Small Business: The Key to Canada’s Prosperity

By Louis J. Sapi, CPA, CA, MBA

If one studies failed societies around the world, the key common factor for their collapse would be a failed economy. If one then studies the failed economy, the key common factor would, in turn, be the absence of a robust entrepreneurial small business sector. It is high time that our society recognize the critical importance that small business (a company employing up to 50 people) and the families that own and operate them play in our economy. We need to help this sector help us. To do so, we must rst recognize that there are far too many archaic and painfully foolish policies hindering this key economic engine of our society.

We need to initiate a new thought process regarding how families who run small businesses are viewed and treated by society and all levels of government. We all know that general business and tax policies are used to motivate economic sectors as well as ensure the government generates enough revenues to carry out its socio-economic mandates. As an experienced Chartered Accountant helping small businesses for over 25 years, I have gained insights into what the small business sector really needs and thus what Canada needs. I do not simply accept typical regulation and laws without rst asking “why” and then challenging the status quo. In my view, many of these policies are misguided when applied to families who run small businesses. There is a very serious disconnect in the Government’s understanding and appreciation of the small business sector. This disconnect manifests itself in the way certain laws and tax policies are set at the same level for all businesses, irrespective of size and substance. With respect to my “disconnection premise” rst let me explain who the small independent businesses are. In the vast majority of cases, small businesses are made up of Entrepreneurial Families (EFs) that have taken on the opportunities, threats, and obligations that come with running a small business. These EFs create the bulk of employment in our economy – some statistics suggest up to 80%! These are the people that Canada must nurture and embrace to assist their courage and fortitude as oppose to hinder it with poorly thought out policies. It is my belief that we need to educate the various government bureaucracies, who when dealing with EFs must understand they are dealing

with people and not just a business, and that their policies need to recognize the difference between the two. It is irrelevant that EFs run a business through an incorporated entity. These people and their families deserve the same protection under the Charter of Rights as any individual and should not be expected to share the same legal burdens as large corporations.

Our governments have been xated on worker rights over the last 50 years, so now is the time to focus on the rights of entrepreneurial families.
CEOs and the presidents of big companies do not have anywhere near the number of personal obligations facing EFs, because almost all laws, be they labor laws or taxation policy do not differentiate between a business like General Motors and a small family owned retailer or manufacturer. What are the effects of these laws? CEOs of big businesses do not have their personal homes as collateral on the business operating line. They (and by default, their families) do not have the direct and personal liability to labor costs like unpaid vacation, payroll, or the payroll taxes that EFs have. Corporate HST is also a personal responsibility to EFs but not big business CEOs since their companies are large enough to indemnify them from personal liability. These same CEOs also have more exibility through much greater resources and uid capital to deal with challenges of the business that may result in civil liability. They can afford Directors & Of cers, or Errors & Omissions insurance, whereas many EFs cannot. Unlike big business CEOs, the numerous challenges faced by EFs directly affect their families.

Because size does not matter to the government, the legal and tax obligations thrust upon the EFs effectively create a signi cant social injustice. This injustice is the result of disproportionate burdens and risks being placed upon EFs, which ultimately hinders Canada’s single largest economic engine.

Entrepreneurial Families are not only being taken for granted, but are also being abused. This is evidenced by the irrationality of WSIB policy toward EFs, the biased inequity in the way payroll taxes are structured, the injustice and, quite frankly, the discrimination against EFs that our labour laws propagate. Income taxation policy also needs to change to effectively motivate EF small businesses to create more wealth and employment.