Incorporated Business and Investment Tax Primer

Synopsis

Canada’s tax regime for small to medium size enterprises makes Canadian-Controlled Private Corporations an extremely attractive life cycle planning and investment vehicle for incorporated professionals and private business owners.

In addition to this primer, NexGen Financial offers a comprehensive set of strategies for financial advisors to use with their clients to get the most from the complex tax rules that govern the investment and distribution of incorporated assets. 

• Holding Companies are important vehicles for:  
  • building a larger, tax-deferred investment portfolio with surplus funds from the business; 
  • “creditor-proofing” assets; and
  • family income and intergenerational planning.
• Active Business Income (ABI) of a corporation, up to the Small Business Limit ($400,000 in 2008), is taxed at rates that are 25% (+ or –) lower than top personal tax rates. 
• Even ABI subject to the higher general corporate tax rate is more lightly taxed than the highest personal tax rates.
• Special treatment of dividends from private companies is an integral part of the tax integration formula.

• To achieve higher wealth accumulation, invest low-taxed corporate income within the corporate structure.
• Use a Holding Company as a portfolio investment vehicle and to achieve asset protection and intergenerational planning objectives.

Determining the tax consequences of investment and distribution planning within a corporate structure is a beneficial but complex undertaking.  See your professional advisor.

Should I Incorporate?