Private Equity

Our firm has many years of experience working with Private Equity firms and their clients. Our experience including working with firms in Canada, the U.S. and Asia. Some of our experience includes the following:

  • structuring private equity funds;
  • advising private equity management on compensation issues and carried interests;
  • carrying out Canadian, U.S. and foreign acquisitions;
  • selling investments or carrying out IPOs;
  • advising on the tax structure for investors in a private equity fund;
  • reviewing tax filings for funds; and
  • assisting in tax matters which arise such as tax audits, transfer pricing, R&D tax credits, and repatriating profits across borders.
Sale of a Business

Tax considerations are very important in selling a business, to maximize the after-tax return to the owner. We anticipate the various ways of selling a business to determine the most tax-effective options for our clients. We :

  • analyze the current corporate and family structure to develop planning recommendations;
  • design the transactions required to put the tax planning in place;
  • liaise with legal and other counsel;
  • assist by reviewing the legal documentation;
  • assist in negotiating the terms of the sale, with particular emphasis on the tax issues involved; and
  • complete all necessary tax filings and elections.

We work closely with legal counsel and business valuators where required. Sometimes, we can minimize tax by incorporating certain international strategies. We can also suggest certain creative approaches, such as earnouts, employee-funded purchases, share-for-share exchanges, and sale/leaseback transactions.

Purchase of a Business

Before purchasing a business, a tax evaluation is always required. Questions such as whether to purchase assets or shares, and how to structure financing typically arise.

A due diligence review of past tax filings may be a prudent step. We can provide this review and summarize our findings quickly and efficiently in a report.

Canada does not allow for consolidated income tax returns, so tax planning is often necessary to match the profits from businesses with losses from other sources or interest expense on loans taken out to buy the business. We can advise on this planning and help to implement it after the purchase.

We work closely with legal counsel to coordinate the tax planning with the required legal documentation.

We can also structure creative strategies, where warranted, including earnouts, sale and leaseback transactions, share-for-share exchanges, spin-offs, and management buyouts.

Corporate Reorganizations

There are many reasons companies or corporate groups may need to be reorganized:

  • to amalgamate or combine companies in order to use the profits of one company against the losses of another;
  • to create holding companies for creditor-proofing reasons;
  • to divide the assets of a corporation among the shareholders (referred to as a butterfly reorganization);
  • to incorporate a business, so that it may be carried on in corporate form;
  • to carry out an estate freeze in the most effective manner;
  • to simplify a group of companies or eliminate inactive companies that are no longer useful; or
  • to change the nature of a corporation’s income (from investment income to active income or vice versa).

We can advise on whether a corporate reorganization is required, the benefits, and the disadvantages, of such reorganization. We can implement the corporate reorganization, and work with legal counsel to execute the plan. We will also prepare the required tax-reporting forms, and produce a reporting letter summarizing the reorganization. For all of this work, we provide a precise cost estimate.

Shareholder Remuneration Strategies

Recent changes to corporate tax rates have changed the rules of thumb followed for decades on how to remunerate owner-managers. The ability to defer tax by leaving funds in a corporation, rather than take a bonus or a dividend is very enticing. Yet, this must be balanced against the cash needs of the family and other matters (such as making an RRSP contribution).

An overall evaluation of how to remunerate an owner-manager and family is complex and multi-dimensional. We take a broad approach, looking at multiple factors such as corporate and personal tax rates, bonuses v. dividends, AMT, income splitting, RRSP contributions, the capital gains exemption, etc.

International Tax Planning

Canadian companies are expanding into international markets at an ever-increasing pace. Once the realm of only the largest multinational corporations, today small and medium-sized companies frequently have international activities. Sometimes, insufficient attention is paid to tax consequences of international expansion and the opportunities for a tax-effective international structure are not pursued.

We can analyze a business structure with international dealings to determine whether it has been arranged in the most advantageous way and assist in restructuring it, if necessary. We also assist with the detailed and meticulous compliance requirements that are necessary for Canadian tax-filing purposes. Finally, we can advise on favourable jurisdictions.

At the same time, we analyze the tax position of the company’s shareholders to determine how an international structure could be of benefit at the personal level.

With working experience in over 40 countries, we are experts in international tax treaty networks. These can be used to minimize taxes (especially withholding taxes) and to make a tax plan more resilient.

Establishing an International Business

The Canadian tax system encourages Canadian businesses to expand internationally. Provided that a bona fide active business is carried on abroad, income from that business can often be earned through a corporation located in a favourable jurisdiction. We are experts in structuring such arrangements, advising on possible locations, and implementing the necessary components. We have experience in setting up companies in numerous jurisdictions around the world.

In assessing an international business arrangement, we

  • work with the client to understand the overall business, how it will operate internationally, and how it will be administered outside Canada;
  • assess the Canadian tax implications of the overall venture, including how to own the foreign company and how to finance it, and advise on the tax consequences of repatriating funds to Canada and of selling the business;
  • advise on appropriate jurisdictions;
  • prepare a detailed and comprehensive memorandum concerning the overall tax plan;
  • assist with implementing the plan by obtaining local tax, legal, and other professional advice in the jurisdiction where the business will be located;
  • make introductions, as appropriate, to professionals in that jurisdiction who can assist in implementing the business plan, administering the entity and finding employees and office space;
  • prepare any required valuations of the business or intangibles (for example, intellectual property); and
  • provide a commentary on transfer-pricing issues.

We also assist in maintaining the tax integrity of the structure and the required Canadian tax filings.

Executives Coming to Canada

Executives coming to Canada find the Canadian tax system confusing and complex, full of reporting forms, deadlines and paperwork. This combined with high tax rates can be challenging at best and demoralizing at worst.

We can assist in a variety of ways.

Prior to coming to Canada, we can do a preliminary assessment of the executive’s tax position. At the same time, we will address tax planning ideas and consider various planning strategies. These may include:

  • realizing income before arrival (such as exercising stock options);
  • triggering capital gains after arrival, since Canada offers new residents very favourable capital gains tax treatment, and
  • designing a tax effective remuneration strategy.

We can also advise on executive compensation and moving reimbursements as well as tax equalization policies. Through our international contacts, we can coordinate tax planning in the executive’s home country and assist with tax filings. We will prepare all required Canadian tax filings, and handle correspondence with the tax authorities. For U.S. persons we can prepare their U.S. tax returns.

Real Estate Syndications

Investors continue to have interest in syndications of Canadian and U.S. real estate. Our team has participated in numerous syndications with a wide variety of structures depending on the type of real estate, the country where it is located, and the tax position of the investors. While we build on our experience, we start each project from a derivation of first principles. The result is usually a solution with an element of customization which sets our work apart.

Related Pages: SR&ED Tax Credits, Transfer Pricing