incorporating BOY, OUR Mr. Smith has certainly been busy since he bracket, depending on province of ‘retired’? two columns ago at the age of 50 after his com- pany offered him a severance package. In the last column, he went into business for himself and now he’s wondering if he should incor- porate. Smith is the creation of Elio Luongo and Tony Lobmeier, of KPMG Peat Marwick Thorne, chartered accountants. They are using him to illustrate various ways to save tax when people move from employment to self- employment — a growing - trend these days. ‘*You get the same breaks as far as claiming deductions for business expenses whether you operate as a sole proprietorship or acompany,’’ said Luongo. “But while having a company means more paperwork and costs, you may gain more flexibility — and: different opportunities to defer or save quite a bit of income tax.”” '. NOTE: Use this information to prompt further research on how the relevant strategies might apply ' to your situation and what specific steps you should take. In many cases, you should also seek the advice of a tax expert — especially - BUSINESS BRIEFS - -°, LOCAL ELECTED NORTH VANCOUVER . resident Beraice Davidson hs ‘veen elected the new president of Canadian Of- fice Services Association (COSA), which provides packaged offices, word processing services and “association management. -.Davidson has owned Support Services Unlimited since 1984. ‘The focus’ of her company is association management. Michael Grenby LLARS AND SENSE when large amounts of money could be involved. “A small business pays only about 23% tax on its first $200,000 of active income,’’ Luongo said. ‘‘this year an indi- vidual could pay avout 46 to 52.4% tax in the top income Davidson is also a member of the National Association of Secreterial Services, based in Florida, and serves on the fund- raising committee of the North Shore Crisis Services Society, which supports North Vancouver’s Emily Murphy House, a transition centre for battered women. Davidson said the use of shared office space is now being accepted by more and more businesspeople asa cost-effective way to do business. ANOTHER ELECTED DEEP COVE resident Bill Trim- ble, president of The W.A.T. _ Group, has been elected the inter- national president of the Young Entrepreneurs Organization. Trimble is in the process of upgrading his Apex Alpine ski resort in the Penticton area. LEAVING GARRY BADER will be leaving his post as North Shore area man- ager of the Royal Bank of Canada to become an area manager in Burlington, Ont. residence, “So if you can leave some of the company’s income in the com- pany, more money remains to be invested, For example, an $75,000 income a company pays about $17,250 tax, leaving $57,750 for investing. On the other hand, an individual (with no other income} pays about $25,600 tax, leaving only $49,400 to invest. Over the years, that difference really adds up.” Of course, the individual will probably need some money to live on. “But here’s where a company’s flexibility can pay off,’ said Luongo. “You could choose to have your company pay you dividends instead of a salary, for example. If you have no other income, you can earn up to about $23,750 in cash dividends and pay no income tax at ail, thanks to the federal dividend tax credit." With this approach, the com- pany cannot deduct the dividends it pays, but the effective tax rate may still be only 23%. When a company is set up, other family members may hold The new job is a promotion for Bader, who has held the North Shore area manager’s job for the Royal Bank for the past three years. While on the North Shore, Bader has become involved with several community groups and projects including the United Way, the North Vancouver Chamber of Commerce, the North Shore Neighborhood House, the North Vancauver Girls’ Softball Association, the Lions Gate Hos- pital Foundation, the Harmony Arts Festival, Norta Shore Family Services, the North Share Counselling Service, the West Vancouver Seniors’ Association and the Rotary Club of Lions Gate. “‘These organizations have helped enrich my life and hope- fully I have been able to give something back to them and the community. “We will always treasure our memories of the North Shore and hopefully will be able to return something in the future,’’ said Bader. BURSARIES THE NORTH Shore Credit Union Lodge looking for volunteer assistance From page 3%.. he’s fair game for attention. Sherman’s - well-trained de- meanor allows residents to get close enough to reap the soothing benefits of a wagging tail and soft ur . Since many Canadian National Institute of the Blind (CNIB) resi- dent homes ‘have closed recently, Wills believes more and more fa- If you are interested in volun- cilities will start admitting resi-. teering at the Kiwanis Lodge, call dents with seeing-eye dogs. “There are a lot of visually im- paired people in care facilities that love to get out once or twice a week,”’ explained Wills. ‘‘But without volunteers who will take an hour a week to walk, most spend their days in or near the lodge."’ Karen at 926-0105. The next time you’re down at the seawall, remember to look around for a man and his dog enjoying something we all seem to take for granted too often: a walk by the water, or y 9 " : STEEN) y oe " ARE LOW INTEREST RATES AFFECTING YOUR INCOME? A secured 9% tax sheltered cash flow The answer: i The investment: Two long-established seniors’ care homes excellently tocated on prime real estate in Victoria and West Vancouver For a preseniation, please call ENiot Laskin or Cheryl Douglas at 688-5998 Minimum investment $25,000 Preferred Management — A division of Samoth Capital Corporation nore * This advertisement must, not be construed as an offering which is made only by an offering Memorandum * shares. This means the company can pay dividends to those indi- viduals; such income-splitting can also save considerable tax year after year. “While you can split income to save tax by paying family members to work in your business, whether incorporated or not, paying dividends provides an opportunity for family members to receive an income without nec- essarily providing services to the company,” Luongo said. _ You need expert advice when setting up a company to deal with matters like voting and non-voting shares, control, profit-sharing and whether a family trust is ap- propriate. When you sell the shares of a qualifying small business corpera- tion, the gain may be eligible for the enhanced capita! gains exemp- tion — $500,000 instead of the normal $100,000. That means, for example, a husband and wife (or any two in- dividuals) could sell their 50-50 shares in the company and realize a total gain of up to $1 million without paying any normal tax. You can even trigger the capital gain, to take advantage of the (NSCU) recently awarded 13 sec- ondary school students $500 busaries. “While high academic standing is an important criterion in selec- ting our bursary recipients, we also take into consideration the students’ involvement with com- munity projects and groups,’’ said Doug Smith, NSCU vice-president of marketing and communication. The local financia! institution has been awarding busaries to sec- ondary school students in. the areas it serves for more than two jay, August 11 , 1993 ~ North Shore News ~ 29 cal RCPCERE punend PRELLEN “1 1) : ® : @ ¢ capital gains exemption while it still exists, without selling the company. ‘Again, you have to plan such moves carefuily to make sure you do get the maximum tax advan- tage,’’Luongo said. He also stressed the need for planning when you move from being a sole proprietor to incor- porating your company. “If you have been deferring tax as a sole proprietor, typically with a fiscal year-end other than Dec. 31, you could end up after you incorporate with two tax years overlapping -- and a heavy tax bill,’’ he said. If you are thinking about incor- porating, talk to an accountant/ tax adviser and possibly a lawyer to see if the benefits outweigh the additional costs. and - compexity, given your particular personal and financial objectives. Mike Grenby is a North Shore-based columnist and in- dependent financial adviser who works with . individuals; he~ will answer your questions as space allows -- write to him c/o The North Shore News, 1139. Lonsdale Ave., North Vancouver V7M 2H4, decades. . The bursaries are in addition to those that the NSCU provides each year as part of the Credit Union Foundation Bursary pro- gram. “We understand the challenge that students face in financing their education,’’ Smith said. ‘By actively assisting them through our bursary program, NSCU reaffirms its belief. that education is vital in preparing our young .people for their role. as tomorrow’s leaders.’ SUMMER SIZZLER SPECIAL e Located in Everett 20 minutes north of Seattie ¢ Just 10 minutes from over: aleadh 400 stores & specialty shops at Everett & Alderwood Malls ¢ 250 guestrooms & suites * Fully equipped fitness center * Indoor pool, sauna & outdoor sundeck « Hardy's Northwest Bar & Grill » WestCoast» Everett Pacific 3105 PINE STREET, EVERETT, WA 98201 1-800-426-0670 Subject to space a Expires 9/30/93 SD.