New company’s structure shoul always be carefully considered IF YOU are going into business for yourself, you’ve undoubtedly researched external factors, such as potential markets, competition, suppliers, customers, and sources of financing. By Derek de Gannes Contributing Writer But. what about internal mat- _ ters, such as how you will struc- ture your company? As any. chartered accountant will remind. you, it’s important to consider the financial, legal, and tax consequences of choosing to operate as a sole proprietorship, a partnership, or a corporation. ’ Due to first-time costs, many. new businesses experience losses or make only minimal profits in the first year of operation. If you expect that your business mighe be among them, consider operating the business as a sole proprietorship (you alone are the principal) or partnership (where there is more than one principal). Either way, reasonable business losses can be applied against other non-business sources of income for income tax purposes, thus reducing the overall amount of tax you pay. If you opt to incorporate, your corporation exists as an entity in its own right for legal and tax purposes, This means you must file a sep- arate corporate income tax return. Business losses, however, cannot be written off against personal income given the separate identity. Regardless of which structure you choose, bear in mind that you may opt for a non-calendzer year-end for the business, that is, a year-end other than Dec. 31. Doing so can, in the case of a sole proprietorship or partnership, result in a one-year deferral of tax on such income. Say you started ihe unincor- porated business on April 1, 1993, and the business is profitable. Let’s assume you pick Jan. 31, 1994 as your first year end. You do not have to report the results of that first profitable period, and potentially pay tax on your prof- its, until you file your 1994 per- sonal income tax return. Timing of the first year-end can also reduce your instalments of tax on income not subject to the normal withholding at source. By delaying the year-end and reporting of business income, your tax base, the amuunt on which subsequent year instalments are calculated, is reduced accordingly. Exposure to liability is another factor to consider when structur- ing your company. Since a corporation is distinct from its owner, creditors are limited to pursuing corporate assets to satisfy claims, uniess you have given personal guarantees. Personal assets, however, are not protected, in the case of sole proprietorship or partnership. It’s also prudent to conduct a search of your business name through the Ministry to censure that no one else is using it. There is a fee for both services. Derek de Gannes is a Canadian chartered accountant and a tax manager. Resolve to put affairs in order this year QUESTION: Do you have any suggestions for keeping household affairs in order? I find that the amount of paperwork required to keep a house and small family or- ganized is overwhelming. To top it off, Pm not the most organized person in the world.’ Answer: Most of ‘us find the task of--keeping our papers: order. a challenging one. It is easy. to-let things slide in that area and . yet:most of us have also run into problems because. something im- portant is lost or misplaced. We have found.that the begin- ning of a new year is a great time to make. sure that things are: in order,, of to start getting orga- nized.:In fact, it could be a sort of New ‘Year’s resolution: ‘‘to resolve to put our affairs in order.’’ Here is'a checklist of things to _consider.. © Do you have a list’ of all credit cards and bank. cards and bank account numbers. kept in a secure place?’ In the event of loss’ or theft, this .will make reporting much easier.’ Give. a list of where you’ keep your: important docu- - ments, such as wills and insurance policies to someone you trust. - @ Have you made an inventory of your household possessions in the case. of fire, theft, or damage? This will-be necessary for. you to make an insurance claim. @-1s your household insurance up to'‘date? Is your coverage adequate to reflect the true value of your belongings? Many people in this area have added earthquake in- surance ‘to their policies. @ Do you have a will? Does your will reflect your current wishes, or are changes necessary? Have you thought about putting money aside for funeral expenses? Have you considered a membership with the Memorial Society of B.C., which guarantees reduced rates for funeral costs? They can be con- tacted at 688-6256. @ Do you have a file (or envelope or shoebox) for your annual in- come tax receipts? Any system wiil make it easier when tax time comes around. @ Do you have a_ household budget, or at least some way of keeping track of your income and spending? ® Is your passport current? It is a good idea to keep it up to date in case of emergency travel. Some kind of a filing system will make your job of organizing easier. It can be. as simple as a cardboard box or as sophisticated as a filing cabinet. ‘ If you can find some way of separating papers, they. will seem more manageable, For example, a file or envelope for warranties of all household appliances, one for bank statements, another for bills to be paid, and so on. Since you have some trouble keeping track of your affairs, you may want.to determine who in your family is responsible for certain tasks. For example, you could be in charge of paying the monthly bills and your partner could balance your chequebooks. It is important to assess your affairs on a regular basis, as cir- cumstances and your needs change. C.M. OLIVER & COMPANY LTD. presents a seminar on | “HOW TO SURVIVE THE CANADIAN DEBT CRISIS” Guest Speaker: Roy. 8. Bennett (Roy.B. Bennett & Associates, Asset Managers) Lonsdale Quay Hotel 123 Carrie Cates Court, North Van Thursday, Jan. 20, 1994, 7-9 p.m. Tickets available through C.M. Oliver & Company . R.S.V.P. Alan W. Berge 668-6835 Help’s at Hand, by North Shore Community Services (NSCS), is a forum for discussing government policies and programs, benefits, consumer and iegal rights, taxa- tion and public services. Answers are intended only as a. general guide and should not be applied to individual cases without farther consultation. This column is prepared with financial. assistance from the Notary Foundation. For more in- formation call NSCS at 985-7138. *94 SATURN SL Recent stock arrival of the oxciting 1994 Satum orth ' “1 ALL NEW ’94 4 SAAB 900 S. =f Standard squipme: includes dual alr Dees, ABS, & air conditioning, p/w, contral jocking system with alarm, foe ar lamps, front & rear ~, 8 FRO ) '93 SAAB 9000 CSE TURBO CORRECTION NOTICE In our B12-1 White Sale flyer, Framed Art Prints offer on page 19 ends Jan. 12,1994, in our B12-2 Fashion Clearance flyer, Men's & Ladies' Reebok Walking Shoes on page 7 are in limited quanti- ties and there wil! be no rainchecks available. 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