People are sometimes surprised to discover the by akgame


									                                                                         SUMMER 2003
               Lipton Wiseman Altbaum & Partners LLP. Chartered Accountants

         Bu y i n g o r Se l l i n g a Bu s i n e s s

       eople are sometimes surprised to discover the                  The second phase of the Lipton Wiseman method-
       effort involved in buying or selling a business.           ology is to carry out the marketing or acquisition strat-
       If you are considering either, it is wise to               egy by identifying potential buyers or sellers, reviewing
consult experienced advisers.                                     proposals, structuring the transaction in the most tax-
     On any given day, one or more Lipton Wiseman                 effective manner and negotiating the final agreements.
professionals are assisting clients in their pursuit of a             “Each phase involves significant detail,” says Tax
business transfer. Contrary to popular belief, Partner            Partner Jeff Nightingale.
Mel Leiderman says that financial issues are often the                “Determining the price, negotiating a letter of
easiest to resolve.                                               intent, carrying out the due diligence process and
     “In many cases the numbers work, but the more                answering follow-up questions, resolving the soft
important issues that can make or break a deal are the            issues – it always takes longer than expected.”
synergies between the buyer and the seller – the people               Sometimes transactions do not close, Jeff warns.
and other cultural issues,” Mel observes.                         Issues can arise in late stages that didn’t show up on
     Lipton Wiseman has an effective two-phase                    paper – for example, if a purchaser is unsatisfied with
methodology that helps guide clients through the process.         the due diligence process.
     The first phase is to answer strategic questions.                Mel points out that Lipton Wiseman has
What are the client’s goals and objectives? What is an            experience with these transactions not only on behalf
appropriate acquisition strategy? What information                of clients, but by carrying out mergers of its own over
should the client seek from a potential buyer or seller,          the years, and investigating others.
and what information is the client prepared to divulge?               “As business people, we know that owner-managers
     The most critical success factor, Mel says, is for the       take a lot of pride in what they have built,” Mel says.
seller to find a strategic buyer, i.e. one who already has        “A sale can be an emotional time. We help clients stay
knowledge and experience in the industry. A strategic             focused on their ultimate goals.”
buyer creates growth opportunities by combining the
business with other related assets to expand markets,
cut costs and increase efficiencies.
     Such a buyer will understand the true value of a
                                                                   Computer security .....................................2
business. Based on that understanding, a mutually
beneficial purchase price can be negotiated, often with            New income tax rulings .............................2
the assistance of a professional valuator. Lipton                  Insured annuities .......................................3
Wiseman can assist with this as well, working with
Certified Business Valuators to calculate the value of a           Professional profile ....................................3
business, including intangible assets such as brands               Firm News ....................................................4
and intellectual property.

                                  Computer Security
                                                                       The plan includes not only backing up data and

            any owner-operated businesses do not have
            adequate security measures in place for their          program files, but replacing computers and other
            accounting systems. Those systems are                  hardware, moving into alternative premises and
vulnerable to many risks, including unauthorized                   assigning contingency responsibilities.
access, environmental events such as fires, and                        Marty has helped many clients develop such
hardware or software accidents and failures.                       disaster-recovery plans. He also works to ensure that
     Rule number one: Make sure you have reliable                  backup files are reliable – something that cannot ever
backup files, and a plan for how to deploy them if                 be taken for granted.
necessary.                                                             “You have to verify your backup data files,” Marty
     “Backing up computer files on tape, CD or even                stresses. “They have to be checked regularly. As
via the Internet is a simple way to ensure their                   corporate systems evolve, the backup system may
availability in case of a catastrophic event,” says                not be recording some of the new files. Also, it
Martin Adler, president of Lipton Adler Computer                   may become incompatible with new hardware.”
Consultants Corp. “It takes only minutes and can                       Marty has seen some businesses endure horrors
ultimately save a business.”                                       such as losing all of their accounts-receivable files. He
     Lipton Wiseman has plans to ensure that, even if              much prefers to help businesses make plans in advance
all computers and files are destroyed, business as usual           than to answer their cries for help.
could be restored in four to six hours.

                         New Income Tax Rulings
                                                                   not yet known if the Department of Finance will

        wo recent court decisions could make a difference
        to you as a business owner, particularly if you will       introduce legislation to stop this new development.
        be receiving a non-competition payment with                     The rules on sale-leaseback arrangements have
respect to the sale of a business or its shares, or if you         also changed.
lease vehicles or equipment.                                            “Lease payments now appear to be deductible as a
     A Federal Court of Appeal decision reverses the               result of a recent Supreme Court decision,” Sunita says,
previous tax treatment of non-competition payments                 “including those that will be owned or purchased for a
received in connection with the sale of shares – with              bargain price at the end of the lease.”
the result that these payments are no longer taxable.                   Previously, if there was a low purchase price at the
     "In these circumstances, the non-competition                  end of the lease that permitted the person to legally
payment was received by an individual on the sale of               acquire the property, the lease was treated as a purchase
shares of a corporation in exchange for a promise not to           and the asset could be capitalized and depreciated.
compete with the corporation,” explains Tax Supervisor                  “Because this is a very complex issue, any current or
Sunita Arora. “These clauses are widely used in business           future leases should be examined to determine how they
to limit competition, and now they do not appear to be             will be treated from a tax perspective.”
subject to capital gains provisions.”                                   Please consult your Lipton Wiseman adviser to
     Canada Customs and Revenue Agency has not yet                 determine how these changes may apply to you.
appealed the decision to the Supreme Court, and it is

                                   Insured Annuities
            ould you like to increase your retirement                An insured annuity can produce the largest amount
            income while reducing the tax you pay? We            of monthly income of all forms of life annuities. It is
            suggest to clients of retirement age that they       a higher amount than would be possible through
consider purchasing an insured annuity.                          interest-only investments such as GICs.
     An annuity is like life insurance in reverse – you              Generally, the older you are, the better the income
pay a lump sum to an insurance company, which in                 from this kind of annuity. The maximum benefit
turn guarantees you a regular periodic payment. In the           occurs when you purchase the insured annuity with
case of an insured annuity, a portion of the payment is          funds that are not in a registered retirement savings
used to buy a life insurance policy equal to the lump            plan, because you gain additional preferential tax
sum that you have invested. That means that, when                treatment on the income from the annuity.
you die, an amount equal to your investment is paid                  Joint annuities provide income as long as one of
to your beneficiaries, so your estate is not diminished          the two spouses is living.
by this form of annuity. Your beneficiaries will not                 It should also be noted that an insured annuity’s
be taxed on the proceeds.                                        amount of income is permanently fixed, and the initial
     There are other advantages, too. The income you             investment is at least $10,000.
receive is taxed at a lower overall rate. That is because            For risk-averse investors, an insured annuity can be
the income consists of both capital and interest, and            a valuable product. Your Lipton Wiseman professional
it is only the interest portion that is subject to               can advise you further.
income tax.

                                            Professional Profile
                           Suzanne Genereux                      Suzanne joined Lipton Wiseman in 1997. Clients
                                                                 benefit from her broad-based business experience and

                                     or Suzanne Genereux,
                                                                 especially her expertise with information technology,
                                     variety really is the
                                                                 which she has developed over the years.
                                     spice of life.
                                                                      “I really became involved with computer
                                  As a senior accountant
                                                                 technology here at the firm, when we were upgrading
                           at Lipton Wiseman, she is
                                                                 our software,” she says.
                        responsible for a range of
                                                                      One thing led to another, and now Suzanne
different activities – everything from meeting with
                                                                 provides on-site computer support and problem
clients, analyzing information, and preparing financial
                                                                 solving for both staff and partners within the firm,
statements and tax returns, to providing computer
                                                                 as well as its clients.
consultation, support and troubleshooting.
                                                                      “It’s rewarding to contribute in different ways and
    “This is one of the nicest advantages of working at
                                                                 assist clients with their accounting and software needs.”
Lipton Wiseman . . . being encouraged to pursue your
                                                                      An avid reader, Suzanne enjoys travelling and
interests in new areas and develop different strengths,”
                                                                 spending time with her family, especially her six-year
Suzanne explains.
                                                                 old granddaughter, Alyssa.
    After some 25 years in business and industry,

                                NewsBrief: Firm News
    Lipton Wiseman welcomes four new
staff members:

   Kristine Bienert, as director of
professional standards and education;

   Sherry Zheng in Taxation; and

   Aleya Hamid in Administration.

                                                                The 2002-2003 hockey season was another successful one
   Brian Wong is also returning to Lipton
                                                             for the Vaughan Rangers Minor Atom Selects, coached by our
Wiseman. Brian was previously a summer                       Tax Partner, Jeff Nightingale. Jeff ’s son Joshua is seated in the front
student in Audit and Accounting.                             row, third from right.

    Our annual post-tax-season party was                                             Memorable Quotes:
held at Alice Fazooli's this year, where                                  “After the game, the king and the pawn
everyone relaxed and enjoyed an evening                                            go into the same box.”
                                                                                                 – Italian proverb
of dinner and conversation.

                                                       Chartered Accountants
                           Member firm of JEFFREYS HENRY INTERNATIONAL
                               Lipton Wiseman Management Consultants
                                 Lipton Adler Computer Consultants Corp.
       Lipton an
        Wisem um                     245 Fairview Mall Dr., Suite 600
          Altba ers
           Partn P                    Willowdale, Ontario M2J 4T1
                                     416-496-2900 Fax 416-496-0559
       PLEASE NOTE: This newsletter is published by Lipton Wiseman Altbaum & Partners LLP to bring current developments relating to
     business, public accounting and taxation to your attention. The contents are of a general nature only. They are not meant as, nor should be
            construed as, full and complete analysis or advice on any matters. The information herein should not be acted upon without
                                                   further consultation with professional advisors.


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