Women in Small Business  By Linda A. Fox

   Women in the world of small business are a force to be reckoned with – and they are a rapidly growing force.

   There are currently 800,000 female business owners in Canada today according to a recent report prepared by CIBC, entitled Women Entrepreneurs: Leading the Charge.

    That same report also reveals that one million Canadian women will own a small business by the year 2010. The female business start-up rate is growing 60 per cent faster than their male counterparts.

   The report also suggests that 60 per cent of self-employed women are "lifestylers" -- business owners who chose self-employment specifically to balance the demands of work and family. A full 70 per cent of Canadian business women are married and almost one third have children under the age of 12.

   But the CIBC report also uncovered an even more surprising fact. The fastest growing group of self-employed business women are those over 55 years of age, with an annual growth rate of 4 per cent – double that of self-employed men in the same age group. The average age of women small business owners is 41.

   The report noted than 96 per cent of women business owners worked for someone else before starting their own enterprises, supporting the fact that older women are going into business after spending years as an employee.

    Canadian small business owners are more educated than they have ever been before. And once again, women entrepreneurs are ahead of the pack. The number of women small business owners
who hold a university degree rose at an annual average rate of more than 10% since 1990— double the pace seen among men. As of 2004, nearly one in four self-employed women is university educated which is a record-high.

    At the same time, the number of self-employed women with less than high school education fell by close to 30%, with the share of this group in the total number of self-employed women falling to a record-low of 13% in 2004.

   The report also said that women entrepreneurs overwhelmingly say (89%) that they do not want to be treated differently than their male counterparts. However, many women entrepreneurs may not be
treated equally or fairly. Among women small business owners, 41% say they are taken less
seriously than male entrepreneurs, said the CIBC pollsters.

    A common misconception regarding women-run businesses is that they primarily provide
products and services for women. In fact, only one in five (22%) women entrepreneurs say
their businesses are geared towards a female clientele, the CIBC report revealed.

    And one in five self-employed women was not born in Canada, a ratio that is lower than the one in four for men. However, women are narrowing the gap, says CIBC.

Home Based Business Tax Tips  by Linda A. Fox

  If you operate a small home-based business, you are trying to get the most out of every dollar you bring in. Figuring out how to maximize tax deductions is one very important aspect of a home based business financial plan.

   Small home based businesses present a number of opportunities for income tax planning that, if not dealt with properly, can actually cost the business-owner money.

   Many such businesses are operated out of the owners’ home, both for reasons of cost as well as the advantage of avoiding a commute and being able to care for small children while still working.

   The income tax act specifically provides that expenses incurred for the purpose of earning income may deducted for tax purposes, so the owner must remain on top of all the costs that are being incurred. Getting good financial advice is the key to keeping costs down.

   Chartered accountant and small business specialist Jerry Paskowitz, a partner in Sloan Partners LLP of Thornhill, warns that many home business costs are “hidden”.

   “For example, rent paid for a residential apartment or the mortgage interest paid on a house may be deductible,” says Paskowitz. “The criterion would be whether there is space dedicated to the operation of the business.”

    Paskowitz cites an example of a person selling giftware from her home.

    “Let’s say the proprietor has inventory stored in a 3^rd bedroom and is also using that space to keep the business records. Customers also go to that room to see the merchandise and place orders,” Paskowitz explains. “In that case, the owner would determine the portion of the home being used for business purposes as a percentage of the total space, and apply that proportion to the mortgage interest to determine the allowable expense. The same rationale would be used for other related expenses such as maintenance costs and utilities.”

    Other allowable deductions would be the expense of stationery and supplies, as would the business use of a vehicle.

   “One question that arises quite often is whether a business owner can employ his or her spouse,” says Paskowitz. “The short answer is that any person who provides services to the business, whether related or not, can be paid. That also includes children. The consideration is that services provided should be documented and paid for at a reasonable rate. There is terrific opportunity for the unaware to miss out on legitimate claims by forgetting to compensate spouses for work performed.”

   When paying a family member or spouse, no tax is paid on income up to $8,000 and those who receive the money can make RRSP contributions, which can benefit the family.

   Other allowable expenses include travel, if your trip is deemed for business purposes, insurance, telephone and cell phone bills.  Meals and entertainment expenses are restricted to 50% of the amounts paid.

   If the business acquires capital assets such as computer equipment, furniture and fixtures, depreciation – “capital cost allowance” in tax speak ­-- is deducted at rates determined by CRA.

   Some types of expenses such as acquiring advanced knowledge may be treated as business expenses or tuition, depending on the circumstances, says Paskowitz.

   “For instance, attending a certification course required by a manufacturer before being allowed to sell a particular product will be treated as a business expense, but attending a college night course to gain advanced knowledge of a software program is most probably tuition,” he says “In either case, they would be allowable deductions in the computing of taxable income.”

    A final word of advice from Paskowitz is “read the related tax paperwork”.

    “To assist in the planning, business owners and prospective owners should look at tax forms T2032 (for service businesses) and T2124 (for product-based businesses) and read the CRA Guides to these forms to get an understanding of the tax treatment of home-based and small businesses,” he says.

    If you are unsure of what to do, get help. Most initial consulting visits to accountancy firms are free. Do your homework and choose someone with a CA or CGA designation and put all your questions in writing so you don’t forget to ask about an important point.