Structuring your Corporation part 2

Here’s the second part of my blog series on “Structuring your Corporation.”

Another note here on splitting the profits from a corporation between spouses is to give both spouses different classes of shares, for example one spouse could have class A shares and the other could have class B shares.  This allows for different amounts of dividends allowed for distribution between spouses for tax planning effectiveness.  If both spouses have the same class of shares, they have to take the same amount of dividends.  It is always advantageous in tax planning for 2 spouses to be able to have control on how much income they receive, and using different classes of shares allows you full control as to “who gets how much income” when it comes to dividends!

This of course differs from multiple people, who are not married, partnering in a corporation.  In the case of an actual partnership with other shareholders you may want to have the same class of shares so that each partner gets the same amount of dividends as they are declared!  Here is also where other classes of shares may come in.  As mentioned there are various classes of shares that can be issued from a corporation so planning is essential.  Don’t do this on your own, or go to a registry agent to structure your corporation, seek professional help.  Kustom Design can assist you in getting your footing when it comes to structuring and we can then further assist you in working with the right legal professionals to finalize and implement the best structure for you!

If you are in a corporation that has multiple shareholders partnering, you definitely want to consider having a Unanimous Shareholder Agreement (U.S.A.) drawn up by a lawyer.  Partnerships have to be given a lot of consideration and must have agreement from day 1 when the structure is formed.  It is best to spell everything out in writing through a contract, and to consider potential outcomes such as death of partner, one partner becoming unable to work, one partner buying out the other partner, and so forth. 

Please check back to read part 3 of this blog series.