Corporate & Business Accounting and Tax

Financial Statements

Preparation of financial statements is the basic service you expect from your Chartered Accountant. Normally you think of financial statements being required to accompany your corporate income tax return. You may also have a friendly banker who requires a copy of your financial statements each year. Whatever the reason, we can help you.

We can show you how your financial statements can be used to help manage your business better by providing valuable information about the past and the future.

There are basically three types of financial reports that can accompany financial statements. We review these types of reports with our clients to ensure they are getting the right type of service from their accountant.

  • Notice To Reader - A Notice To Reader is the most basic form of financial statement report. It is commonly-used for small businesses/corporations where the business has little external debt and is reporting primarily for tax return purposes. It is also the least costly form of financial statement report available.
  • Review Engagement Report - A Review Engagement Report entails more work from the accountant's perspective since the main purpose of the report is to ensure that the financial statement balances, individually or as a whole, are "plausible" (do they make sense to a reader of the statements). There is also more disclosure required in the notes to the financial statements for a Review Engagement report. Consequently, the cost of Review Engagement report financial statements is normally higher than that of a Notice To Reader financial statement.
  • Audited Financial Statements - Audited financial statements are not normally required for small businesses. Audited financial statements are normally required where the entity is reporting to various stakeholders who are relying on the financial statements to show them accurate, reliable financial information prepared in accordance with generally accepted auditing and accounting procedures. Commonly, non-profit organizations require audited financial statements as part of their funding contracts with various agencies. Due to the level of work involved to prepare audited financial statements, this form of report is normally the most expensive form of financial statement report available.
  • Special Financial Reports - Sometimes a business or non-profit organization requires a special report. One example would be a report on sales that might be required from a landlord or a franchisor. These reports tend to be very specialized. We would appreciate discussing your accounting needs with you.
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Corporate Tax Returns

The end point of many financial statements is the preparation of your corporation's tax return. We have years of experience in preparing corporate tax returns and minimizing your income tax based on the rules provided by the Income Tax Act.

Most business owners want to "fly under the radar" of Canada Revenue Agency. Making sure your corporate tax return is prepared professionally and submitted on time are two important ways to ensure this.

We do not just "prepare" your corporate tax return. We plan the return first to ensure it meets the goals of your business.

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Corporate Tax Planning

Kevin Dunn has extensive experience in planning corporate reorganizations designed to ease your estate planning, creditor-proof your business assets, and generally make your business life more secure. Other accountants call on Kevin Dunn to assist their clients with corporate tax planning. You can get the benefit of this on a consistent basis.

Some ways we assist our clients with corporate and business tax planning include:

  • Employment Insurance Refunds - Employment Insurance premiums are levied on wages paid by employers (whether incorporated or not). There is an exemption for shareholders who own 40% or more of the voting shares of a company. That's great for the shareholder. What about family members such as your spouse or children? Well, the EI Act does not automatically exempt family members from EI premiums. The employer must ask for a ruling from Canada Revenue Agency.

    We have successfully obtained EI premium exemptions for the family members of many business clients. Even better, we usually can obtain a refund of EI premiums paid in the past three or four years. You have likely heard commercials from companies that do this as a specialty. Often these companies will charge up to 30% of the refund to process the application. Our fee is usually much less. If your spouse or children are unlikely to be laid-off from your business, why should you and they pay EI premiums?

  • Creditor-Proofing - You work hard to build up your wealth. Unfortunately, small businesses are also subject to significant risk from creditors and our increasingly litigious society. Would you like to sleep better knowing that your accumulated wealth is safe from an unintentional and uncontrollable error?

    Just putting your business into a corporation does not automatically provide sufficient protection from creditors. We can show you how to create a separate company that holds all your excess business cash and investments completely away from the hands of potential creditors. What's more, it's all legal and the transfers to this new company can be done with no current income tax.

    Come in and talk with us about other ways to ensure you keep as much of your earnings as possible.

  • Incorporation of Professionals - Professionals (including doctors, lawyers, veterinarians, and dentists) have been allowed to incorporate their practice for some years. The exact rules of incorporating these professionals are set by the governing bodies for the various professions.

    Although most professionals do not obtain additional creditor protection from incorporating (unlike most other corporations), the corporation still provides significant benefits. First, net income that is greater than the professional needs in that year can be left in the corporation. The corporate tax rate (in Ontario) is only 16.5%. Without incorporating, the professional would have paid up to 46% tax on this income. This is the tax deferral benefit of incorporation.

    Now that the practice is incorporated, the retiring professional can sell the shares of the company and in most cases will be eligible for up to $750,000 of tax-free capital gains. This is the capital gains deduction. Proper professional planning is required to ensure the shares of the corporation maintain their eligibility for the capital gains deduction.

    Some professional organizations allow non-voting shares of the professional corporation to be owned by family members of the professional. This allows income splitting with family members. Often we use these non-voting shares to provide for dividends from the company to children (over age 18) that will finance the child's post-secondary education at minimal tax cost (often only the 16.5% corporate tax).

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Selling Your Business

Selling your business can be a traumatic time for a business owner. It can be difficult to pass on the source of your life's work, even where the purchaser is one of your children. Sometimes it is even more difficult to sell your business to a family member than to an outright stranger. Yes, this is a time when your accountant can double as your psychologist.

Our services can include helping you determine the value of your business, qualifying your potential purchasers, arranging your business to make it more attractive, and developing a strategy to minimize your tax on the sale of the business.

It's not too late for an unincorporated business to benefit from the $800,000+ capital gains deduction but this is where professional help becomes invaluable. The lifetime capital gains deduction was increased to $800,000 for 2014 and is indexed for inflation for years after 2015.

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Some of our clients rely on us for their monthly bookkeeping needs. We can arrange to have your bookkeeping done at our location or your's. Many times clients need the bookkeeping done either for the preparation of their HST returns or for their year-end financial statements or tax returns. We can also help setup your accounting system on any of the popular bookkeeping packages available (Quickbooks, Simply Accounting, MYOB, which is now called AccountEdge).

As part of our bookkeeping service we can prepare your annual T4's and T5's. We can also prepare ROE (Record of Employment) forms. We can also prepare your annual WSIB return and EHT (Ontario) return.

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Email us for more information or to arrange a free initial consultation.

Tax Planning

We're coming in to a few months of filing deadlines. T4's and similar slips must be completed by February 28, 2014. CRA will penalize you for late-filing these slips. Taxable benefits must be reported on your T4 slips. Call us to find out the most current rules for calculating taxable benefits, including those for automobile use, shareholder loans, and group insurance benefits.