Awerix CPA Professional Corporation

Dealerships

No matter what you’re in the market of buying and selling, our accounting and tax services will provide you with the peace of mind you need to make sure that your business operations reflect the reality on the ground, and we will help you as you endeavour to ensure the maximum profitability, to make the most of your opportunities, and to minimize risk.

We can provide financial services to any kind of dealerships, including but not limited to:

  • New and used automobile
  • Recreational vehicles
  • Marine and motorsports
  • Farm and heavy equipment

What kinds of services can we provide to dealerships?

  • Assurance engagements.
    Many dealerships, given the high-cost nature of their inventory, are required to take out loans or make other arrangements with creditors and investors. These stakeholders may require you to have your financial statements audited or reviewed on an annual basis. As a public accounting firm, we are qualified to provide these engagements to you at a reasonable, competitive price. Should your firm not require an assurance engagement, we also provide compilation services, where we produce financial statements based on the materials you provide to us.
  • Corporate and individual income tax preparation.
    Whether your dealership is incorporated or you are self-employed and operate the business as a sole proprietorship, or a partnership, we can inform you of the tax consequences of your firm’s performance, and also prepare annual tax returns – T2s for corporate clients, and T1s for self-employed clients.
  • Payroll, HST, and corporate tax remittances.
    No dealership can be a success without a great team – and paying that great team’s salaries, as well as the monthly or quarterly payroll remittances to the CRA based on their payroll deductions – should be a top priority. We can help by preparing payroll schedules for your employees, and determine the amount to remit to the CRA to cover their deductions, as well as your employer deductions. We can even remit on your behalf. As for HST, we can help you to determine what your net payable is. The HST you pay on purchases and supplies can be counted against the HST you collect on sales – make sure you don’t pay more than you have to! We can also help you to keep on top of your quarterly or annual HST filings and even remit your HST payments on your behalf.
  • Corporate finance
    Today more than ever before, it is possible to find new sources for financing beyond loans from chartered banks. We can help you to identify these alternative lending sources and how to avail yourself of them, and what requirements will be needed to do so.
    Should you borrow more money? What is the ideal debt-to-equity ratio for your firm? This is dependent on your industry, on the overall economy, and on the profitability trends of your individual business. We can help you to find the ideal ratio, and whether or not that means you should borrow more, or to repay your existing debt.
    Our financial statements and other reports are designed with interested parties (such as potential investors and financiers) in mind. We know what they’re looking for!
  • Succession planning
    Your business is a going concern, but we don’t live forever, and retirement may be a desired option for you in the medium-term. We can help you to prepare a smooth and orderly handover to an interested buyer, because of our own experience working with firms which have changed owners or sold their assets to other parties. This is a concern for clients on the personal side of the equation, whether or not their business is incorporated. Selling your successful business could result in a capital gain for you. It’s important to be informed of the tax consequences of your actions before they happen.

Other Considerations for Dealerships

  • Holding companies
    Accumulated equity built by the dealership over time, especially If that equity is then invested into assets which are not relevant to the dealership’s operations (for example, portfolio investments, or real estate) it may be more beneficial to create a holding company for those assets rather than to include the revenues generated from them as part of your operating company. You may even be able to transfer these assets from the operating company to the holding company without negative tax consequences. We can help you determine if a holding company is the right approach for you.
  • Securing loans
    It is important to secure loans, particularly intercompany loans or loans from investors, to reduce risk. Most loans between related parties are non-interest-bearing, and this means that if the loan must be written off, there is no tax benefit for the lending corporation on its bad debt. Ensuring that the loans are interest-bearing allows for the lender to generate revenue and increases the odds that, should the loan need to be written off, that it is seen as a valid business expense for tax purposes. Prime interest rates today are lower than ever – there’s never been a better time for an intercompany or investor loan with interest to reduce risk and provide a cash infusion.

CECRA (Canada Emergency Commercial Rent Assistance)

To qualify for CECRA, fill out the application provided by the CRA and make sure all information is correct and accurate. Then you must meet the eligibility requirements:

  • Gross rent is less than $50,000 per month, annual revenues are less than $20 million, and the business has incurred at least a 70% in pre-COVID-19 revenue
  • A legally binding rent reduction agreement with the tenant, reducing their rent by at least 75%, and which includes the following:
    1. A moratorium on eviction for the period
    2. And a declaration of rental revenue

With regards to dealerships, the following considerations need to be taken into account:

The CECRA is available to owners in non-arm’s length cases, for example when the holding company owns the land on which the dealership (the operating company) is situated. However, this is only permitted if there is a valid and enforceable lease agreement between the two companies at market rates.

If there is more than one operating dealership, and each dealership forms its own corporation, then each individual dealership would be eligible for CECRA as a small business tenant if its earnings is less than $20 million, even if one or more of the dealerships, or all of the dealerships in aggregate, earns over $20 million.