I hope everything is rolling for you!
As you know my company offers consulting services.
As explained in a previous email, I am working on building a website for this company.
Now, another topic of discussion, I am also building another transactional e-commerce website to sell products online without any correlation with my consulting activity. Can I relate this new activity to my existing company, is there impacts at the accounting & tax levels…
Thanks and have a good one!Ms. F.
Hello Ms. F.,
It is possible to attach a second activity in your company.
You just need to update your profile at the Registraire des Entreprises du Québec.
The only caveat concerns business risk. Generally, we do not put two distinct businesses / activities in the same company because the business risk of one activity could impact the other activity.
For example, if the company has excess cash or excess assets (such as investments), it risks losing those assets if one or more of the activities are bankrupting or being sued.
The good practice is to create a management company for the excess liquidities, and to put each activity with a business risk in a separate operating company.
This structure protects you the best in terms of risk, but it obviously involves higher accounting costs.
If you choose to operate both activities in the same company, the losses of one activity will be applicable against the gains of the other activity, which is not possible if the activities are in two separate companies.
Also, it is possible, in the future, to change your mind and split everything, but it would cost significantly more to do so compared to choosing the right structure from the start.
Finally, there are considerations regarding the capital gains deduction. Some businesses may qualify for a capital gains deduction of $ 866,912 (in 2019). This means that you could resell your company’s shares without paying tax on the first $ 866,912 of the gain. If one of your businesses / activities could possibly be sold, it would then be necessary to reorganize your structure to be entitled to claim this deduction. It is possible to do this afterwards, but the structure must be in place at least 2 years before a potential sale. This would block you in the event of a spontaneous offer from a buyer…
As you can see, nothing is ever easy in taxation!
I remain available to discuss it further with you.
Nicolas Godbout, M. Fisc., Pl. Fin.