As an entrepreneur, operating your day-to-day business and planning for the future can consume a lot of your time. Paying less tax, although important, may not always be top of mind.

There’s no time like the present to ensure you are taking full advantage of all the tax minimization strategies available to you. As tax season approaches, here are some tips to get you started.

1. Employ your spouse and children. Whether you carry on your business personally or through a corporation, you should consider paying a salary to your spouse and/or children.  Paying a salary to a spouse or child who pays tax at a lower rate than you can create net tax savings. But you must ensure that the salary is reasonable for the services they perform for the business.

2. Incorporate your business. If your business produces more profit than necessary to satisfy your personal cash flow needs, then incorporation could produce a sizeable tax deferral by accessing the lower small business tax rate for active income. This deferral benefit, however, is only available if the profits are left in the company. The longer the profits are left in the company, the larger the tax advantage. 

3. Invest excess cash. Since the biggest bang for your tax buck is accomplished by leaving profits in the company, the question becomes what to do with those profits. If paying down debt or reinvesting in the business isn’t an option, then a smart investment plan is your best alternative. This strategy is most effective for active business income, which is subject to the small business deduction.

4. Plan for your retirement. Build your wealth with a registered retirement savings plan (RRSP) or a tax-free savings account (TFSA). These strategies can help you achieve balance in your personal investment plan. An investment consultant can help you determine how your contributions will fit within this year’s maximum contribution limits. 

5. Prepare for the sale of your business. It’s never too early to plan your business exit strategy. If you’re planning on selling all or part of your business at some point, confirm with your accountant whether you’re eligible for the lifetime capital gain exemption and what steps need to be taken.

Unfortunately, we can’t eliminate taxes. But we can use wise business practices to minimize or defer income taxes that would otherwise be payable. These are only a few of the tax-planning opportunities available to you as a business owner. By working with an investment consultant, you can get a complete tax check-up to help identify all the tax-planning strategies available to you.