Kind of a lame joke, but in reality, this is what often happens; your accountant rinses and repeats whatever was done last year.
At JPM Partners we think differently. We want to understand your full financial situation so that we can implement an integrated tax, estate, and investment plan for your small business and your family.
Most business owners go to their accountant for tax filings, their lawyer for legal advice, their realtors for real estate advice, and their bank for investment advice. Often these advisors have conflicting recommendations. What they lack is a quarterback who can help integrate all of these important disciplines.
This lack of integration often leads to thousands, sometimes hundreds of thousands of dollars of lost opportunities.
Let's look at an actual client example (names changed for confidentiality)
MR. AND MRS. SMITH (BOTH IN THEIR MID 40'S) CAME TO US LOOKING FOR TAX PREPARATION SERVICES AS THEY FELT THAT THEY WERE NOT GETTING VALUE ADDED ADVICE FROM THEIR CURRENT ACCOUNTANTS.
- Mr. Smith is a sales employee for a pharmaceutical company earning about $300,000 per year (T4)
- Mrs. Smith is an independent mortgage broker earning $250,000 in self-employed commissions per year
- The family requires $225,000 per year to meet their personal lifestyle obligations
Their current accountants were preparing personal tax returns for them on an annual basis and Mrs. Smith claimed all of her commissions personally as a sole-proprietor.
Under their current structure they were paying about $225,000 per year in tax/CPP/EI, leaving them with about $325,000 after-tax, or $100,000 remainder after their personal expenses. Not bad, but as you’ll see there’s much room for improvement.
After some careful analysis, we made the following changes.
- INCORPORATE A COMPANY TO CARRY OUT MRS. SMITH'S BUSINESS
- PAY MRS. SMITH A SALARY OF $70,000 PER YEAR FROM SAID CORPORATION
- RETAIN EARNINGS IN HER CORPORATION TO FUND THEIR FUTURE RETIREMENT
- BUILD A TAX EFFICIENT CORPORATE INVESTMENT PLAN
Under the new plan, they were now paying a total of $166,500 in annual tax, leaving them with $158,500 per year to save and invest. That’s a $58,500 per year improvement, or a 58.5% improvement.
To put that in context, $58,500, invested annually over a 20-year period at a 5% rate of return would give this family an additional $1,934,000 in retirement savings.
At JPM Partners we solve these types of issues on a daily basis and have done so for thousands of clients. We start with tax and integrate your entire financial plan under one roof to ensure your business and family end up with the most financially secure future possible.
