What you need to know to build your tax and business plans

Ontario Regional Tax Leader & National Real Estate and Construction Tax Leader, MNP
Sponsored by MNP

Real estate and construction companies have faced shortages of products, supplies, and workers in the past year. The uncertainty arising from the past year has driven up costs and caused projects to either be delayed or canceled.

Now’s the time to plan the near and long-term future of your business by focusing on what you can control. The following are top issues to address.

What tax issues should real estate and construction companies be thinking about going into 2022?

While the industry faced many pandemic-related challenges throughout 2021, there were no significant changes to federal and provincial tax legislations. However, this does not mean businesses can afford to remain static. Savvy business owners should continue to look forward and plan accordingly, including tightening operations and ensuring any available grants and subsidies are utilized.

Talk with your advisors to discuss any changes you’ve implemented to ensure there are no adverse tax impacts. An experienced business advisor can provide valuable insights to help you and your business, including options for succession planning and talent retention.

What has changed around succession planning that could impact my tax plans?

If you are a business owner with children or other family members involved in your company, you might have held off on your succession planning because of uncertainty around Bill C-208.

Previously, income tax legislation treated gains from intergenerational transfers of a business as a dividend rather than a capital gain, often resulting in a higher tax bill if sold to a family member (compared to a third-party sale). Bill C-208 now allows owners of qualifying small business corporations access to the lifetime capital gains exemption when selling to family members where certain conditions are met. As no changes to Bill C-208 were announced in the federal government’s 2021 fall economic and fiscal update, business owners should continue to explore available succession planning options with their advisors.

How do I retain the talent needed to grow my business?

Many construction companies are struggling to retain key staff as talent is generally in short supply. One way to incentivize valued team members to stay is by offering an employee profit-sharing plan or an employee stock option plan.

These plans allow owners to work with employees to set clear objectives (both short and long-term) and can help motivate employees by having them directly invested in the success of the business.

What are the benefits of an employee stock option plan?

Given the talent shortage, companies are offering salary incentives to recruit experienced people. If you have key employees you want to keep, offering an employee stock option plan can give employees the potential for greater returns as the company grows versus an hourly wage increase, with minimal impact to business margins and operations.

At the same time, an employee stock option plan opens the door for employees to buy the business when the owners are ready to step down, which can often be the best option for real estate and construction businesses. Often, owners assume employees will not be able to afford to buy the business, but with advance planning and professional advice, there are ways to make a full or partial employee buyout work.

To learn more about tax planning for your real estate and construction business, visit mnp.ca or contact:

Melissa Aveiro, CPA, CA
[email protected]

MNP is one of the largest national accounting and consulting firms in Canada, providing client-focused accounting, taxation and consulting advice.

Read more

MNP is one of the largest national accounting and consulting firms in Canada, providing client-focused accounting, taxation and consulting advice.

Read more

Industry Events