Balderson and Mombourquette,

Canadian Entrepreneurship & Small Business Management,

10th Edition

Presentation prepared by:

Peter Mombourquette of
Mount Saint Vincent
University
 CHAPTER 12
MANAGEMENT HELP: MENTORS, BOARDS OF
ADVISORS OR DIRECTORS, AND TAX ASSISTANCE

Copyright © 2017 by McGraw-Hill Education Ltd. 2

Learning Objectives
LO1 Illustrate how advisers, boards of directors, or boards
of advisers can be used.
LO2 Explain the importance of understanding the nature
of the Canadian tax system.
LO3 Discuss key tax management principles the owner-
manager can follow.
LO4 Describe specific tax-related programs that apply to
small business.

Copyright © 2017 by McGraw-Hill Education Ltd. 3

Advisers and Small Business
As entrepreneurs are engaged in planning and
starting their business, they will often seek out
assistance from more experienced entrepreneurs
or mentors.

Copyright © 2017 by McGraw-Hill Education Ltd.

4
Advisers and Small Business
Use of Advisers
◦ Entrepreneur will usually use outside advisers such as
accountants, bankers, lawyers, advertising agencies, and
market researchers on an as-needed basis.
◦ These advisers, who are separate from the more formal
board of advisers, can also become an important part of
the organization and thus will need to be managed just
like any other permanent part of the new venture.

Copyright © 2017 by McGraw-Hill Education Ltd.

5
Mentors
◦ Often the first stage in formal advice is the use of a
mentor.
◦ Mentors can be used on an ad hoc basis or formally
assist the entrepreneur in running the company on an
ongoing basis.

Copyright © 2017 by McGraw-Hill Education Ltd.

6
Finding Mentors
Entrepreneurs should seek out mentors almost the same
way they should look for employees.
Entrepreneurs should start by listing their own personal
strengths and weaknesses, noting where they lack
knowledge and require assistance.
Entrepreneurs should then prioritize areas for development.
Entrepreneurs should identify key areas of their business
where advice would have the most meaningful impact.

Copyright © 2017 by McGraw-Hill Education Ltd.

7
Managing the Mentor Relationship
Mentor relationships are like most relationship, they have a
beginning, a middle and an eventual end.
Relationship should start with clear expectations, engage in
meaningful discussion and assess if the relationship is
mutually beneficial.

Copyright © 2017 by McGraw-Hill Education Ltd.

8
Advisers
◦ Board of Advisers
◦ Some entrepreneurs will form a board of board of
advisers occasionally referred to as a board of directors.

Copyright © 2017 by McGraw-Hill Education Ltd.

9
Advisers and Small Business
The board of advisers may serve a number of
functions:
◦ Reviewing operating and capital budgets providing
accountability and discipline.
◦ Developing longer-term strategic plans for growth and
expansion.
◦ Supporting day-to-day activities.

Copyright © 2017 by McGraw-Hill Education Ltd.

10
Advisers and Small Business
The Board of Advisers may serve a number of
functions (cont.):
◦ Resolving conflicts among owners, partners, or
shareholders.
◦ Ensuring the proper use of assets.
◦ Developing a network of information sources for the
entrepreneurs.

Copyright © 2017 by McGraw-Hill Education Ltd.

11
Advisers and Small Business
Entrepreneurs should do the following when
selecting board members:
◦ Select individuals who can work with a diverse group and
will commit to the venture’s mission.
◦ Select candidates who understand the market
environment or can contribute important skills to the
new venture’s achievement of planning goals.

Copyright © 2017 by McGraw-Hill Education Ltd.

12
Advisers and Small Business
Entrepreneurs should do the following when
selecting board members (cont.):
◦ Select candidates who will show good judgment in
business decision making.
◦ Candidates should be identified using referrals of
business associates or from any of the external advisers
such as banks, investors, lawyers, accountants, or
consultants.

Copyright © 2017 by McGraw-Hill Education Ltd.

13
Taxation and Small Business
History of Taxation
Income Taxes
◦ Complexity of principles and frequency of legislative
changes

Copyright © 2017 by McGraw-Hill Education Ltd.

14
General Tax Management Principles

Nine Fundamental Areas

1. Continual tax planning
◦ Through the year requirements
2. Tax Deferral
3. Income Splitting
4. Marginal Tax Rates

Copyright © 2017 by McGraw-Hill Education Ltd.

15
General Tax Management Principles
Nine Fundamental Areas (cont.)
5. Deductibles
◦ Accounting and legal expenses
◦ Advertising
◦ Business entertaining
◦ Automobile expenses
◦ Interest expense
◦ Repairs and improvements
◦ Office expenses

Copyright © 2017 by McGraw-Hill Education Ltd.

16
General Tax Management Principles
6. Government Tax-Related Programs
◦ Special Tax Rate Deductions
◦ Small Business Deduction (SBD)

◦ Manufacturing and Processing Deduction

◦ Investment Tax Credit

◦ Deferral Programs

◦ Deferred profit sharing

◦ Registered retirement savings plan
◦ Bonus deferral

Copyright © 2017 by McGraw-Hill Education Ltd.

17
General Tax Management Principles
6. Government Tax-Related Programs (cont.)
◦ Accelerated Capital Cost Allowance
◦ Small Business Financing Programs
7. The Incorporation Question
◦ Corporation vs. Proprietorship vs. Partnership

Copyright © 2017 by McGraw-Hill Education Ltd.

18
General Tax Management Principles
8. The Remuneration Question
◦ Compensation salary or dividend
9. Transferring the Business: Capital Gains
◦ Capital gains and family members

Goods and Service Tax (GST) and Provincial Sales

Tax (PST)

Copyright © 2017 by McGraw-Hill Education Ltd.

19
 Concept Checks
1. Why do entrepreneurs use advisers?

2. Describe some of the benefits of using a business mentor.

3. What functions do boards of advisers serve?

4. What should entrepreneurs do when selecting board

members?

Copyright © 2017 by McGraw-Hill Education Ltd.

20
 Concept Checks
5. Why is it imperative that the small business owner have
some tax knowledge?

6. What is continual tax planning?

7. What are two good reasons to defer taxes?

8. What is income splitting?

Copyright © 2017 by McGraw-Hill Education Ltd.

21
Concept Checks
9. What are the nine fundamental areas of tax management
of which an owner should be aware ?
10. What is the definition of a deductible?
11. List the six government related programs available to
small businesses.

Copyright © 2017 by McGraw-Hill Education Ltd.

22
Concept Checks
12. Why would a company wish to incorporate ?
13. From a tax perspective, would it be better to take a
salary or dividends from an incorporated company ?

Copyright © 2017 by McGraw-Hill Education Ltd.

23