 What
kind of accounting engagement is the more appropriate
for my business?
There
are three types of accounting engagements: Audit, Review
or Notice to Readers.
The type of engagement will depend on the requirements
imposed by regulatory and financing institutions as well
as by private investors and or stockholders. In general,
a Review engagement is the most common of the three for
private corporations that have obligations with financial
institutions, or expect to sell the business in the future.
Audits provide additional assurance and credibility to
external readers of your company's financial statements.
Notice to Readers is the very basic type of engagement
that is acceptable when the owner/principal and CCRA are
the only readers of those financial statements.
How
do I know how much a business is worth?
The
only way is by getting a Valuation conducted on the
target business by an experienced Business Valuator.
The Business Valuator will determine the fair market
value of the shares or of the assets of the company
by following basic rules of financial analysis and operations
appraisal applied on historical, future oriented and
statistical data of the company and the industry gathered
on your behalf. The results of the valuation will come
in the form of an Opinion, Estimation, or an Indication
of Value of the shares or assets of the company that
you are attempting to buy or sell.
Do
I have to pay tax on income from my foreign assets when
I immigrate to Canada?
Residents
of Canada are subject to taxation on their world wide
income.
Section 94 of the Income Tax Act provides new immigrants
a tremendous planning opportunity. Non-residents who
move to Canada can essentially enjoy a five-year tax
holiday by setting up an immigration trust. Assets in
a properly structured trust grow tax-free for up to
five years.
In order to have the maximum time for the trust to
escape Canadian tax, it should be set up before the
person becomes resident in Canada. However, it can be
set up after the immigrant takes up residence in Canada.
Proper planning is essential to avoid the attribution
rules of the Income Tax Act that can effectively wipe
out the tax holiday.
What
happens when I leave Canada to work abroad?
Many individuals leave Canada for a few years to work
or study abroad. While these individuals generally can,
if they wish, remain resident in Canada for tax purposes,
some may prefer to give up Canadian residence, or may
be required to do so.
Canadian tax rules deem an individual who ceases Canadian
residence to have disposed of each property owned at
proceeds equal to fair market value. Any accrued taxable
capital gain would be taxed in the year of departure.
The taxpayer can use any available capital gains exemption
to shelter the gains from deemed disposition, or minimize
the departure tax.
There are exceptions from the departure tax such as
property situated in Canada, shares of a private corporation
which is resident in Canada, certain pension benefits
and employee stock options.
What
do I need in order to open or increase my operating
line of credit?
Most financial institutions normally request the applicant
to provide financial statements of the previous three
years. These statements, at a minimum, must be reviewed
by a professional accountant. Notice to Readers statements
compiled for tax filing purpose are of limited use.
Generally banks look at the strength of various components
such as:
Cash
flow
Fixed
assets
Debt
to Equity and other ratios
Aged
list of receivables
Aged
list of payables
Inventory
Personal
Statement of Affairs
Cash
collateral or equivalent (Mutual funds, CSBs, stocks,
subordination of shareholders loans, etc.)
Other
collateral such as a charge over property or equipment
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