The Canadian Tax Law Shocks Dave Ramsey

Summary

A business owner discusses the challenges of managing two restaurants, one of which is a quick-service Smash Burger establishment and the other a full-service diner. Despite generating $4 million in revenue, he’s exhausted from working 65-hour weeks for over two decades. He considers selling one of the restaurants to pay off his mortgage and gain more time with his family, but Canadian capital gains taxes make this option less appealing. The conversation shifts to hiring a high-end general manager to manage operations, giving the owner the freedom he craves without losing too much profit.

Takeaways

• 😀 The business owner runs two restaurants, one being a Smash Burger QSR, and the other a full-service dining restaurant.
• 😀 The owner has been working 65 hours per week for 22 years, managing stress and pressures from running small businesses.
• 😀 The total revenue from both restaurants is approximately $4 million.
• 😀 The business owner is considering selling one of the restaurants to spend more time with family or continuing to work hard to pay off his mortgage.
• 😀 Selling one restaurant could help pay off the personal mortgage but would require finding a second career to supplement income.
• 😀 The capital gains tax in Canada is 66%, which significantly reduces the financial gain from selling a restaurant.
• 😀 The high capital gains tax is seen as a deterrent for selling the restaurant as it feels like giving away a substantial portion of the profits.
• 😀 The business owner is exploring the idea of hiring a top-end manager to take over the restaurant's operations.
• 😀 Hiring a general manager could give the business owner back his personal life without selling the business.
• 😀 The advisor suggests offering a compensation package with a base salary plus a percentage of profits, giving the manager a sense of ownership without actual ownership.
• 😀 The conversation includes humor about the high taxes in Canada and the business owner's frustration with them.
• 😀 The business owner expresses a strong emotional reaction to the 66% capital gains tax, which greatly influences his decision-making.

Q & A

What are the two types of restaurants owned by the speaker?

The speaker owns two restaurants: a quick-service restaurant (QSR) called Smash Burger, which has been open for about a year and a half, and a full-service dining restaurant that has been in business for 22 years.

What is the main challenge the speaker is facing with their business?

The speaker is dealing with burnout from working long hours, approximately 65 hours a week for the past 22 years, while managing two restaurants. They are also struggling with the stress and pressures that come with owning small businesses.

How much revenue do the speaker's restaurants generate together?

The combined revenue from both restaurants is about $4 million.

What option is the speaker considering to alleviate their workload?

The speaker is considering selling one of the restaurants to gain more time with their family or keeping both businesses and working for the next five years to pay off their personal mortgage.

How does the speaker feel about selling one of the restaurants?

The speaker seems conflicted about selling the restaurant due to the high capital gains tax in Canada, which would take away a large portion of the proceeds. They are also considering the impact of having to find a second career to maintain income after selling.

What is the capital gains tax rate in Canada, according to the speaker?

The capital gains tax rate in Canada is 66%, meaning that if the speaker made $100,000 from selling a business, the government would take $66,000.

Why does the speaker find the Canadian capital gains tax frustrating?

The speaker finds the high capital gains tax frustrating because it significantly reduces the financial benefit of selling the business, essentially taking away most of the money they would receive from the sale.

What solution is suggested to help alleviate the speaker's workload without selling a restaurant?

The suggested solution is to hire a top-end general manager who could take on many responsibilities, thus reducing the speaker's workload and giving them more time for their family while still maintaining ownership of the restaurants.

What compensation model is recommended for the general manager?

The recommended compensation model for the general manager is a base salary plus a percentage of the restaurant's profits. This structure gives the manager a sense of ownership in the business without actually granting them ownership.

How does the speaker react to the idea of hiring a manager?

The speaker seems open to the idea of hiring a general manager, acknowledging that it's a good solution to alleviate their workload, but they also express that it's challenging to find the right person for such a demanding role.