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hansol

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  1. Asset sale vs share sale is generally dependant on whether you're on the buy-side or the sell-side: If you're buying, asset sale is generally the "best", as it allows you to only purchase the assets you need for the business, and avoids aquiring redundant or unneccessary items. Additionally, it avoids you being on the hook for any unlisted liabilities of the business that the seller "forgot" to mention. Lastly, it gives you a fresh CCA base for the assets, so you receive a tax-savings benefit from that as well. If your'e selling, typically a share sale will look more attractive, mainly for the ability to take advantage of the newly-increased $800,000 lifetime capital gains exemption, which has the effect of hugely reducing your tax balance payable on the sale of the corp. Additionally, it is a heck of a lot simpler, and therefore cheaper in terms of accounting fees/legal fees, to sell the shares. So that's basically it, but as always there are exceptions to the rule. Often you can structure an asset sale/share sale to be just as attractive as the other, so don't necesarily just walk away from an offer if it's not in your "preferred" form.
  2. Dannny, as koft said above I can't really answer that for you. Any "opinion" I could offer is no better than speculation, and I have no qualms about saying that. In fact, most everything you hear about the markets is just one person's opinion on that specific day at that specific hour. One of the best "bits" of investment advice I've ever been given was basically "if the investment is at the retail level, you're already behind." Basically what it means is that to get anywhere with investing, you need to find an angle that the general public doesn't have access to. A real-world example was actually a dental client of mine who was contacted directly by a fairly affluent hotel chain to put up a 30% investment in a new hotel being built in an upscale part of town. A friend of a friend knew the dentist, knew he was good with money, and put him in touch with the hotel. So you'll find that as you're in business longer, it's opportunities like these that offer the "best" return on your money as opposed to buying mutual funds or the like.
  3. Generally I would suggest getting your employment first, figuring out what kind of income you'd be generating, and then incorporating after a few months. That way you can focus more on the practice-side of things before getting swamped in start-up paperwork. With that being said, it won't hurt anything incorporating a prof corp right off the bat either, so it's basically whatever you feel comfortable with. Disadvantages are namely cost and admin purposes. By incorporating you're typically going to incur more expenses (accounting fees, legal fees, corporate registration costs etc), as well as the admin/paperwork side of things. I will say however that one "perk" of being involved in the medical/dental fields is that the tax benefits/savings of incorporation and running your own prof corp greatly outweigh those general admin costs.
  4. The short answer is that it depends on residency status. If you're a Canadian resident, you're essentially taxed at Canadian rates, and the Canadian tax paid counts as a "credit" towards any US tax you might owe. There's a bit more complexity to it than that, but that's the basics.
  5. Regarding dividends vs salary: This is something that will be specific to your situation. Ideally you want a combination of the two in order to take advantage of the various personal tax credits available against emplyments (t4) income, but also want to take advantage of the low(er) taxation of dividends as well. This "blend" will always be unique to your circumstances of the year, so that's where sitting down with your accountant comes in to play, and you two can hash out the best way to take advantage of your current situation, as well as plan for the future. Corp vs. trust regarding income splitting is a pretty "heavy" topic, which again, I could write pages about. Feel free to PM me, or give me a bit of time and I'll do a "trust vs corp" breakdown for the readers here. Dentists are in a unique spot as you guys tend to earn enough income to warrant these various tax planning and estate planning methods, so I think it's worthwhile that a person has a basic understanding of these concepts so that the "financial wolves" out there don't take advantage of one's not knowing.
  6. You're in a pretty complex situation, so I don't know how helpful my advice will be, but I can certainly give it a shot. The deciding factor for whether or not you're taxed in both Australia comes down to the concept of "Primary" and "Secondary" ties. The Coles Notes version is that if CRA decides you have enough "ties" to Canada, they will deem you a Canadian Resident for tax purposes, in which case you'll likely be taxed in both locals. That being said, if Canada has a tax treaty in place with Australia (and I believe they do) you will receive credit for the taxes paid in Australia. That's not to say it's a good deal, as you may wind up, for example, paying more tax in Australia than you would have in Canada, or other such scenarios. Best thing is to actually sit down with your accountant and run the numbers and go from there. I suggest incorporation straight out of graduation, and going from there, assuming you'll be making high-rate income and that sort of thing. The student loan debt is tricky, because as I stated above, I tend to think that paying it off sooner rather than later is a better idea, all things being equal.
  7. There's two angles to look at this: Firstly, from a purely monetary standpoint, it's better to have two separate corporations in terms of having the ability to take advantage of two separate $500,000 small business limits, instead of splitting the one limit 50/50 between the two practitioners. (Probably best to PM me on this one.) Secondly, often professional colleges have restrictions on who can hold shares in a professional practice. For instance, it's possible that two dentists can hold shares in one dental corporation; however, the dental college may also restrict the holding of dental practice shares to dentists only. In that instance, a medical doctor may not be allowed to be a shareholder in the dental corp. So it definitely helps to read up on what your professional body allows/doesn't allow.
  8. Okay this is a bit of a loaded question. In the accounting world, there has always been a bit of a "competition" for which designation was the "best." In my experience, after a person has been in practice for a while, the designation they carry isn't as relevant as much as the experience they have in practice. And with all 3 designations now merging into one "CPA" designation, the competition will soon be irrelevant. That being said, the CA route was/is very intensive, and some food for thought was while you would often hear a CA student maybe take the CMA/CGA route as a fall-back plan, you never heard of a CMA/CGA student pick the CA route as a fall-back plan. You can make your own conclusions from this, but again, I want to point out that the main thing to look at is the individual accountant and their experience with your field; adding numbers is adding numbers at the end of the day. Regarding whom to look for in an accountant for dental-specific practices, I'm a little biased, as that's what my practice is of course, so please seek other opinions as well. What I think is important is you want an accountant who understands the unique sides of the industry. He should have an understanding of joint venture setups so that you can maximize the earning potential of two practices working under one roof, for example. He should also be able to explain the GST/HST issues that come with a dental practice (for example, some aspects of the practice will collect GST, while others are GST free.) If your accountant is unfamiliar with this, get out of there fast. Additionally, one thing I would look for as a new professional starting out would be whether my accountant is "reachable" or not. Again, to use a personal example, my practice is "paperless" - as long as a client can scan/email their paperwork to me, I can do everything remotely and PDF the finished result to the client, with the followup review work done via telephone. Now, this isn't anything fantastic, but what it means for you, the new dental professional, is that you can be vacationing in Mexico and still review business issues with your accountant at the same time. I've found that this "little" bit of value-added gives the client huge comfort, as you know that no matter where you are or what's happening, as long as you have your smart phone with you, you can still take care of any emergency business that comes up, and not have to wait to be "scheduled in" at your accountant's convenience. So this is a long-winded way of saying make sure your accountant is up to speed on technology and has the ability to handle all the questions and unncertainty that come with starting up your own practice.
  9. Okay this is an interesting scenario, and will depend on how a person feels about finance and "time value of money" and all that. One thing to remember is accountants tend to be quite conservative, so by all means seek other opinions to contrast with this one: Because borrowing rates are so low right now, we are in a very fortunate time in terms of being able to access "cheap" money. However, nobody can really say how long this goes on for. Certainly getting rid of debt as fast as possible is never a bad idea, regardless of the market returns of the time. With the markets, you can never be 100% sure about returns; with debt, you can be 100% sure that you will need to repay it. Typically, what I like to suggest without knowing the specifics of your actual scenario, is pay down debt as fast as possible, and once the debt is paid off, THEN start focusing on investments. The interesting thing about earning investment income while paying off interest on a loan is that you put yourself in a unique scenario where your net returns are not all that great in terms of the risk of the assets you're invested in. In normal-people speak, this means if you invest in something where you earn 7% (a "risky" asset return in the current market) but are paying 4% interest on student loans, your net return for the year is 3% - a return that could be achieved by simply investing in a "riskless" GIC, for example. Funnyguy, just thinking out loud, but what I could see doing in your scenario is incorporating and making the majority of your income in the corp, and leaving the majority of the cash in there. The cash you do take personally should be a combination of dividends and salary in the amounts enough that you can maximize use of your tuition tax credits or any other non-refundable tax credits available to you. This cash you would then use strictly for debt repayment and living expenses. Remember, the more cash you take out, the higher you're taxed at, so the goal here is to maximize the speed in which you can pay off that debt while also mimizing tax for the year.
  10. Pinky, I will do up a separate post on this one; it's rather "intensive" give me a bit of time to get it all on paper. Thanks.
  11. Unfortunately I can't offer a decent answer here, as the question has so many variables that without specifics I can't really comment. One thing I can say though is if Ontario really starts to push this provincial CPP idea that is going around, ON is going to be one of the costliest places to do business in terms of payroll taxes. You're possibly going to be looking at a sunk cost of $8000 per staff member on your payroll. About the only thing I can really add is basically look specifically at the provincial tax rates that are in effect for the income level you're earning, and see where things are at. Often provinces have different rates than the federal ones, and that can really have an effect on how much tax one is paying. My apologies for not being much help here, as the answer could run 10 pages without ever getting around to addressing your specific circumstances.
  12. This one is pretty simple. and one that I recommend quite often, as it seems to be the best bang for your buck. Basically just go down to the registry office, and register your corp there. You'll need a copy of the share structure, and once everything gets processed, you pick up one of those do-it-yourself minute books, and just fill out the templates provided. As I stated above, you'll need a copy of the share structure, and these is where people sometimes get in trouble. You want to structure your corp with the greatest amount of "options" in terms of shareholders (both current and future), and that's something your accountant or lawyer can help with. You don't want to be amending your articles of incorporation down the road, as then the lawyers need to get involved, and that gets expensive. Doing it right the first time avoids this.
  13. For someone in your shoes, it makes huge sense to incorporate and use the company as a low-tax vehicle. There are of course a few things to be aware of with such a setup, but from a long term savings point of view, clients that are set up in a position such as you have described are doing quite well for themselves. 46% tax really tends to limit savings and investment opportunities...
  14. Absolutely you can, but realize that there are different "tax rates" for different sources of income. Only dental income will be subject to the 14% rates; any investment income will be taxed at around 35% in the corp. That being said, when you flow through that investment income to your person, the corporation is refunded that "high rate" tax. However, one thing to keep in mind is investment income is taxed personally at around 35% anyway, so earning investment income either personally, or in the corporation, are comparable. What isn't comparable is that the money you are investing (your dental earnings) has been taxed at 14% - you then invest this money having only paid 14% tax on it initially. Contrast this with where you earn dental income personally, and then invest it. You'll have already paid 35% tax on this income, so essentially you're working with 20% less capital to invest. That's a big reason to invest via your corporation, and not personally. Also, I should mention that a lot of the info here is more "in-general"; there are things to take into account such as personal tax brackets, registered investment accounts (ie. rrsp's), personal tax credits, etc. But I think the important thing here is to understand the big picture first, and then tailor the advice to your personal situation afterwards via sitting down with your accountant and going from there.
  15. Typically you're looking at anywhere from $400 - $1,200 for initial incorporation, depending on whether you do it yourself vs. have a lawyer do it. After that you're looking at anywhere from $1,000 - $2,500 for an average Prof Corp year-end in accounting fees. (An important thing to realize is cheapest rate is not always the best; as the expression says, there's no such thing as a free lunch.) Lastly, annual registration of your corp I believe runs anywhere from $30-$100 depending on where you reside. A good rule of thumb is if you see yourself having about $20,000 or more in unused cash or savings after expenses, a corporation is a decent idea. If you find yourself spending everything you earn, the increased professional fees don't result in any appreciable savings, and also incur the extra paperwork headache that comes with running your own business.
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