TheReview

“Accountant gives
incorporation advice

By Ron Park Executive Vice-
President Institute of Chartered
Accountants of British Columbia

The increase in the number of
small business firms as a result of
the economic recession in Westem
Canada is a significant trend in the
region.

Thousands of people who have
received a “golden handshake” or
who were simply retired from their
jobs earlier than they anticipated
have tumed the situation around
by establishing their own small
businesses.

Types of businesses range all
over the marketing specttum —
from turning a hobby such as
crafting wooden horses for grand-
children into making toys for the
mass market, establishing a restau-
Tant, or simply consulting.

In any case, these people and
others contemplating or establish-
ing small businesses today are
probably wondering whether to
incorporate the new entity. Is
incorporation preferable to other
forms of ownership?

Let’s look at the advantages and
disadvantages of incorporation.
Chartered accountant Bill David-
son, who is with Davidson &
Company in Vancouver, talked to
me about the pros and cons of
incorporation.

On the pro side, he said, small
businesses receive some tax defer-

ral advantages flowing from the

small business tax rate, on the first
$200,000 of taxable income. For

- businesses that are eligible, this

makes more funds available to
Te-invest in inventories, another
business, or other investments.

In addition, incorporation per-
mits some minor tax deferral
advantages on investment income,
and possibly minimization of the
estate tax on real estate held in the
United States.

One important factor is incor-
poration may limit your personal
liability. In other words, if your
small business doesn’t work out,
creditors may not be able to claim
on your personal assets.

Bill said bankers and other busi-
ness people seem to think a com-
pany is more credible than a
partnership or proprietorship.

Family fortunes can benefit, too.
In a corporation there are opportu-
nities to split income with family
members in a lower tax bracket,
and thereby gain some tax savings,
and opportunities for estate plan-
ning where future earnings can be
effectively transferred to family
members.

One of the biggest incentives to
incorporation is that the shares of
a company may be eligible for a
$500,000 capital gains exemption,
if the company’s assets are used in
an active business carried on pri-
marily in Canada.

Bill pointed out to me that there
are disadvantages with incorpora-
tion, too. What are they?

Well, there is some potential for
‘double-taxation’ where capital
gains are made. Assets that are

COLLECTION

Continued from Page B2
owes you the money. Is it really the
person you gave it to, or is it his
company? If it’s a company, be
sure you have the legal name.

Whether it’s a person or a
company, try to get a current
address and phone number if pos-
sible. In many collection cases,
this is one of the most difficult
parts of collecting the debt. By
going to the local Sheriff's office,
you may be able to save yourself
some time.

They will help you find out if
there are any writs of execution
against the debtor. If there are, you
know that someone else has tried
unsuccessfully to collect money
from the person.

If this is the case, you might
consider dropping the whole thing
and chalking it up to experience.
Unless you think the amount itself
is larger than the projected legal
costs. Don’t forget to factor in the
cost of your own time and effort.
Irs a good idea to get a lawyer's
advice before giving up at this
stage.

If you decide to go ahead, but

THEREIS
NO FREE RIDE

still can’t locate the debtor, here
are a few tips on how to proceed.
The first obvious place to look is
the phone book. If the person has
moved, ask the operator to check
the new listings. If you have either
a phone number or an address you
can get the other by calling the
reference desk of your local library
and asking for information from
the city directory.

If you have a motor vehicle
licence plate number, you can
contact the Motor Vehicle Registry
in Victoria to get the address of the
registered owner. Follow-up every
lead you have.

If you think you know where the
person works, you can call the
employer to check. But be aware
that you can’t contact a debtor’s
employer for any other reason than
for confirmation of employment in
connection with the collection of a
debt.

This is part of a series provided
by the lawyers in your community.
These tips are for general informa-
tion only. If you have a specific
legal problem you should consult
a lawyer.

..» WITHA

DRINKING DRIVER

DRINKING DRIVING
COUNTERATIACK

accumulated belong to the com-
pany and are not for the personal
use of shareholders. The sharehol-
ders can receive assets for personal
use by paying themselves bonuses,
or dividends.

A corporation must prepare a
financial statement each year and
prepare corporate income tax
returns, for which a cost is
involved.

Corporate profits, while they
may be taxes at the lower small
business rates, are not eligible for
the $100,000 capital gains deduc-
tion.

If shareholders require all the
corporate profits to meet personal
needs then tax deferral advantages
may be reduced considerably.

A simple incorporation proba-
bly costs $750 to $1,000 in legal
fees and disbursements. Annual
maintenance fees will be at least
$150 a year.

HELP
US rts
HELP
EACH
OTHER

Thanks to you

it works...
FOR AL

‘United Way

And, once you’re incorporated,
you'll be faced with never-ending
paperwork and changes in corpor-
ate - as well as personal - tax laws.

“Ts incorporation good or bad,
then?”’ I asked Bill.

“Tt all depends,” he said. “on
what best suits a businessperson.
Each has to make that decision
based on individual circum-
stances. It’s best to consult with a
chartered accountant.”

THE BIBLE
THE BOOK FOR TODAY

What we are witnessing today is
an incredible fulfilment of Pro-
phecies that come right out of
our Bibles. Truly, holy men of
God spoke as they were moved
by the Holy Spirit Paul states “all
scripture is given by inspiration
of God”.

Let us take into account what is
happening in Azerbaijan. Just
this week we read in the press
that Israel has agreed to take
1000,000 Jews wanting to get
out of the country. The prophet
Jeremiah made these very
pointed predictions that are now
happening right before our
eyes. Jeremiah 16:15 “The lord
liveth, that brought up the chil-
dren of Israel from the land of
the north, and from all the lands
whither he had driven them, and
will bring them again into their
land. Behold | will send for
many. fishers, saith the LORD,
and they shall fish them, and
after will | send for many hunters
and they shall hunt them from
every mountain, and from every
hill.”

Really how can we fail to see
the wonder of what is happen-
ing. These Jews are going to be
returning to their ancient father-
land, in spite of themselves. It is
a fact that Isreal has invited
them back, and it is also a fact
that Isreal is unable to cope
withthe large numbers being
forced to return. Why must they
return? For two reasons A. Jere-
miah 30-3 says “For lo the days
come, saith the LORD that | will
bring again the return of my
people Israel, | will cause them
to return to the land of their
fathers.” So, as difficult as it
may seem, see what Jeremiah
23:4 says again “I will set up
shepherds over them,which
shall feed them, and they shall
fear no more.” We can be sure
then that God will provide the
means to take care of them as
they return.

Israel has a destiny. The land of
Israel is their home. They MUST
go back. They are faced with
anti-semetic enemies in Europe.
As one Israeli said, he would
rather be alive in Israel than
face horror and possible death
in Europe.

How. does this great drama of
Israel affect us? Paul, in Ro-
mans 11:15, puts it this way—
“For if the casting away of Israel
be the reconciling of the world,
what shall the receiving of them
be but life from the dead.” Is-
reals Messiah told us in the
Gospel records that the sign of
the fig tree (Israel - Luke 21-29)
would be one of the signs her-
alding his (Christs) coming. We
should be ready.

BIBLE CORRESPONDENCE
COURSE AVAILABLE

Get to know your
Bible Better.

Wednesday, January 31,1990 — B7

PHONE 655-1061

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