At Hogg, Shain & Scheck, we look forward to the opportunity to work with entrepreneurs. Our team loves to fuel innovation by refining the financial practices of Ontario’s business owners. To serve our clients better, we continuously perform research to remain aware and ahead of trends that may affect entrepreneurs and their growing businesses. Our team is always excited to be an instrumental part of fuelling a company toward growth by providing tax saving tips from the start. When clients feel empowered to buy a new business, we want to make sure that they are fully aware of important accounting issues that will affect their company’s purchasing power.
There are many risks and opportunities presented to the purchasers of a private company. Below, we incorporate this advice with information from Canada Revenue Agency and our firm’s knowledge to give purchasers a brief idea regarding this important undertaking for their bottom line.
Purchase of Shares
If both parties agree to the purchase of shares, then the purchasing party may have leeway when negotiating a reduced price for the business. This negotiating power may come from the vendor benefiting from tax exemptions on the sale of their shares. This gain will occur after the acquisition has occurred, but only if the purchase has been properly managed.
On the other hand, deciding on the purchase price on an asset acquisition will directly affect the vendor’s taxable income. Further, dependent on what type of assets are purchased and their value, this structure will also determine how the buyer may expense or amortize the purchase. The two opposing parties will be vying for the most financially beneficial way of structuring the purchased assets and the purchase price of the company. The purchaser will want as much of the purchase price as possible to be attributed to assets that will depreciate quickly. However, in opposition to the purchasers, the seller will suffer if the purchase price is managed this way, as it will force him or her to report a larger amount of taxable income. These, at times heated, negotiations are one of the many elements of purchasing a company in Canada that makes it important to hire professional help to realize tax implications. A price savings may not translate if the tax burden is higher.
Purchasing a Company
Before purchasing a company, you need to take the time and leverage the necessary person power to gain a full understanding regarding the tax attributes and tax liabilities of the company and what you would be taking on. By doing your tax due diligence as the buyer, you may position yourself to have more leverage for negotiation. The more you know, the more able you will be to make informed decisions that will affect your bottom line for many years to come.
By hiring a professional accounting firm that services the Greater Toronto Area you may save yourself a great deal of heartache and frustration, We will ensure that we pursue a purchasing structure that respects both parties’ needs, but enables you to purchase your target company in an efficient and lucrative manner including the tax implications. If you are looking to acquire a business in Canada, contact Hogg, Shain & Scheck for client service and innovative money saving techniques.
Information for this article was taken from: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/lf-vnts/byng/menu-eng.html