Tip: Don't bury those personal expenses so deep in your corporate tax returns no one can find them-not even bankers or buyers.
Minimizing tax liability is a strategy all business owners think about. But when it comes time to obtain financing or sell the business, buried personal expenses and assests can create a problem in determining the true cash flow. Buyers and bankers won't always give credit to many of these items. As a result, the cash flow can be suspect. And when you apply a multiplier to determine the value on the business, the results can be disappointing . It is in the best interest of a business owner to show a healthy bottom line in the years preceding the sale of their business to get the highest price possible.
Tip: Don't bury those personal expenses so deep in your corporate tax returns no one can find them-not even bankers or buyers.
Bill,
ReplyDeleteWhile your advice is good, it is somewhat sad that you have to appeal to a business owners self-interest to promote honesty in business expenses.
I would like to think there are many of us that don't charge personal expenses to our businesses because it isn's acceptable to CRA - whether or not we think we will be caught.
Yes, the majority of business owners are honest and upfront about what is truely a personal vs. business expense. That said, there is often lots of 'grey' area items that business owners can take advantage of with CRA, because they can, and because often times those are the 'perks' of owning your own business.
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