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Business Valuations In The Long-Term Care Homes Sector

Long Term Valuation Article

Nathan Treitel, Partner at Segal Valuation and Transaction Advisory, co-authored this article for the Chartered Business Valuator Institute’s Journal of Business Valuation.


The expected growth in the seniors’ age demographic in the coming decades has garnered considerable attention in the social, political and financial discourse of late. This has brought attention to expense and capacity issues around seniors’ residential care. In addition to the costs of administering care, residential facilities involve substantial capital costs in the form of land, buildings and equipment. Further, while provincial governments have historically provided funding to the sector, we are likely to see significant policy changes in the coming years, particularly in jurisdictions facing intense budgetary pressures. These dynamics are common to most jurisdictions within Canada.

Within the seniors housing and residential care industry, market participants typically segment properties as retirement homes (RHs) or long-term care homes (LTCHs). While the two segments are related, the businesses are different enough to warrant the distinction, particularly as it relates to the level of care delivered within the residence, the extent of government operating funding and regulatory involvement in the business operations. Residents of LTCHs most often have more significant care requirements and benefit from government subsidies to cover the personal care services delivered within the property, whereas the cost of RH services and accommodation is most often exclusively the responsibility of the resident.

The valuation of firms that own and operate LTCHs must take into consideration numerous market and government policy factors. Critical market factors include demographics, cost of capital, resident choice, competition, economies of scale, availability of staffing, and the impact of negative media coverage. The principal policy factors can be divided, practically, into those affecting government funding, and those related to governance, which include licensing, regulation of services, inspection and compliance.

To learn more about business valuations in the long-term care home sector, click here to download the full report.


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Liquidity Alternatives

Liquidity Alternative

In my previous article, I discussed how to prepare a business for a liquidity event. Proper preparation ensures a business is well-positioned when encountering any unexpected events that may result in a liquidity event. It is recommended to give consideration to various liquidity alternatives in order to yield results that are optimal to shareholders and allow them to best meet their objectives.

Shareholder Motivations for Liquidity

  • Business owners may desire to “take some money off the table” and reduce personal financial risk by diversifying their assets.
  • Business owners may be looking to take a step back from the business in order to pursue other interests or retire.
  • A shareholder can elect to leave the business due to challenging interpersonal situations resulting from mutual ownership with other individuals with different personalities and/or visions for the future growth of the business.
  • An unexpected personal circumstance, such a death, deteriorating health or divorce, may require the division of family assets.

Liquidity Alternatives

Numerous liquidity alternatives exist that allow individual shareholders to realize their objectives. These alternatives include:

  • Management /Employee-Led Buyouts: a company is sold to its existing management or employees
  • Recapitalizations and Financial Restructurings:  new capital is infused into a company to facilitate growth and the partial buyout of existing shareholders
  • Divestitures: selling a company to a strategic or financial investment that is external to the business
  • Raising Private Capital: raising debt and/or equity capital to facilitate growth or ease liquidity constraints

Characteristics of Liquidity Alternatives

The transaction alternatives, as noted above, each have certain characteristics which make it a better option for achieving the shareholder motivations and objectives. Some of these characteristics include:

  • Confidentiality: the ability to maintain a higher degree of confidentiality about the existence of the process and the fact that existing shareholders are looking for a buyer or investor
  • Speed: certain of the alternatives have the advantage of being able to be executed more rapidly due to the familiarity of the buyer/investor with the business and the fact that the required capital for the transaction is readily available.
  • Growth & Upside: certain of the alternatives allow existing shareholders to continue to retain an interest in the company where they believe considerable future growth and upside potential exists. These alternatives involve partnering with experienced investors with access to tangible resources, experience and knowledge not available to the existing management and shareholders.
  • Price: by their nature, some of the alternatives will be directed to a broader pool of potential buyers/investors and a more formal auction process will likely be undertaken. Broad auction processes that target strategic investors are typically considered optimal from a price perspective.
  • Use of Proceeds: certain of the alternatives, by design will result in existing ownership being diluted, taking chips off the table and diversifying their assets. Other alternatives do not necessarily (immediately) allow for these options.
  • Ongoing ownership and management: certain of the alternatives result in existing ownership severing the relationship with the company immediately while others result I n continued ownership and possibly management roles going forward. One also needs to contemplate the various alternatives in light of the shareholder’s com with having additional/new stakeholders at the table.


We oftentimes find shareholders desiring a liquidity event fixated on a particular transaction alternative. Given the range of transaction alternatives available, it behooves business owners to carefully consider all the options so that they can identify the alternative objectives available to them.

This is the second article in a series by Nathan Treitel, MBA, CBV, from Segal LLP’s Valuation and Transaction Advisory. This piece was produced as a part of the quarterly Canadian Overview, a newsletter produced by the Canadian member firms of Moore Stephens North America.

New CRA Audit Project: Car Expenses

CRA Car Expenses

It appears that the Canadian Revenue Agency (CRA) has a new project: corporate car expenses. This change comes as a surprise as previous correspondence from CRA was proposing to disallow personal car expenses for owner-managers.

In CRA correspondence that we have seen of late, the focus is on those companies that had an expense in the vehicle expense line of the tax return. The standard letter is asking for the following items:

  1. A detailed list of the general ledger transactions for vehicle expenses.
  2. Invoices of the ten largest items in one month in the year.
  3. A listing of the vehicles with clarification as to who owns the vehicles.
  4. The make and model of the vehicles that the company leased.
  5. The percentage allocation between personal use and business use as well as a copy of the log used to track the business and personal use.
  6. An explanation of how the business and personal use is dealt with. For example, they are asking if expenses were reduced or reimbursed or if there is an employee benefit or standby charge.

They appear to be dealing with the years 2016 and 2017, which will shortly be statute barred.

One of the main issues being dealt with by accountants is that many clients do not keep very good travel logs. Additionally, there are a number of clients who purchased cars in the owner’s name and not the corporation’s name, even though the corporation is deducting the expenses. Another issue is that the only backup for expenses is credit card statements and not the actual invoices or receipts. This could be a problem, as CRA has stated that they will not accept credit card statements because the statements do not provide sufficient detail. To date, we have not received correspondence from CRA that they will not accept the credit card statements, but we have reason to believe that this will be the case.

General Car Rules

In general, there are a set of rules depending on whether an individual or corporation owns the car. Where the company owns the car, there may be requirements for calculations on both the operating benefit and the standby charge. The operating benefit is a per kilometer benefit for every personal-use kilometer used ($0.28 per km). This amount should be included in the income of the individual who uses the corporate car. There is also the concept of a standby charge. If the car is corporate-owned, it is 2% of the original cost of the vehicle. If the car is corporate leased, it is 2/3 of the monthly lease cost. Both of these numbers are then multiplied by the number of months that the vehicle is available during the year. There is, however, a reduction of the standby charge where the car is used more than 50% business use and less than 20,000 km of personal use. In those cases, the standby charge is prorated based on personal use versus the total use.

The challenge that many clients and taxpayers have is poor record keeping. One of the things to consider, in order to reduce the level of record-keeping, is for the corporation to pay a “reasonable allowance”. Based on CRA rules, a reasonable allowance is a per kilometer allowance of $0.58 for the first 5,000 kilometers and $0.52 for each kilometer thereafter. The record-keeping required is to submit the number of business kilometers driven each month. In this way, receipts and other backup are not required for the actual operating expenses.

When a reasonable allowance is paid, it does not show up on an individual’s T4 and the individual does not need to report it. The corporation deducts this expense as a car expense.

The key takeaway is to ensure that clients and taxpayers keep sufficient records to justify their business car expenses.


Contributed by Howard Wasserman CPA, CA, CFP, TEP, a Tax Partner at Segal LLP. This piece was produced as a part of the quarterly Canadian Overview, a newsletter produced by the Canadian member firms of Moore Stephens North America.

Pre-Employee Share Ownership Plans (“ESOP”)


Developing an ESOP is new territory for both employer and employee. Many owners may already have a clear plan mapped out and have shared this plan with their employees, whilst others are less advanced in the ESOP process.

It is important for the business valuator engaged in the ESOP process to determine which end of the spectrum their client is on as this will have a bearing on the terms of the valuation engagement and the assistance required.

Irrespective of where your client is on their ESOP journey, the following key principles should be followed throughout all stages of the valuation process:

  • Transparency – through an independent valuation;
  • Communication – through regular updates to employees on the valuation process;
  • Setting and Managing Expectations – communicating any changes to % ownership offered, price, terms, etc. in real-time.

Engaging the Business Valuator – the “When and “Why”

When should you engage a Business Valuator? – It is never too early…

Early Planning Considerations from the Owner’s Perspective:

  • Purification of Company (for tax purposes) if the owner is selling their shares;
  • Is a share freeze required if the value of shares may be too high (expensive0 for an employee to buy-in;
  • Corporate Reorganization – removal of non-operating assets from the company;
  • Adequacy of share structure – what if issued share capital is only 1 share?
  • Early indication of value may help determine how an employee is buying shares:
  • Purchase from Owner – can the employee afford the shares?
  • Purchase from Treasury – is there a need for a share freeze prior to buy-in?
  • Potentially an early reality check on Value from the owner’s perspective.

Early Planning Considerations from the Employee’s Perspective:

The sooner in the process Value is established, the sooner the employee can determine:

  • Can they afford to buy in; and,
  • Do they want to buy in.

It may also help determine how the shares are going to be purchased:

  • Purchase for Cash – employee savings, RSP’s, TFSA’s
  • Purchase in lieu of bonuses;
  • Purchase through payroll deductions;

Employer Financing or Corporate Guarantees to employees:

Why should you engage an Independent Business Valuator? It is extremely important to get the initial valuation RIGHT as:

  • It establishes the initial buy-in price for the employees;
  • It sets the benchmark for measuring future growth and increase in share value.

Owners often resist or question the need for an independent valuation based on cost. So why is it so important? It IS Independent:

  • Eliminates owner bias as to Value;
  • Provides transparency to employees – it is not the owner’s number!
  • The Business Valuator is available to provide independent information and analysis to both employer and employee without professional conflict.
  • Lends credibility to the determination of Value – important to employees as potential investors and to third party lenders.

Independent Valuation establishes a credible basis for future valuations and a formula/methodology going forward.

Valuation Engagement Process

Who is engaging and paying the Business Valuator? Irrespective of whom, the concept of independence must be clearly communicated.

What Level of Report is required? A higher level of assurance may be more important to the employee than the employer. Two most common types of Report:

  • Calculation of Value – basically uses the owner’s numbers with little or no corroboration;
  • An estimate of Value – an independent assessment of business and economy – a higher level of corroboration.

Other Valuation Considerations:

  • Valuation Date – should be current;
  • What is being valued – 100% of shares (en bloc) of specific percentage;
  • Basis of Valuation – Fair Market Value, Fair Value, Net Book Value?

In conclusion, the valuation process will ultimately be driven by the circumstances in each specific situation, and the likelihood of a smoother process and positive outcome increases the earlier in the process the Business Valuator is engaged.

Contributed by Andrew Dey from Mowbrey Gil. This piece was produced as a part of the quarterly Canadian Overview, a newsletter produced by the Canadian member firms of Moore Stephens North America.

Revenue Diversification by Non-Profit Organizations


The Canadian Income Tax Act defines a non-profit organization as “a club, society or association that, in the opinion of the Minister, was not a charity within the meaning assigned by subsection 149.1(1) and that was organized and operated exclusively for social welfare, civic improvement, pleasure or recreation or for any other purpose except profit….”

On several occasions over recent years, the Canada Revenue Agency has had to issue interpretations on this subsection in order to offer its opinion on whether activities carried out by non-profit organizations, such as the rental of parking spaces, income generated through fibre-optic networks or other similar activities, could have an impact on the tax status of such organizations. In any case, the CRA has deferred to the courts in each of its interpretative notes, in holding that the profit must be ancillary and in support of the organization’s objectives.

Possible Changes to the Income Tax Act

During the presentation of the 2014 Federal Budget, the Minister of Finance made known his intention to reexamine the tax-exempt status of non-profit organizations. The review would be to determine whether such an exemption continued to be properly targeted and whether sufficient transparency and accountability provisions were in place. At the moment, it is still unclear if the liberal government, elected in 2015, will hold this review. In November 2016, the Minister of Finance stated that such a consultation remained possible but was not a priority at the time.


The courts have clarified that a non-profit organization can diversify its income sources while still maintaining its tax-exempt status under the Income Tax Act. However, the courts have stated that, to avoid a change in tax status, the activities of the organization must be linked to its mission as well as be ancillary to it.

For some years now, the Canada Revenue Agency has taken the same stance as the courts. However, the CRA often takes a far more restrictive interpretation of what can be considered an ancillary activity with a link to the mission of the organization.


In our opinion, non-profit organizations should exercise a certain amount of caution before diversifying their activities. It would seem astute to first show that the new activities have a connection with their mission and that they are ancillary to those main activities. This would help ensure that your status as a non-profit organization will not be later disputed by the Canada Revenue Agency.

Contributed by Marcil Lavallée. This piece was produced as a part of the quarterly Canadian Overview, a newsletter produced by the Canadian member firms of Moore Stephens North America.

Partnership Announcement


Segal LLP is pleased to announce the firm’s two new partners.

Dora Mariani, CPA, CA, CFP, TEP, and Howard Wasserman, CPA, CA, CFP, TEP, will join the firm’s partnership group, effective July 1st, 2019.

Dora Mariani joined Segal as a Principal in the Segal Tax Group in 2015. She consults on Canadian and international tax matters for private corporations, high net worth clients and advises U.S. and international clients on appropriate tax structures for their Canadian operations. Her advisory expertise includes corporate reorganizations, purchase and sale of a business, tax planning for individuals immigrating to and emigrating from Canada and personal tax and estate planning.

As an expert in her field, Dora has presented at various tax seminars and conferences throughout North America. She is a member of the Chartered Professional Accountants of Ontario, Chartered Professional Accountants of Canada, Canadian Tax Foundation, International Fiscal Association, Society of Tax and Estate Practitioners and of the Financial Planning Standards Council.

Howard Wasserman has worked in tax for more than twenty-five years, specializing in both Canadian and international tax matters. Howard advises on a diverse range of tax issues including estate planning, mergers and acquisitions and purchase/sale of a business. He has a very successful track record in presenting appeals and managing tax negotiations with CRA on behalf of Segal clients.

Howard is a highly sought-after speaker and has presented at the Canadian Tax Foundation, various local CPA associations, seminars and other conferences throughout Canada. In 2016 Howard introduced the Segal Tax Series, an annual CPD series focused on providing CPA’s tax learning and tools to support their clients.

We extend our sincere congratulations to both Dora and Howard and welcome them to the Segal partner group.

Dora Mariani: 416-490-3452 | email

Howard Wasserman: 416-490-3465 | email


Cloud Accounting

Cloud Accounting

The Internet Age has revolutionized every industry and accounting is no exception. Introducing, cloud accounting; a faster and more efficient method of tracking your business’ expenses and financial reporting.

Cloud accounting is the process of migrating financial accounting systems into a cloud-based platform, away from a server. In terms of the accessibility and benefits to your business, this means having access to your accounting data- accounts payable and receivable, expense account, etc.- from anywhere and at any time. All you need is Internet access and you can simply log in to access all your financial reporting documents with the same ease of logging into Facebook.

The benefits of moving into cloud-based accounting are numerous and the demand for it is growing, particularly among small to mid-size companies. It simplifies account software and maintenance meaning business owners/managers will no longer need to look after hardware and software upgrade. It also eliminates the concern that clients won’t be able to access their documents because of an error on your end. It also offers efficient means of business management by enabling users to upload documents as easily and simply as taking a photo of an invoice and uploading it to the cloud.

Many features of cloud accounting are also automated, such as paying invoices, accepting payments, and grouping expenses. The addition of artificial intelligence can also automate regular business tasks by gauging your usage habits and tailoring the program in ways that best suit you and/or your business’ individual needs. Tools can be added to your cloud accounting solution, giving you a real-time view of all transactions appearing on your bank and credit card statements. By creating rules, the tool can automatically post transactions it recognizes.

By centralizing your reports, documents and expenses, this also makes the process much more collaborative, efficient and streamlined for accountants, CFOs and bookkeepers.

Understandably, some business owners and managers are apprehensive to switch to cloud accounting out of concern for security. However, rest assured these cloud solutions have security on par with that of online banking. Major companies, including Microsoft, are developing software for cloud-based accounting. Not only do they have endless resources to develop top-notch and secure software but, also, it’s important to remember that trusted names in technology will not risk their reputation on anything at risk of being hacked. The bigger risk is that users have their passwords stolen, however, this is an easily avoidable risk that can be reduced by creating strong passwords that utilize numbers, a mix of uppercase and lowercase letters, and symbols.

If you are interested in further exploring cloud-based accounting, the next step is to look into companies and software that offer the tools best suited to your business. QuickBooks has been a long-standing favourite of smaller companies and can be expected to add more features to their cloud-based solutions over the next few years. Xero and Wave are two other software companies that specialize in cloud accounting software. Net Suites has been offering cloud-based solutions since 1999 and, as previously mentioned, Microsoft is rolling out new cloud solutions for accounting.

Ultimately, cloud accounting holds a promising future of the modernization and improved efficiency of accounting. It has the potential to be a top tool for both accountants and business owners alike and its value to business operations should to be embraced.

Written by Giles Osborne, CPA,CA from Segal LLP and Alain St-Laurent from Demers Beaulne.

This piece was produced as a part of the quarterly Canadian Overview, a newsletter produced by the Canadian member firms of Moore Stephens North America.

It’s Never Too Early To Organize Your Music Business

Music Business

It’s Never Too Early To Organize Your Music Business

Once you’ve started directing effort and funds toward earning income as a musician, congratulations, you’re in the music business!
Many musicians put off organizing the business side of their career until they have to, only to realize how many opportunities they missed to save money along the way. So, no matter how overwhelmed you may feel about tax planning or the grant application process, meeting with a lawyer from our entertainment group as early as possible is a good idea for understanding the big picture and keeping more money in your bank account.

If you’re just starting out in the music business, here’s some of what we’ll discuss with you:

Business Structure

Incorporating your business is a step that warrants a conversation with a professional. Yes, it involves additional compliance and costs, and at the outset of your career the costs outweigh the benefits, but once you’re gigging more and earning more per appearance, it’s a smart move.

You’ll be able to run expenses through the corporation, like new instruments and gear, which you can write off so you pay less tax. Also, as an incorporated company, you’ll be personally protected against any claims made against you by club owners, record labels or anyone else.

Our team can take you through the ins and outs of incorporating and get you set up for a long run.

Expense Tracking

Generally speaking, when you’re starting out in the music business, you’ll spend more than you earn. This is called a “business loss,” and a big mistake a lot of musicians make is not taking full advantage of these losses, which you can claim against other income from your day job, or carry forward so you get the tax benefit when you are making money down the road.

The best way to do this is to track and report all of your expenses. We can help you determine what expenses you should be tracking.

Income Tax and GST/HST

You’re required to register for GST/HST when you hit $30,000 in gross sales (business income before expenses). As a musician, your gross income includes royalties and advances, so you can hit the threshold without being aware.

Once you are registered, you have to collect GST/HST on taxable revenue at the rate set out in the province where you are performing. But the money you spend in GST/HST on business expenses is subtracted from what you collect in GST/HST, so you wind up owing less per period. If you pay out more GST/HST than you collect, CRA will issue you a cheque for the difference.

We can set you up for GST/HST collection, and make sure you have what you need to remit on time (the penalties for late filing add up quickly!).

Cash Planning and Budgeting

Touring is expensive and fraught with unforeseen expenses like vehicle and gear repairs, weather-related problems, cancelled gigs and more. As well, recording costs can also get away from you if you’re not careful. This is why planning a tour or an album should include a budget with a contingency amount. It’s a valuable exercise that will help you to stay financially focused.

We can give you template worksheets to reconcile money you earn/spend on the road, settlements, grant funding and more.

Chasing your dream of being the next <insert your favourite artist here> is a great thing. Hit all the right organizational notes and you’ll be in a much better financial position every step of the way.

Contributed by Donna Branston, CPA, CGA from DMCL.

This piece was produced as a part of the quarterly Canadian Overview, a newsletter produced by the Canadian member firms of Moore Stephens North America.

Preparing for a Liquidity Event


The success of a liquidity event involving a privately-held business requires considerable preparation.

Even in circumstances where a sale is not imminent, much can be done to improve the operational and financial performance of a business in order to ensure owners can capitalize on favourable market conditions and execute their liquidity option when the timing is optimal.

Even if a liquidity event not be expected to occur for many years into the future, business owners will end up benefitting from owning a company with reduced risk and better operating and financial performance.

The following outlines the main areas of focus for business owners contemplating a future liquidity event:

Know the Value of the Business

Even if there are no plans for an imminent sale, it is important that business owners have a reasonable estimate of their company’s value.

When armed with this knowledge, owners will be better positioned to evaluate unsolicited offers by potential investors. Additionally, obtaining a periodic, realistic estimate of value serves as a tool to examine changes in value over time and is a means to target and track growth objectives.

Relying on a value based on pricing obtained in transactions involving similar companies may lead to value expectations that are unrealistic in an open market transaction. It is worth retaining an experienced Certified Business Valuator to get an accurate and unbiased valuation based on the financial and non-financial, tangible and intangible factors specific to your business.

Understand the Value Drivers

Along with an estimate of a realistic value range, it is important to understand the factors driving this value.

Value drivers consist of financial and non-financial metrics and intangible attributes that are of importance to prospective purchasers. They are also the catalysts to increase the future value of a business prior to any liquidity event. Identifying value drivers will allow owners to focus on enhancing areas that are deficient, resulting in better financial performance, lower risk and, ultimately, a higher value.

Prepare for a Liquidity Event

Optimizing a liquidity event involves timing the transaction to coincide with favourable company and market conditions.

Much preparation can be done to ensure owners are ready to capitalize on attractive market conditions, including the following:

• Reducing key man risk through the development of a strong senior and mid-level management team;

• Reducing customer and supplier concentration;

• Investing in maintenance and capital expenditures to ensure productive capital assets;

• Improving financial systems and reporting capabilities;

• Documenting undocumented business relationships with customers, suppliers, employees and related parties, as well as internal operating controls and governance protocols;

• Obtaining resolution and greater clarity relating to contingent liabilities, outstanding tax and litigation matters;
• Cleansing the balance sheet of redundant assets;

• Developing a growth plan based on sound business strategy and detailed financial assumptions

Successfully implementing the above initiatives will increase profitability while reducing risk and costs to potential buyers thereby increasing the attractiveness, marketability and ultimately the value of the company.

Consult With a Transaction Advisor

Liquidity events are unusual in the business lifecycle and therefore an area where management typically has limited experience. Given the significance of the process to the business owner, it is prudent to hire an advisor to ensure the outcome is maximized.

However, even business owners experienced with the transaction process can benefit from engaging a transaction advisor prior to initiating a liquidity event. These benefits include:

• Signalling that the process will be professional, pragmatic and unemotional;

• Advising on the purification of the balance sheet prior to the transaction to ensure overall value is maximized for the business owner;

• Advising on the optimal transaction structure (full sale, partial sale, management buy-out, sale to family members, etc.) and process that will yield the best outcomes for the business owner; and

• Outsourcing the responsibility for overseeing and managing the transaction process maximizes the efficient use of management’s time and enables them to focus on the day-to-day operations and growth of the business.

This is the first in a series of articles by Nathan Treitel on transactions and valuation issues relating to small and mid-sized privately held companies.

The next article will focus on liquidity and financing alternatives for privately held businesses.

This piece was produced as a part of the quarterly Canadian Overview, a newsletter produced by the Canadian member firms of Moore Stephens North America.

Segal Celebrates: Convocation and Honour Roll Night

It was a busy weekend for several members of the Segal team!

On Friday night, our very own Chris Ball was one of the honorees at Chartered Professional Accountants of Ontario (CPA Ontario)’s annual CFE Honour Roll dinner at the Four Seasons Hotel in Toronto. The 2018 Honour Roll is made up of the top 1% of all CFE writers across Canada! Segal Principal, Jason Montgomery, was in attendance at the event and says; “It was a privilege to be there in support of Chris, on behalf of Segal LLP, and to witness him being recognized for his incredible achievement.”

The CFE Convocation was also held this weekend with five members of our team- Chris Ball, Chris Luk, Cheryl Vanderland, Katelyn Li and Victoria Huang- in attendance.

Congratulations to all on your accomplishments!



Jason and Chris

CFE Convocation