Planning for the Future
“Life after Graduation”
Introductions
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John McMillan- Lawyer
Darren Farwell - Scotia Mcleod
Maria Tsiaousidis – Manager Personal Banking.
Jim Blair – Snr Manager Toronto Region BNS
Graham Flanagan – Centre Manager Q& M
Agenda
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Dealing with student debt.
Incorporation of a business ( Accounting)
Negotiating employment contracts.
Incorporation of a business (Legal)
Buying vs Leasing a vehicle.
Financing a Real Estate purchase.
Other forms of financing.
Protection
Building for the future.
Helping you throughout your career.
Dealing with Student Debt
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Profile:
Maximum SPSP $48,000 ( 4x$12,000)
Pharmacy resident $10,000
OSAP average$36,000 (4x $9,000)
– Prime +1.5% Osap
– Prime +2.5% Federal
• Credit cards and undergrad debt.
Options
• Scotia Professional Plan- Prime +0.5%
• Term out of SPSP
– Less than $10,000 –5 years Prime +0.5%
– Over $10,000 – 10 years Prime +0.5%
• Retail Line of Credit to consolidate debtPrime 1.5% approx.
Costs of a Professional Corporation
• One time set up fees $4,000- $4,500
includes Legal Fees and Accounting /Tax
• Additional annual costs $1,500-$2,000
currently owned practice)
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Benefits of Professional Corporation
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Personal Tax 46.4%, PC 18.62% on 1st $250,000.
Tax deferral of $69M P.A. ($250M x46.41-18.62)
No corporate installments 1st year of a PC.
No personal tax installments.
Limited Liability.
$500M capital gains exemption (sale of shares).
$10M tax free death benefit.
Fund expansion for practice with 82c vs 54c after tax
dollars. E g building, equipment, renovations
Understanding a Professional Corporation
• The professional corporation operates the practice.
• Pharmacist owns PC.
• PC hires Pharmacist, pays salary and can pay
dividends.
• PC pays corporate taxes $250M @18.62%
• Pharmacist pays personal taxes on salaries and
dividends received from PC.
Who should incorporate their practice
• Taxable Income > $103M + $14.5M RRSP =
$117.5M.
• Pay off all significant personal debts (mortgage)
• Must be able to leave surplus profits in PC
• Will you be purchasing equipment, building etc.
LEGAL ISSUES FOR
PHARMACISTS
John McMillan, LL.B.
416 364 4771
johnmcmillan@bellnet.ca
RETAIL
Large Chains
Employment
“Associate Owner” (Shoppers Drug Mart)
Franchise
Employment Agreements largely uniform
POST-GRADUATION PATHS
Public Health (Hospitals etc.)
Collective Agreements (OPSEU / CUPE)
Private
Corporate (R&D, pharmaceutical sales,
regulatory)
Chains
Banner stores
Independent
Start-Up
RETAIL CONT…
Small Chains and Independents
Employment agreements may be informal
(verbal) or written
Be prepared for a wide range of scenarios
EMPLOYMENT
AGREEMENTS
Most common arrangement for new
graduates
Written agreements on the increase
Heavy competition between employers
Written Agreements instrumental in
communicating incentives to potential
employees
Written Agreement also used to secure certain
terms for the benefit of the employer
WRITTEN EMPLOYMENT
AGREEMENTS
Basic Elements:
Term
Job Description
Compensation, bonuses
Benefits
Hours and days of work
Restrictive Covenants
Vacation, sick days, parental leave
Termination
Assignment
WRITTEN EMPLOYMENT
AGREEMENTS CONT…
Benefits to Employee
Documentation of incentives
signing bonuses, milestone bonuses, benefits,
covered expenses (fees, licenses, continuing
education etc., moving expenses)
 Defines job description
Clarifies other terms and conditions
Vacations, sick days, parental benefits, hours
and days of work, compensation etc.
WRITTEN EMPLOYMENT
AGREEMENTS CONT…
Benefits to Employer
 Defines term of employment (“lock in”)
Defines job description
Termination provisions (including definition of
termination for “cause”)
Non-competition provisions
Re-location provisions
Clarifies other terms and conditions
Vacations, sick days, hours and days of work,
compensation, probation periods, termination
WRITTEN EMPLOYMENT
AGREEMENTS CONT…
Things to Watch For (Employees)
Milestone Bonuses
Bonuses may be payable by employer after
employee has been continuously employed for a
certain period of time (e.g. 2 years)
If employee terminates (or is terminated for
cause) prior to milestone, bonus may not be
paid.
WRITTEN EMPLOYMENT
AGREEMENTS CONT…
Things to watch for Cont….
Relocation Clause (Chain Stores)
Agreement may provide that employee agrees to
relocate to other locations, if required
Decide first if you are willing to relocate
If yes, negotiate for moving expenses and
moving bonus, in advance
Also negotiate that relocation must be on
sufficient notice (120 days minimum)
WRITTEN EMPLOYMENT
AGREEMENTS CONT…
Things to watch for Cont….
Fixed term agreements
Protections contained in Employment
Standards Act and the common law principle of
“reasonable notice” do not apply if there is clear
and explicit language to establish a fixed term
contract (Ontario Court of Appeal)
Note: Employment without written agreement
governed by Employment Standards Act and
common law
 Prescribes notice periods for termination
WRITTEN EMPLOYMENT
AGREEMENTS CONT…
 Things to watch for Cont….
 Independent Contractor Provision
 May not be employment
 Example: “The parties hereby acknowledge and agree that
the relationship between them is not an employment
relationship….[The pharmacist] agrees that s/he shall be
responsible for and will remit to all relevant government
authorities all taxes, CPP etc.”
 May prevent (or hinder) wrongful dismissal claim under
Employment Standards Act (but, if relationship displays
“hallmarks” of employment, tribunal or court may find
find employment relationship to exist)
OTHER ARRANGEMENTS
 “Associate Owners” (Shoppers Drug Mart)
 Qualify after 2 years pharmacy experience
 Licensing of retail operation to “Associate Owner”
pharmacist (also “designated manager” under DPRA)
 Associate Owner, through wholly-owned corporation,
enters into licensing agreement with wholly owned
subsidiary of SDM
 Licensing Agreement requires Owner Associate to
devote full time and attention to the operation and
management of the location
 Owner Associate receives base income, plus profit
sharing (site-specific)
 SDM receives “service fee” from Owner Associate
INCORPORATION
Why?
To enable shareholders (pharmacists) to gain
tax relief
Trade creditor protection (but not protection
from professional liability or accountability to
the College)
INCORPORATION CONT…
When?
Tax driven consideration
Consult your accountant
INCORPORATION CONT…
 Compliant Ownership
Structure (Regular
Corporation)
 51% (or more) held directly
by pharmacist or by “J.
Smith Pharmacist
Professional Corporation”
 49% (or less) held by nonpharmacist, family member
or holding company
 Non-Compliant
Ownership Structure
(Regular Corporation)
 51% held by #’ed
corporation wholly
owned by pharmacist
 49% held by nonpharmacist, family
member or holding
company
INCORPORATION CONT…
Why Not?
Advantages may be limited
Pharmacists already permitted to operate under
regular corporation, with ownership of 51% of
shares by pharmacist
Consult your accountant
May not perfectly fit with “Associate Owner”
program (Shoppers Drugs), as activities of the
corporation would include non-pharmacy retail
Revenue streams may need to be split (consult your
accountant)
INCORPORATION CONT…
Why Not? Cont…
If operating through professional corporation,
but not a pharmacy owner, you may be
deemed to be an employee by the Canada
Revenue Agency
Employer (pharmacy) would then have to
deduct tax at source and issue T4 (tax benefits
could be lost)
Leasing (How to ensure the rate
you are paying)
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Know the cash price of the vehicle.
How much are the payments, & how many.
What is the Purchase option.
Is the lease rate fixed or floating.
Simple interest vs compound interest.
Obtain one or two quotes.
Tax benefits of Leases
• No tax advantages in leasing vs buying
• Assets acquired must depreciate faster than
the assigned CCA rate (Computers &
Leaseholds).
• Professional Business must be profitable.
• The Lease structure meets the CRCA
requirements.
Leases V Term Loan
• $40,000 Car Lease
• 4 years to a 35% option
• Lease expenses 65% of
Lease payments (35%
purchase option)
• 65% of $40,000 =
• Total
$26,000
• Purchase opt $14,000
• Payments
$550 p m.
• Restriction 20M KLM
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$40,000 Car Loan
4 years, depreciation 25%
Yr 1@ 12.5% = $ 5,000
Yr 2@ 25 % = $10,000
Yr 3@ 25 % = $10,000
Yr 4@ 25% = $10,000
Total
= $35,000
Fully paid for.
Payments $833.33 + interest.
Mortgages
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Application requirements
CMHC
1st time Homebuyers
Mortgage products
Closing costs
New construction vs Resale homes.
Other Credit Products
• Scotialine & Scotialine Visa
• Visa
– Value
– Classic
– Gold
Darren Farwell, Director, Senior
Investment Advisor
&
Leslie McCormick, Investment
Executive
Planning for the Future
“Living With A Surplus”
Three Cornerstones of Financial
Management for Professionals
 Protect Yourself and Your Family
 Protect Your Practice
 Save for Tomorrow
Protect Yourself
 Life Insurance
 Term
Cost
Term
 Whole Life
 Universal Life
Permanent
(WL & UL)
Age
Protect Yourself
 Disability Insurance
 What is the Definition!!
Protect Your Practice
 Professional Liability Insurance
Build for Tomorrow
Your Personal Savings Pyramid
Insurance
RRSP
RESP
Downpayment for a New Home
High Cost Debt, (Reduce the highest cost debt first)
Mortgage Prepayment, (particularly at today’s rates)
Investment Accounts
** Of course, the specific order for your personal circumstances is a function of
your lifestyle and objectives and therefore should be considered on an individual
basis with professional advice
Build for Tomorrow
$585,978
• Start Saving Early
$348,256
$204,060
Start at age 40
(25 years invested)
Start at age 35
(30 years invested)
Start at age 30
(35 years invested)
Investing $5.00 a day at 10% growth per year until age 65
Build for Tomorrow
• Invest for Long-Term Growth, (if you can
handle the bumps along the way sometimes they are big bumps). Say you
had $100,000 to invest,
R.O.R.%
15 years
20 years
25 years
6
8
10
239,655
317,217
417,725
320,713
466,096
672,750
429,187
684,848
1,083,471
Build for Tomorrow
• “If You Don’t Know Where You’re
Going, You’ll End Up Somewhere
Else”
Yogi Berra
Building Relationships for Life
History of Scotiabank’s involvement in your
Profession
• Tenure in the Professional field ( 13 years)
– We are not about to buy market share.
• Meeting future needs for Students and Professionals.
– Focus Groups
– Customers Expectations
• Team of Experts ( Queen & McCaul)
• Heart surgery vs General Practitioner
• Accessibility
– Association Endorsement
– Specialty Classification for Professionals
My Role
• Conduit to the health care profession.
• Keeping abreast of changes in your industry i.e.
incorporation, P.I.PE.D.A. tax issues etc.
• Provide Guidance Throughout your career
– Introductions to industry experts i.e. C.A’s, Lawyers, Insurance
Experts and Brokers.
– Advising which “Centre of Influence” will be best suited to your
needs:
– Location, Profession, Complexity
My Role (cont’d)
• Support Continuing Education:
– University Involvement.
– Professional Faculty
• Training & Development of “Centre of Influence”.
to meet the ever changing industry and meet your future
expectations of a financial institutions.
Any Questions
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