A brief spoken presentation by Bob Gauvreau emphasizing that lack of tax planning is a major risk for small businesses. He warns that starting as a sole proprietor can lead to very high personal tax rates (he cites ~57–58%), and advises business owners to choose tax-efficient structures (corporations) once they begin paying tax — citing Canadian corporate tax (~12%) and U.S. C-corporation example (~20%) — so owners legally minimize tax and reinvest savings into the business.
Chapters
We're talking about risks that many small businesses have. And one of the greatest risks that I see that small businesses face is not having tax planning put in place. A lot of times when you're a small business owner and you're just getting started, you use the wrong business structure. I see it happen a lot where people enter into sole proprietorships because it's super easy for them to get started. Barriers to entry are super low. Next thing you know, they're paying 57, 58% tax rates, and their business is in jeopardy because they're paying all this money to the government. This is a bad situation. So very quickly, I understand if people start as a sole proprietor, but you have to get it right once your tax starts, once you start paying tax as a business, you should be looking at the structure that optimizes you. And don't wait too long, because once you start making money, you know the tax obligations are coming on the other end. Where in Canada, you know, 12% is the business tax rate for a corporation, 20% is a C corporation tax rate. In the United States, if our tax rates are projected to get above that, we need to be looking at these types of entities to make sure we're saving tax money. So if you're not planning your taxes and you don't have a plan, this can be a major failure point in your business. Let's get that part right. Let's pay the government the least amount of tax legally possible and put that money back into your business, back into your pocket. But let's use that to build the business that we always wanted to.
