2016 planning priorities for business owners

AdrianBy Adrian Mastracci, KCM Wealth

Special to the Financial Independence Hub

Today’s business owners are preoccupied with the day-to-day operations for 2016. They need plenty of encouragement in planning their tomorrows.

Owners know that curve balls can suddenly appear practically every day. A continuous challenge for many is trying to improve their business prospects.

Business plans can easily veer off course, often beyond one’s control. A refresh of your business elements is good value.

First, mull over what you would like to achieve with your business.
Then brainstorm with some solid ideas.

Assess, Analyze & Adopt

I call this my “AAA” approach.
That is: “Assess”, “Analyze” and “Adopt”:

Assess business goals.
Analyze action plans.
Adopt necessary changes.

Businesses that employ up to 50 people are the backbone of a thriving economy.
It’s prudent for business planning matters to be prioritized for periodic review.

Arranging a meeting to brainstorm with your professional advisors is productive and insightful; say the accountant, lawyer and money manager.

Contemplating business matters is best done in a coordinated way.
That is, review all the implications at once and design one sensible plan.

I highlight seven planning priorities for business owners in 2016:

1.) Business structure

Perhaps, your business structure that served for years could use a tweak or fresh face.
It may now be a partnership, an incorporated company, or a set of holding companies.
First evaluate valid business reasons for the current structure. Then examine if you can further benefit by modifying the setup.

2.) Owner remuneration

Review the composition of your 2016 owner remuneration. Revisit your mix of salary, management fees, bonus and dividends best applicable to you. Maximum 2017 RRSP room of $26,010 requires “earned income” of $144,500 in 2016.Some family members may be able to receive dividends while paying little income tax.

3.) Business continuance

The continued operation of the business is also neglected too frequently.
Specifically, who will take the helm if you become disabled, ill or deceased?
You want someone qualified to step into your shoes temporarily, perhaps longer.
In fortunate situations, there may be a family member or someone in the organization.

4.) Family trusts

Many business owners have various family trusts that have been set up over the years.
Some of the rules have changed, as some trusts are approaching their 21-year life.
Take this opportunity to revisit your family’s planning needs and trust benefits.
Those who don’t have a family trust can assess whether it makes sense to establish one.

5.) Lifetime capital gain exemption

A lifetime capital gain exemption up to $824,000 per spouse is available in 2016.
It exempts gains from the sale of qualifying small businesses, farm property and fishing assets. Review the eligibility steps for the special gain if you own such assets.
Usage of the full exemption implies a tax saving over $180,000 per spouse across Canada.

6.) Find a mentor

Find a mentor with a broad, thoughtful perspective for your business: a person who can filter different points of view with logical reasoning. Someone who relates to what you are trying to achieve, with imagination who can be a terrific sounding board.

7.) Disaster recovery

Plan for the day you may require alternative business premises in very short order.
Start by backing up your key computer data and store it off-site on a regular basis.
Consider how reliable your supply chain can be in an emergency.
Ensure that all your key people are on board.

Implementing these planning priorities helps achieve your family business goals.
Always check that all your professional advisors are on the same page as you.

Adrian Mastracci, MBA,  is president and portfolio manager for Vancouver-based KCM Wealth Management Inc., specializing in designing and stewarding retirement portfolios.

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