Détenir une voiture via l’incorporation ou personnellement? Voici 4 éléments à considérer.
droit des affaires entreprise fiscal IncorporationTax season is in full swing and your accountants are working overtime trying to complete your corporation’s financial statements.
Although most entrepreneurs already know that their businesses must prepare these financial statements on a yearly basis, very few know that the Law (whether it be at the Quebec or at the federal level) requires that such statements be audited.
So, what does this entail and how exactly can you reduce your fees?
First, note that there are basically three types of financial statements:
1- Compilation or Notice to Reader Statement
2- Review Engagement; and
3- Audit Opinion
In a nutshell, the difference between these three types of financial statements is the level of assurance that will be provided by your accountant when providing these statements. In other words, how confident can one be that your business’s activities are accurately and completely reflected in your financial statements? This level of assurance varies from practically no assurance at all (compilation) to a very high level of assurance (audit opinion).
Obviously, the higher the assurance, the higher the accounting fees involved. Which is why many small to mid-sized businesses prefer to avoid the high professional fees associated with the audited financial statements. But, as mentioned above, the Law does require that the shareholders appoint an auditor at each annual shareholder meeting.
So how to avoid this costly obligation? Simple, both the Quebec and federal law include a useful exception to the general rule: a corporation may avoid audited statements if all, and no less than all, the shareholders say so. In other words, the shareholders may pass unanimous resolutions (including those who hold non-voting shares) reflecting their decision not to appoint an auditor. This decision is only valid until the next annual shareholders meeting.
So, if for whatever reason your business does not really need audited statements (ex: if your financial statements are only used to prepare your yearly corporate tax return, no bank requirements, no plans to sell your business, etc.), you may want to consider preparing and passing such unanimous shareholders resolutions. By doing so, you will be legally allowed to prepare a compilation or a review engagement instead, thus significantly reducing your accounting fees each year.
As for those who have been opting for compilations and review engagements without first passing these unanimous resolutions, you may want to reconsider your way of doing things. Remember that a shareholder (any shareholder) has a legal right to audited financial statements, regardless of its costs and the corporation’s past practices. As such, this may lead to unhappy shareholders with valid legal arguments to plead…
Any questions or ideas for our next article? Please contact us at the 514-856-5601 (320) or at malek@malekavocat.ca.
