www.liptonllp.com
30
SEP
2015

Is a Merger Right for your Business?

One of the most complicated small business decisions you may have to make is whether to merge your business with another. A merger requires a great deal of thought about the complexities involved.

There is no real one-size-fits-all formula. The most successful mergers start when companies look to increase market share and strengthen resources—not to save a struggling enterprise—so it’s beneficial to look at a potential merger as an improvement rather than a saving grace.

Advantages of Merging

Merging with another company brings along its customer base, which can increase your business. Merging is a way to encourage growth, you can look at it as a way to open up new channels and new markets.

For example, if you’re a technology company looking to reach out to a consumer market, it would be smart to merge with a software company because your services complement each other, and you would automatically have direct access to a new market and already established customer base.

Merging can be a great business venture for strengthening a part of your company that is weak, but don’t count on a merger to save two failing companies. If both companies are broke, chances are they won’t make it together.

How to merge smoothly

Although merging your business with another can be a good opportunity to grow, that doesn’t mean it will be easy. A merge integrates culture, technology and people. Making it work after the fact is where the real skill is.

Here are some tips for facilitating the merge:

Focus on core values

It’s important to make sure your values are aligned before joining. One business might be philanthropic and one might be mercenary, but they must have the same core values when merging in order to achieve the same goals.

Keep lines of communication open

When it comes to employees, treat the merge almost like a marriage. You’re bringing together different backgrounds and histories, so there has to be constant communication to make sure everyone’s voice is being heard and no one feels slighted. Put all goals, boundaries and expectations in writing to guarantee everyone is on the same page.

Keep job roles as consistent as possible

Role changes need to really stay as closely related as possible to what employees were doing before the merger unless an opportunity opens in an area where an employee has the opportunity to do something they are really passionate about. You want people to excel with a merger and a completely new role could set up for that employee’s failure.

Encourage team cohesiveness

A merger is going to be successful based on how you treat the employees. To help the new team work well together, have a social event or a team-building session in the early stages of the merge. It will allow everyone to get to know each other better, which makes for better teamwork.

When preparing for a merge, insuring the right people are there to guide you is critical. Finding the right bankers, and the right people is something I always advise to my clients. Do your homework, take your time and make sure your lawyers and business advisors are with you every step of the way.

Michael Wagman received his Chartered Accountant designation in 1995, and has spent his entire professional career at Lipton, where he became a Partner in 2002.   Michael’s extensive experience includes a wide variety of professionals in the medical, dental, psychology, legal and real estate sectors.   Michael has decades of  experience servicing professionals and has a substantial knowledge of the rules and regulations governing specific organizations, such as the Ontario and Canadian Psychological Associations,   The College of Physicians and Surgeons of Ontario, The Royal College of Surgeons of Ontario, Ontario Society of Professional Engineers and The Law Society of Upper Canada.

 

 

 

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21
AUG
2015

Why should I setup a Professional Corporation?

What is a “Professional Corporation”?

A professional corporation is a corporation that provides professional services and that is regulated by a governing professional body such as the Law Society of Upper Canada or the College of Physicians and Surgeons of Ontario.

Basically, if you are a professional and you are planning on offering your services through a company, you will need to setup a professional corporation.

Who is considered a “Professional”?

Generally only those professions that are governed by a professional body or association will be allowed to incorporate. These typically include physicians, psychologists, dentists, veterinarians, lawyers, accountants, engineers and architects. The rules will differ slightly across provinces, so it’s a good idea to check with your accountant or legal advisor before you go ahead. In Ontario for example, social workers and certain regulated health professionals can also incorporate which may not be the case for other provinces.

Why Setup a Professional Corporation?

The tax reasons for setting up a professional corporation are similar to why many businesses will want to incorporate. The main income tax advantages of a professional incorporation are:

Tax deferral

Professional corporations can take advantage of the difference in tax rates between the highest personal tax rate and the more favourable small business corporate tax rate. By taking out less than the full amount of corporate earnings, you can defer the tax paid to a later date when you’re in a lower tax bracket.

Potential income splitting

Professional corporations can issue salary or dividends to family members in lower tax brackets, allowing you to reduce your overall tax liability. Instead of taking out $150,000 in salary by yourself and paying tax at the highest personal rate, you may be able to split the amount between your spouse and children which will significantly reduce your tax bill.

Can all of my family members be included in the income-splitting?

Unlike a non-professional corporation where you typically have the flexibility to elect anyone as a shareholder, a professional corporation is restricted to the rules set out by the governing professional body. That means who can be on your shareholder list (other than you of course) is a question for your governing body, which will differ depending on what profession you are in and in which province you are operating.

Favourable tax rates on dividends

As an incorporated individual, you have the ability to take out a portion of your income from the company as dividends and pay less tax on your earnings due to favourable tax rates on dividends.

Consider Liability

Keep in mind that a main differentiator between a professional corporation and a non-professional corporation is that of liability. If you incorporate your photography business and you get sued, your liability will be limited to whatever you invested in the company (there are exceptions).  Of course if you weren’t incorporated, all your personal assets would be up for grabs.

In a professional corporation, the story around liability is a bit different.  If you are a physician and are sued for malpractice, the corporation does not protect you. You’ll have to check the terms of your professional insurance to see just what your liability is. What the corporation does provide is some protection from creditors if you borrow money, perhaps for the financing of a new office or for some expensive equipment.

Think a professional corporation is right for you?

Getting professional advice is the best way to start!  Contact me today, I will be happy to get you started!

Michael Wagman received his Chartered Accountant designation in 1995, and has spent his entire professional career at Lipton, where he became a Partner in 2002.   Michael’s extensive experience includes a wide variety of professionals in the medical, dental, psychology, legal and real estate sectors.   Michael has decades of  experience servicing professionals and has a substantial knowledge of the rules and regulations governing specific organizations, such as the Ontario and Canadian Psychological Associations,   The College of Physicians and Surgeons of Ontario, The Royal College of Surgeons of Ontario, Ontario Society of Professional Engineers and The Law Society of Upper Canada.

Michael offers his clients a variety of services including accounting, taxation, estate planning, corporate finance, reorganization and restructuring.  Michael has developed an extensive network of contacts, including the community’s top banking, financial, insurance and legal institutions. He is particularly adept at leveraging his contacts for his clients’ benefit.  Michael takes pride in bringing the right people together.

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05
MAR
2013

Preparing for a Merger

One of the most complicated small business decisions you may have to make is whether to merge your business with another. A merger requires a great deal of thought about the complexities involved.

There is no real one-size-fits-all formula.  The most successful mergers start when companies look to increase market share and strengthen resources—not to save a struggling enterprise—so it’s beneficial to look at a potential merger as an improvement rather than a saving grace.

Advantages of Merging

Merging with another company brings along its customer base, which can increase your business.  Merging is a way to encourage growth, you can look at it as a way to open up new channels and new markets.

For example, if you’re a technology company looking to reach out to a consumer market, it would be smart to merge with a software company because your services complement each other, and you would automatically have direct access to a new market and already established customer base.

Merging can be a great business venture for strengthening a part of your company that is weak, but don’t count on a merger to save two failing companies.  If both companies are broke, chances are they won’t make it together.

How to merge smoothly

Although merging your business with another  can be a good opportunity to grow, that doesn’t mean it will be easy.  A merge integrates culture, technology and people. Making it work after the fact is where the real skill is.

Here are some tips for facilitating the merge:

Focus on core values

It’s important to make sure your values are aligned before joining. One business might be philanthropic and one might be mercenary, but they must have the same core values when merging in order to achieve the same goals.

Keep lines of communication open

When it comes to employees, treat the merge almost like a marriage. You’re bringing together different backgrounds and histories, so there has to be constant communication to make sure everyone’s voice is being heard and no one feels slighted.  Put all goals, boundaries and expectations in writing to guarantee everyone is on the same page.

Keep job roles as consistent as possible

Role changes need to really stay as closely related as possible to what employees were doing before the merger unless an opportunity opens in an area where an employee has the opportunity to do something they are really passionate about. You want people to excel with a merger and a completely new role could set up for that employee’s failure.

Encourage team cohesiveness

A merger is going to be successful based on how you treat the employees. To help the new team work well together, have a social event or a team-building session in the early stages of the merge. It will allow everyone to get to know each other better, which makes for better teamwork.

When preparing for a merge, insuring the right people are there to guide you is critical.   Finding the right bankers, and the right people is something I always advise to my clients.   Do your homework, take your time and make sure your lawyers and business advisors are with you every step of the way.

Michael Wagman’s extensive experience includes audit and accounting, tax, estate, family and succession planning, corporate finance and business advisory services for an array of owner-managed businesses. His industry specialties include real estate and construction, distribution, manufacturing and technology. Michael’s portfolio also includes several public companies and mortgage investment corporations.  Michael is a member of the Canadian Tax Foundation and the Society of Trust and Estate Practitioners.

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