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| Adrian Mastracci |
By Adrian Mastracci
Sounding Board
The Vancouver Board of Trade
May 2003 Issue
Business plans may have veered off course amid the
lingering fear and uncertainty. Perhaps, they need
refreshing or second opinions.
It may be useful to brainstorm with your professional
advisors. If the core business plan is appropriate,
a periodic tweak will keep you on track.
Perhaps, consider my “AAA” approach: assess,
analyze and adopt. That is, assess the future prospects,
analyze the present blueprint and adopt the necessary
changes.
Here are some ideas:
1. Find a mentor
Find a mentor for your
business. Someone with imagination and a wide perspective
to bounce ideas at. Able to
filter different points of view and relate them to
what you're trying to do. What a terrific sounding
board.
2. Business plan
Fine tune your business plan. You
do have one, of course. Examine your business goals,
what you have
to do to maintain success and where your industry is
headed. Be realistic and ascertain if what you're doing
today will still get you there tomorrow.
3. Business structure
Revisit that proprietorship,
partnership, incorporated company, or complex set of
holding companies. The business
reasons for the structure may have changed. Inquire
if you can improve your business by doing something
different.
4. Succession planning
Reflect on the financial ramifications
and who will step in case of a disability, retirement
or death.
Begin identifying competent managers to guide your
business. Perhaps. a family member may fit in. Prepare
your vision for the business succession. This is one
is a best investments.
5. Estate freezing
As you wrestle with succession
planning, ask whether it makes sense to consider some
form of estate freeze
for the business assets. If warranted, this can be
expanded to other assets owned.
6. Management remuneration
Review the remuneration
of owners and key management. Consider the affects
of a mix of salary, dividends
and a sprinkling of stock options.
7. $500,000 capital gain exemption
Analyze whether
crystallization of your business or operating farm
qualifies for the $500,000 capital gain
exemption. The full exemption can save $109,250 of
taxes in BC.
8. Selling one business, buying another
Owners that
sell an eligible small business and buy another should
review the potential to defer the tax
on the capital gain on the business being sold.
9. Small business limit
Pay attention to the lesser
rate of tax on the first $200,000 of qualifying business
income. Soon rising
to $300,000 after 2005.
10. Managers as owners
Review the benefits for management
to be shareholders of the enterprise they are entrusted
to guide. Consider
selling shares to key executives, especially in private
companies. Managers that own a piece of the rock think
differently.
11. Loans to employees and shareholders
Businesses
can make loans, at the prescribed rate, to employees
and shareholders. The rules are involved;
therefore, seek professional counsel. The rate is 3%
till June 30, 2003.
12. Corporate interest deductibility
Get to know how
the new interest deductibility proposals affect you.
For example, revisit borrowing strategy
to pay dividends or make shareholder loans.
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Need an answer? Ask our expert. Adrian Mastracci will
take questions from Board members on a range of financial
topics. Send your questions to twong@boardoftrade.com
and look for the answers in the next issue of Sounding
Board.
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