If you came to this page, then you probably have or are considering starting a private corporation to house some of your employment or active income. This can be a great strategy when set up correctly to help deal with some of the tax burden you may be facing. We have a passion for helping small business and corporations make the most of their unique tax and legal structures.
Legal Structure and Shareholders
One of the most important considerations for those who own a private corporation is the legal and share structure that you choose. While not impossible to change later, it can be expensive and time consuming if your company has grown substantially over the years.
We are not lawyers, but we can help to identify a few potential areas of concern, especially if your family circumstances have changed. If you have children who will be the ultimate beneficiaries of the corporate assets and they are not listed as shareholders, it may be time to book an appointment with a lawyer to review if changing the share structure makes sense for your family. If you don’t know where to begin, we can help point you in the right direction.
Consider a few things when establishing your corporation:
Who will be the ultimate beneficiary of the assets contained within?
How much money will I require and when will I require money from the corporation?
How easily do I want to be able to add potential shareholders?
Taxes on income earned inside of corporations differs greatly. In order of least to most taxed, here is a list of typical income earning in corporations:
Canadian Sourced Dividends
Investing in Corporations
If you find yourself taking most of the retained earnings out of your corporation, only to invest that money personally, you may find this section informative.
Many of the corporations we work with see their retained earnings as a major component of their retirement plan. There are many ways that investing inside of a corporation can be advantageous to investing personally. Perhaps one of the biggest advantages being the tax-preferential way that operating income is taxed: If you made $300,000 as an individual doing your regular occupation you would be taxed significantly more than if you made that same income in a corporation. This is the reason that many people establish corporations, but it doesn’t need to stop there.
Given the complex nature of tax on investments inside of a corporation, careful planning is required. If you plan on holding only interest-bearing investments inside of your corporation (such as Bonds or GICs) it may not be as beneficial to keep money inside of your corporation for investment purposes.
It is important to ensure that the types of income you make inside of your corporation do no end up hurting your investment portfolio as a result of taxation. It is also important to incorporate the investments inside of your corporate accounts with your entire investment portfolio to ensure that you are making the most of all of your assets.
Insurance and Corporations
With so many opportunities and added levels of complications, insurance inside of a corporation is a necessity. Rather than reflect on the tax and risk mitigation effects of insurance, here is a list of insurance that many of our corporations, big and small, have used to enhance their corporate assets:
Each of these insurances covers a specific risk, and helps to protect the assets of the corporation for you and the ones who will be the ultimate beneficiaries of the business. If you are not familiar with these insurances, please contact our office for more information on how they could be beneficial.
Consider the way you are using your corporation and the assets that are inside of your corporation. If you feel like you could be doing better, call (403) 220-9808 and we can set up a time to review your corporation and the assets it holds. Feel free to email any questions and we will get back to your inquiry within 24 hours.