Golden Girl Finance
 
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Entrepreneur

Why protection is essential to your business plan

April 29th, 2015 by

Hey entrepreneur, who's got your back?

 
 

As a business owner, you may be facing complex decisions about growth, new issues, even mergers and acquisitions – and you also want to make sure you protect your business, especially when venturing into new territory. Yet, all too often, small businesses overlook the importance of insurance in their business planning. In fact, Business Insurance is often the most overlooked aspect of business planning, which has proved a very costly mistake for some companies and their owners. 

Unsure of where to start with insurance? Your first step could be to connect with a professional and knowledgeable financial advisor who is experienced in small business needs. She can explain the value of various types of insurance for your business, and work with you to determine the investment products and services that best suit the needs of you and your company.

What is business insurance? 

Business insurance protects your business and your family from the financial and operational burdens associated with unexpected absences, either your own or your business associates’ due to injury, illness or death.

How does it work?

As a business owner, business insurance allows you to be prepared for the unexpected, in a number of ways. You have the option to:

  • Insure your partner’s shares in your company
     
  • Insure your business loans
     
  • Insure a key person in your company

In the event that an insured party dies or becomes incapacitated, the beneficiary of the policy will receive a lump sum payment, enabling seamless business continuity and operations.  Insurance can provide for both income replacement and business overhead protection.  It’s a simple, cost effective way to ensure the stability of your business for years to come.

Protection for your employees can benefit you

Of course, a company has many other business needs beyond those of its ownership team. Insurance products for employees can promote employee retention and potentially reduce operating costs by reducing turnover. Here are some of the Group products that a small business can consider for their work force: 

Group Benefits

  • Pension plans: Group registered pension plans, deferred profit sharing plans and RRSPs
     
  • Group Health & Dental plans including Long Term Disability coverage, and even Critical Illness.

With the help of a financial advisor who specializes in small businesses, owners gain the professional insight and analytic capabilities that can help them make business development decisions with confidence.  

Protect your success

With the right business protection and group benefits, small businesses can be well positioned for growth. However, it’s equally important to periodically evaluate your coverage against current needs to ensure you’re properly protected. If you haven’t done that in the last three years, you’re likely overdue. A review should be part of your annual business planning process.

Investing

In Canada, cash investments are king

March 24th, 2015 by

Spring may have arrived, but it's still all about that cold, hard cash

 
 

The most recent Manulife Investor Sentiment Index revealed a truth about Canadians and their money-saving tendences - when compared with investors in the U.S., Canadians are far more likely to favour cash investments over the stock market.

It's all about the benjamins (er, lauriers?)

Most people would probably look at the differences between our two countries and cultures and chalk that fact up to our different tolerance for risk. That may be true on a general basis.

Regardless of the reason behind the preference, the thing that stands out to me is how much people need to understand that it is important to have an investment plan and then follow it. Almost every investment plan has a component of cash and cash-equivalents, but if you are in a situation where you need to be making a 5-6% return, then just putting money in cash is not going to get you what you need.

Don't cash out on opportunity

Making sure you're not too heavily weighted into cash products if you need to hit higher returns is a great conversation to have with your advisor this year.

 

Note: the information contained here is general in nature and does not take into account your personal situation. Before acting on any of this information, you should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial advisor.

Investing

5 tips for investing in RSPs

February 26th, 2015 by

Guidelines to keep in mind as you plan for the 2015 tax year

 
 

Now that the RSP deadline for 2014 contributions has passed, many forward-looking investors are already planning their contributions for the 2015 tax year. Here are some important guidelines to keep in mind: 

5 RSP guidelines to consider before making your contribution

  1. Don’t waste your contribution limit  

If you contribute and then withdraw in the short term from your RSP, then you will lose the ability to have that amount grow tax sheltered in the future. It is best to think of this account as longer term money/savings.

  1. Beware of over contributing

When calculating how much you can contribute to an RSP you need to be aware of how much you are contributing at work and make sure that you do not put too much into your RSP.  If you do over-contribute then the penalty would be 1% per month.

  1. Use your contributions to the best tax advantage possible

If you’re fortunate enough to have a financial windfall or other lump sum that you want to use to top up your RSP, then it’s a good idea to seek expert financial advice.  You may find that you will benefit far more if you spread out your contributions and using the deductions on your tax return for multiple years.   

  1. Start your contributions early

The earlier you start, the longer your contributions have to grow tax free and compound.

  1. Maximize your contributions every year, throughout the year

Being diligent and focusing on maximizing your contributions each year will only help you to save more. Of course looking at your various options between TFSA, Non-Registered savings and RSPs to see where it makes the most sense is important, but the consistency of investing on a monthly basis leads to a more successful investor.

Retirement

Emerging trends are changing how Canadians plan for retirement

February 11th, 2015 by

Are you a retiring Boomer? 5 new trends that could affect your retirement plans

 
 

With the March 2nd, 2015 RSP deadline approaching, many Canadians are planning their annual contributions and hoping for a comfortable nest egg when retirement rolls around.  But with recently lowered interest rates potentially diminishing returns and several new trends emerging on the retirement front, it could spell changes in how Canadians need to plan for retirement.

As Canadians plan for their financial needs in retirement, there are several emerging trends that need to be considered. The Baby Boomer generation is now crossing the retirement threshold, and we’re seeing a new kind of ‘Young Retiree’ who envisions a very active and comfortable retirement, yet they may not be taking some important trends into consideration as they plan for their leisure years.

5 emerging trends that impact retirement planning

  1. Seniors are living longer

According to Statistics Canada, the average 65-year-old Canadian near the beginning of the 20th century could expect to live about 13 more years. A hundred years later in the new millennium, that figure has jumped to almost 20 years. 

Conclusion: Retirement funds have to be sufficient to accommodate an increasingly long life span.

  1. The retired population is growing, and accelerating rapidly

According to Statistics Canada, between 1981 and 2005, the number of seniors in Canada almost doubled, increasing from 2.4 million to 4.2 million. The very first baby boomers turn 68 this year. The average retirement age of Canadians is 62, so many boomers have already entered retirement, while many others see it on the horizon. By next year, 1 out of every 5 Canadian adults will be 65 or over.

The number of Canadians entering their retirement years is accelerating.  Between 2006 and 2026, the number of ‘Young Seniors’ aged 65 to 74 (people just retiring) is projected to almost double.

Conclusion: In the future, there will be an increasing demand for resources geared to a growing pool of retirees.  This demand could potentially impact supply/availability and ultimately, pricing.  Sound financial planning should make provision for increased prices for retirement-related resources and services.

  1. Today’s retiring population is different from earlier generations

Seniors themselves are changing.  Financially, they are better off than they were twenty-five years ago. They are better educated, Internet savvy, and active.   Seniors are also starting to be seen as different sub-sets within their overall category.  Characteristics of ‘Young Seniors’ aged 65 to 74 differ dramatically from their older counterparts.

Conclusion: Retirement funds for ‘Young Seniors’ need to be sufficient to accommodate a more active lifestyle than in times past.

  1. Health challenges faced by long-lived seniors can strain retirees’ financial resources

As Canadians live longer, they’ll need to plan for what may be extended periods when special care and living arrangements are needed.  Planning should also take rising care costs into consideration.

Conclusion: Contingency funds need to be established to provide for long term care/ special needs in retirement. 

  1. Many Canadians are retiring with debt

In 2009, 34 percent of retired individuals aged 55 and over held mortgage or consumer debt, according to Statistics Canada. The median amount owed by these individuals was $19,000.  The incidence of debt was much higher (almost double) among those in same age group who had not yet retired

Divorced retirees (43 percent) had the highest incidence of debt. They were followed by people in a couple (35%), those who never married (30 percent) and widows or widowers (28 percent). Also, divorced retirees had the lowest annual median income and net worth, compared with all other groups.

Retirees with debt had a median annual household income of $42,000 and a median net worth of $295,000. Overall, their debt was equivalent to about 7 percent of their total assets.

Older retirees were significantly less likely to have outstanding debt. Just under one-half (48 percenty) of retirees aged 55 to 64 had some form of debt, compared with 20 percent of retirees aged 75 and over.

Conclusion: Many people approaching retirement age may be delaying their retirement plans due to debts. Today’s low interest rates make this a perfect environment to pay down debts quickly. Plans for eliminating debt should be part of your overall financial strategy both leading up to and after retirement.

Listening to clients is key

Our company was recently recognized by the Mississauga Board of Trade’s Business Excellence Awards, as the 2014 Small Business of the Year. We’ve built our business on satisfying the unique needs of each individual customer. We listen to our clients’ needs to understand what their goals and challenges are, and then help them choose a path to change their financial future.

Entrepreneur

Business owners: Do you know your 2014 Lifetime Capital Gains Exemption?

December 15th, 2014 by

What the exemption increase means for you and your business

 
 

Effective for 2014, the Lifetime Capital Gains Exemption (LCGE) is increased to $800,000.

Here’s what you need to know about what this means for your business...

5 things you need to know about the Lifetime Capital Gains Exemption

  1. Qualification for the exemption

The capital gains exemption exempts up to $800,000 in capital gains from tax on dispositions of Qualified Small Business Corporation (QSBC) shares, qualified farm property and qualified fishing property. The exemption also applies to capital gains that are flowed to individuals through partnerships, trusts and certain other types of investment vehicles. The exemption is available to individual taxpayers while a resident in Canada.

The exemption is not available to offset capital gains realized by a corporation. Nor is it available to offset capital gains retained by a trust - i.e., capital gains that are not paid or payable in the year to a beneficiary.

  1. Qualified small business corporation shares

In order to qualify for the LCGE, shares of a corporation must be QSBC shares. To qualify as QSBC shares there are several complex tests that must be met with respect to the type of assets owned by the corporation and the length of the period during which the shares are held. The first test to qualify as QSBC shares is at the time of disposition the shares must be shares of a Small Business Corporation (SBC). An SBC is a Canadian Controlled Private Corporation (CCPC) of which all or substantially all (90% or more) of the assets, on a fair market value basis, are used principally in an active business, carried on primarily (50% or more) in Canada by the corporation or a related corporation. The assets meeting the “all or substantially all” test may be shares or debt in another SBC which is controlled by the CCPC or of which the CCPC owns at least 10% of the voting shares and value.

The second test is a holding period test. To meet this test, no one other than the shareholder (or a related person or partnership) must own the shares for two years. During this period, at least 50% of the fair market value of the corporation’s assets must have been used in an active business. The test becomes very complicated where holding companies are involved.

  1. Planning considerations regarding availability of the exemption

If a corporation holds non-active assets, transferring those assets to separate holding companies may be considered. The anti-avoidance rules contained in the Income Tax Act should be reviewed prior to entering into any transactions that attempt to extract assets from a corporation on a tax-deferred basis.

  1. Planning considerations relating to timing of use of exemption

There are planning techniques available to accelerate the realization of capital gains in order to use the capital gains exemption. One of the more common reasons to realize a gain is to lock in the capital gains exemption while the QSBC shares qualify; for example, before the corporation accumulates investment assets.

  1. Impact of corporate-owned life insurance

Holding a cash value life insurance policy in a corporation may affect whether shares of a corporation qualify as QSBC shares. Whether the corporate-owned life insurance policy held while the life insured is alive is considered an active business asset and whether the death benefit proceeds from a life insurance policy are used in an active business must be determined. Further, the “value” of the policy must be determined for purposes of the asset tests (for both the prior two years and at the time of disposition).

It is important to note that any type of passive investment asset may cause the corporation to be offside for purposes of the QSBC test. Generally, funds not required in the active business operations are used to purchase the insurance policy. Therefore, the corporation would likely have failed the QSBC tests regardless of whether the insurance policy was purchased, since the funds would likely have been invested in a different passive asset.

Conclusion

The capital gains exemption creates additional opportunities (and complexities) in tax planning. Taxpayers should consult their tax advisors when they are attempting to utilize their exemption.