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Practically everyone needs insurance, but it’s a must for business owners. If you are ill or get into an accident, who is going to run the company while you are recuperating? If you are unable to work, things can deteriorate quickly as bills and daily tasks collect.
Key Person Insurance
Key person insurance is popular among business owners, as it protects the company in the event that an owner, or other executive, gets injured or dies. The policy is taken out by the company in the name of the designated key person. Funds are paid out to the business, and can then be used to replace the key individual or keep the business going some other way.
In most cases, a company would take out a 10- or 20-year term insurance policy on the key person, as it’s the most cost-effective kind of insurance, says Mike Thomas, Vice President, Insurance Distribution at IG Wealth Management. Coverage is determined by how difficult it would be to replace that key individual, and what skill sets they possess, he adds. “You should be looking at the economic loss of that person.” In a tragic situation, key person insurance gives the company some options other than immediate bankruptcy.
If the company is a sole proprietorship, then key person insurance isn't necessary. However, you may want to protect your family, in which case you should consider personal life insurance for that purpose.
You also need to protect your assets and earnings in the event that a disaster or emergency destroys part or all of your business premises (and its assets). Property insurance will cover the property and buildings owned by your business in the event of destruction or damage. Contents insurance covers assets that you store at your business premises. If you are leasing space for your business, the owner probably has property insurance, but you are likely responsible for your own content insurance. If you run your business out of your home, you will likely need separate content insurance for your business assets.
Disability/Critical Illness Insurance
Disability insurance provides business owners with income for a specified period of time, if you are unable to work due to injury or illness. Critical illness provides a lump sum payment in the event of the diagnosis of a serious illness, such as cancer. Like key person coverage, the company would be the beneficiary and the money can be used to pay employees or hire new staff, says Thomas.
There are other types of business insurance on the market, such as partnership insurance (also known as buy-sell insurance). If your business partner passes away, partnership insurance will allow you to purchase the shares and continue running the business. You might also want to consider general liability insurance to cover injuries on your property, or errors and omissions insurance, which covers mistakes in the provision of professional services.
It can be overwhelming, but insurance is a necessity for business owners who want to protect themselves. Consult an accountant or a full-service financial advisor to determine which types of insurance are right for you.
Executive Financial Consultant
Investors Group Financial Services Inc.
This is a general source of information only. It is not intended to provide personalized tax, legal or investment advice, and is not intended as a solicitation to purchase securities. Dwayne Rettinger is solely responsible for its content. For more information on this topic or any other financial matter, please contact an IG Wealth Management Consultant. Insurance products and services distributed through I.G. Insurance Services Inc. Insurance license sponsored by The Great-West Life Assurance Company.
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If you’re self-employed, a business owner, a freelancer or an independent contractor, you’re certainly not alone. Statistics Canada says 2.5 million Canadians identify as self-employed, representing about 15% of working Canadians. That number has been rising steadily as employers have contracted out services once reserved for full-time or part-time workers.
In fact, a recent study by Intuit Canada suggests that 45% of Canadians will be self-employed by the end of next year. The Intuit survey found that 41% of those self-employed want to supplement their regular income while 47% are self-employed to improve their work-life balance.
The gig economy is allowing people to do self-employed work in a flexible fashion, according to Intuit Canada president Jeff Cates, who also explained that many new jobs coming into the market are part-time, so people are looking to augment their income with self-employed options.
Being self-employed means you are entitled to a variety of income tax deductions, such as:
The self-employed can deduct 100% of advertising costs related to Canadian radio, television and newspaper ads. Some magazine ads may also be deductible. You can also deduct the cost of designing, producing, and distributing advertising materials including flyers, business cards and promotional websites.
Home Office Expenses
If you rent an office or work out of your home, you can deduct related expenses for the space. To determine your home office expenses, calculate the size of your home office as a percentage of your home’s total size. For example, if your home office is 50 square meters and your home is 1,000 square meters, your office is 5% of your home, which means you can deduct 5% of your mortgage interest or rent, utilities, home insurance, security monitoring fees, repairs and other related costs. You can also deduct the cost of cellphones and internet access, assuming they are essential for your job.
Entertainment and Travel Expenses
If you travel to a convention, meeting or other business-related event, you could deduct all of your travel expenses, including public transportation fees, hotel costs and conference fees. You can also deduct 50% of your meal and entertainment costs, including those incurred while you are at home and taking a client for lunch, for example.
If you have a vehicle you use exclusively for your business, you can deduct all of the expenses related to that vehicle, including gas, insurance, repair costs and parking. If you use your vehicle for both business and personal use, you can deduct a percentage of those costs based on how often you use your car for business.
To make sure you’re not missing anything, find last year’s tax materials and make a list of all the slips and receipts you needed for 2017; chances are you will need the same (or similar) ones for 2018. This process will also help you discover if there’s anything missing, such as an invoice, a charitable donation receipt or an RRSP contribution slip.
The key is to get organized and stay that way throughout the year. That way, there will be no surprises come tax time. Your financial consultant can help steer the way.
Dwayne Rettinger, Investors Group Financial Services Inc.
This is a general source of information only. It is not intended to provide personalized tax, legal or investment advice, and is not intended as a solicitation to purchase securities. Dwayne Rettinger is solely responsible for its content. For more information on this topic or any other financial matter, please contact an IG Wealth Management Consultant.