Our Blog - Segal Insider

Partnership Announcement

Segal LLP is pleased to announce the firm’s two new partners.

Dora Mariani, CPA, CA, CFP, TEP, and Howard Wasserman, CPA, CA, CFP, TEP, will join the firm’s partnership group, effective July 1st, 2019.

Dora Mariani joined Segal as a Principal in the Segal Tax Group in 2015. She consults on Canadian and international tax matters for private corporations, high net worth clients and advises U.S. and international clients on appropriate tax structures for their Canadian operations. Her advisory expertise includes corporate reorganizations, purchase and sale of a business, tax planning for individuals immigrating to and emigrating from Canada and personal tax and estate planning.

As an expert in her field, Dora has presented at various tax seminars and conferences throughout North America. She is a member of the Chartered Professional Accountants of Ontario, Chartered Professional Accountants of Canada, Canadian Tax Foundation, International Fiscal Association, Society of Tax and Estate Practitioners and of the Financial Planning Standards Council.

Howard Wasserman has worked in tax for more than twenty-five years, specializing in both Canadian and international tax matters. Howard advises on a diverse range of tax issues including estate planning, mergers and acquisitions and purchase/sale of a business. He has a very successful track record in presenting appeals and managing tax negotiations with CRA on behalf of Segal clients.

Howard is a highly sought-after speaker and has presented at the Canadian Tax Foundation, various local CPA associations, seminars and other conferences throughout Canada. In 2016 Howard introduced the Segal Tax Series, an annual CPD series focused on providing CPA’s tax learning and tools to support their clients.

We extend our sincere congratulations to both Dora and Howard and welcome them to the Segal partner group.

Dora Mariani

416-490-3452
dmariani@segalllp.com

Howard Wasserman

416-490-3465
hwasserman@segalllp.com

Cloud Accounting

The Internet Age has revolutionized every industry and accounting is no exception. Introducing, cloud accounting; a faster and more efficient method of tracking your business’ expenses and financial reporting.

Cloud accounting is the process of migrating financial accounting systems into a cloud-based platform, away from a server. In terms of the accessibility and benefits to your business, this means having access to your accounting data- accounts payable and receivable, expense account, etc.- from anywhere and at any time. All you need is Internet access and you can simply log in to access all your financial reporting documents with the same ease of logging into Facebook.

The benefits of moving into cloud-based accounting are numerous and the demand for it is growing, particularly among small to mid-size companies. It simplifies account software and maintenance meaning business owners/managers will no longer need to look after hardware and software upgrade. It also eliminates the concern that clients won’t be able to access their documents because of an error on your end. It also offers efficient means of business management by enabling users to upload documents as easily and simply as taking a photo of an invoice and uploading it to the cloud.

Many features of cloud accounting are also automated, such as paying invoices, accepting payments, and grouping expenses. The addition of artificial intelligence can also automate regular business tasks by gauging your usage habits and tailoring the program in ways that best suit you and/or your business’ individual needs. Tools can be added to your cloud accounting solution, giving you a real-time view of all transactions appearing on your bank and credit card statements. By creating rules, the tool can automatically post transactions it recognizes.

By centralizing your reports, documents and expenses, this also makes the process much more collaborative, efficient and streamlined for accountants, CFOs and bookkeepers.

Understandably, some business owners and managers are apprehensive to switch to cloud accounting out of concern for security. However, rest assured these cloud solutions have security on par with that of online banking. Major companies, including Microsoft, are developing software for cloud-based accounting. Not only do they have endless resources to develop top-notch and secure software but, also, it’s important to remember that trusted names in technology will not risk their reputation on anything at risk of being hacked. The bigger risk is that users have their passwords stolen, however, this is an easily avoidable risk that can be reduced by creating strong passwords that utilize numbers, a mix of uppercase and lowercase letters, and symbols.

If you are interested in further exploring cloud-based accounting, the next step is to look into companies and software that offer the tools best suited to your business. QuickBooks has been a long-standing favourite of smaller companies and can be expected to add more features to their cloud-based solutions over the next few years. Xero and Wave are two other software companies that specialize in cloud accounting software. Net Suites has been offering cloud-based solutions since 1999 and, as previously mentioned, Microsoft is rolling out new cloud solutions for accounting.

Ultimately, cloud accounting holds a promising future of the modernization and improved efficiency of accounting. It has the potential to be a top tool for both accountants and business owners alike and its value to business operations should to be embraced.

Written by Giles Osborne, CPA,CA from Segal LLP and Alain St-Laurent from Demers Beaulne.

This piece was produced as a part of the quarterly Canadian Overview, a newsletter produced by the Canadian member firms of Moore Stephens North America.

It’s Never Too Early To Organize Your Music Business

It’s Never Too Early To Organize Your Music Business

Once you’ve started directing effort and funds toward earning income as a musician, congratulations, you’re in the music business!
Many musicians put off organizing the business side of their career until they have to, only to realize how many opportunities they missed to save money along the way. So, no matter how overwhelmed you may feel about tax planning or the grant application process, meeting with a lawyer from our entertainment group as early as possible is a good idea for understanding the big picture and keeping more money in your bank account.

If you’re just starting out in the music business, here’s some of what we’ll discuss with you:

Business Structure

Incorporating your business is a step that warrants a conversation with a professional. Yes, it involves additional compliance and costs, and at the outset of your career the costs outweigh the benefits, but once you’re gigging more and earning more per appearance, it’s a smart move.

You’ll be able to run expenses through the corporation, like new instruments and gear, which you can write off so you pay less tax. Also, as an incorporated company, you’ll be personally protected against any claims made against you by club owners, record labels or anyone else.

Our team can take you through the ins and outs of incorporating and get you set up for a long run.

Expense Tracking

Generally speaking, when you’re starting out in the music business, you’ll spend more than you earn. This is called a “business loss,” and a big mistake a lot of musicians make is not taking full advantage of these losses, which you can claim against other income from your day job, or carry forward so you get the tax benefit when you are making money down the road.

The best way to do this is to track and report all of your expenses. We can help you determine what expenses you should be tracking.

Income Tax and GST/HST

You’re required to register for GST/HST when you hit $30,000 in gross sales (business income before expenses). As a musician, your gross income includes royalties and advances, so you can hit the threshold without being aware.

Once you are registered, you have to collect GST/HST on taxable revenue at the rate set out in the province where you are performing. But the money you spend in GST/HST on business expenses is subtracted from what you collect in GST/HST, so you wind up owing less per period. If you pay out more GST/HST than you collect, CRA will issue you a cheque for the difference.

We can set you up for GST/HST collection, and make sure you have what you need to remit on time (the penalties for late filing add up quickly!).

Cash Planning and Budgeting

Touring is expensive and fraught with unforeseen expenses like vehicle and gear repairs, weather-related problems, cancelled gigs and more. As well, recording costs can also get away from you if you’re not careful. This is why planning a tour or an album should include a budget with a contingency amount. It’s a valuable exercise that will help you to stay financially focused.

We can give you template worksheets to reconcile money you earn/spend on the road, settlements, grant funding and more.

Chasing your dream of being the next <insert your favourite artist here> is a great thing. Hit all the right organizational notes and you’ll be in a much better financial position every step of the way.

Contributed by Donna Branston, CPA, CGA from DMCL.

This piece was produced as a part of the quarterly Canadian Overview, a newsletter produced by the Canadian member firms of Moore Stephens North America.

Preparing for a Liquidity Event

The success of a liquidity event involving a privately-held business requires considerable preparation.

Even in circumstances where a sale is not imminent, much can be done to improve the operational and financial performance of a business in order to ensure owners can capitalize on favourable market conditions and execute their liquidity option when the timing is optimal.

Even if a liquidity event not be expected to occur for many years into the future, business owners will end up benefitting from owning a company with reduced risk and better operating and financial performance.

The following outlines the main areas of focus for business owners contemplating a future liquidity event:

Know the Value of the Business

Even if there are no plans for an imminent sale, it is important that business owners have a reasonable estimate of their company’s value.

When armed with this knowledge, owners will be better positioned to evaluate unsolicited offers by potential investors. Additionally, obtaining a periodic, realistic estimate of value serves as a tool to examine changes in value over time and is a means to target and track growth objectives.

Relying on a value based on pricing obtained in transactions involving similar companies may lead to value expectations that are unrealistic in an open market transaction. It is worth retaining an experienced Certified Business Valuator to get an accurate and unbiased valuation based on the financial and non-financial, tangible and intangible factors specific to your business.

Understand the Value Drivers

Along with an estimate of a realistic value range, it is important to understand the factors driving this value.

Value drivers consist of financial and non-financial metrics and intangible attributes that are of importance to prospective purchasers. They are also the catalysts to increase the future value of a business prior to any liquidity event. Identifying value drivers will allow owners to focus on enhancing areas that are deficient, resulting in better financial performance, lower risk and, ultimately, a higher value.

Prepare for a Liquidity Event

Optimizing a liquidity event involves timing the transaction to coincide with favourable company and market conditions.

Much preparation can be done to ensure owners are ready to capitalize on attractive market conditions, including the following:

• Reducing key man risk through the development of a strong senior and mid-level management team;

• Reducing customer and supplier concentration;

• Investing in maintenance and capital expenditures to ensure productive capital assets;

• Improving financial systems and reporting capabilities;

• Documenting undocumented business relationships with customers, suppliers, employees and related parties, as well as internal operating controls and governance protocols;

• Obtaining resolution and greater clarity relating to contingent liabilities, outstanding tax and litigation matters;
• Cleansing the balance sheet of redundant assets;

• Developing a growth plan based on sound business strategy and detailed financial assumptions

Successfully implementing the above initiatives will increase profitability while reducing risk and costs to potential buyers thereby increasing the attractiveness, marketability and ultimately the value of the company.

Consult With a Transaction Advisor

Liquidity events are unusual in the business lifecycle and therefore an area where management typically has limited experience. Given the significance of the process to the business owner, it is prudent to hire an advisor to ensure the outcome is maximized.

However, even business owners experienced with the transaction process can benefit from engaging a transaction advisor prior to initiating a liquidity event. These benefits include:

• Signalling that the process will be professional, pragmatic and unemotional;

• Advising on the purification of the balance sheet prior to the transaction to ensure overall value is maximized for the business owner;

• Advising on the optimal transaction structure (full sale, partial sale, management buy-out, sale to family members, etc.) and process that will yield the best outcomes for the business owner; and

• Outsourcing the responsibility for overseeing and managing the transaction process maximizes the efficient use of management’s time and enables them to focus on the day-to-day operations and growth of the business.

This is the first in a series of articles by Nathan Treitel on transactions and valuation issues relating to small and mid-sized privately held companies.

The next article will focus on liquidity and financing alternatives for privately held businesses.

This piece was produced as a part of the quarterly Canadian Overview, a newsletter produced by the Canadian member firms of Moore Stephens North America.

Commentary on the 2019 Federal Budget

Dear Clients and Friends,

On March 19, 2019, the federal government released the budget for 2019.

This budget was not focused on corporate tax issues. Instead, the budget provided for a few directed measures for individuals with regard to re-training and purchasing a home. There were no changes to corporate or personal tax rates.

Please follow the link below to a summary of the budget presented by our Tax Team.

Federal Budget Commentary 2019

If you have any questions, please do not hesitate to contact your Segal tax advisor.

Best regards,

The Segal Team