| The best way to tell how someone will perform in the future is to examine their past. Hobb & Company has demonstrated over the years a depth of flexibility and solution generations that has contributed to our clients' success and personal satisfaction. We hope you will enjoy these real life stories. Perhaps one or more of these stories will reflect your situation.
COMPLEX TAX ISSUES, SUCCESSION, U.S. BRANCH, NEW SHAREHOLDER Two unrelated families own a company 50/50. One family wished to relocate to the U.S. and establish a satellite operation. At the same time the two families wished to give an employee a 10% interest in the entire operation. This employee was being groomed to eventually take over the company. There were several complex tax issues due to the one family leaving Canada and maintaining an interest in the Canadian operations, setting up a business in the U.S. in which the Canadian family would maintain an interest, and bringing in a new shareholder who would have a 10% interest in both the Canadian and U.S. operations.
We assembled a team that included ourselves, Canadian legal counsel, U.S. legal counsel and U.S. tax specialists. We provided the Canadian tax planning and quarterbacked the entire process. We were able to set up a structure that included a U.S. partnership, which acted as the U.S. sales arm, a Canadian sales company, and the existing Canadian manufacturing company. The structure minimized the income taxes arising on the sale of shares to the employee and the deemed disposition of the Canadian assets of the members of the family that moved to the U.S. This structure will also minimize the tax on future profits flowing from the U.S. operations to the Canadian owners and from the Canadian operations to the U.S. owners. The structure also allowed the family moving to the U.S. to continue working with the business and provided the company with an avenue to grow its U.S. sales. The structure will also facilitate the eventual succession of the business to the employee.
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SALE OF BUSINESS
A privately held company with proprietary product was selling shares to a large public company for a large selling price. The major shareholders were concerned with the amount of income tax they would pay on the sale. We worked with the corporate lawyers and came up with a tax plan that saved the two major shareholders over $2.5 million of income taxes.
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BUSINESS SALE, DEFFERED INCOME TAX A manufacturing client was selling its business for a seven figure selling price. We assisted the client in negotiating the details of the sale including a tax plan which deferred income taxes of $550,000. The tax plan was audited and accepted by Canada Revenue Agency. ~
REDUCED BACK TAXES
A new client contacted our firm as they had been assessed by Canada Revenue Agency for income taxes that they did not understand. We reviewed their situation which related to a number of years and negotiated with Canada Revenue Agency a reduction in the balance owing of over $128,000.
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GETTING THE RIGHT PRICE FOR A BUSINESS THROUGH COMPUTER MODELLING
A client wanted to sell his business. Using computer models that we have developed, we could tell the client what his “after tax cash retained” from the sale of his business assets would be, after winding up his corporation. Our model also calculated the “after tax” net investment the purchaser would have in the assets. This allowed us to compare an “asset sale” to a “share sale” and find a middle ground where both the purchaser and vendor were better off with the share sale.
The client negotiated with various potential buyers over an eight month period. During negotiations with the eventual buyer, the client actually called us from a meeting to find out what his net after tax cash would be from the sale. We were able to tell him the net number, and provide him with percentages and cut off points where the after tax cash retained changed, based on changes to the selling price.
The client eventually sold to this purchaser, who was impressed with our ability to provide critical information to our client in a telephone conversation during a meeting. The purchaser was so impressed, that after the deal closed, he engaged our firm to be their accountants. Eighteen months later, we helped the purchaser sell this same business.
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HOBB’S INTERVENTION RESULTS IN LOAN, FINANCIAL SUCCESS A growing distribution business, referred to us by an existing client, was struggling with cash management issues and processes. They were not able to acquire appropriate financing for their strategic expansion in what was perceived as a low margin industry. Through our coaching and assistance with cash projections, the Company was able to gain the confidence of their financial institution to finance the expansion of their business, resulting in increased revenues of 25%. The continual monitoring of results has also provided them with the information to increase margins by 8%.
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AIR TIGHT DUE DILIGENCE An organization, referred to us by a Toronto law firm, contacted us to conduct due diligence services their current auditors were unable to provide. The directors were not able to articulate exactly what they required except that they wanted to know that “everything was fine from inception of the plan to date” which was a ten year period. After discussions with key personnel, we were able to determine what the potential concerns were and what the deliverables would be. We performed our due diligence audit and prepared a detailed report for the directors, providing all information required, as well as corrective actions and improvements to operating policies and procedures. The report was well received and we have since been engaged to perform taxation and other special services for this organization.
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