income Tax, there are different kinds of income, and so there are also different kinds of losses. Most investments, when you profit, give rise to a capital gain. Capital gains are treated differently from other forms of income. For one thing, unlike ordinary business income, generally only…

Photo : Michael  Citrome October 12, 2015