Maximizing the use of your corporation Part 2

Here is part 2 of our blog series, “Maximizing the use of your corporation.” This part is about the strategies you can use to minimize taxes in your passive income.

Passive income is taxed much higher in a corporation than active income, so strategy and planning is key to minimize taxes in passive income investing through corporations.  Some examples of strategies that can be used in your plan include:

1.      Using Trusts (See my blogs on Trusts for many options and benefits)

2.      Having a Consulting Corporation that you work for and consulting with the investment/passive income corporation.  Here your Consulting Corporation bills (active income) the Investment income corporation, thus lowering the passive income and raising the active income.

3.      Using Capital Dividends.  These are Dividends based on the 50% of Capital Gains in a corporation that is not taxable.  Not only is the 50% of the Capital Gain not taxed in the corporation, the Capital Dividends are also not taxable in the recipient’s hands.

4.      Creating enough work from your Passive income corporation to have multiple people working for you.  Best off to have at least 6 full time people(As per prior precedent setting court cases), or get a ruling from CRA.

You are probably by now beginning to see that there are so many options available to you in your planning, structuring and implementation of your corporate structure.  The use of Holding Companies, Trusts and other entities in your structure can be very effective in maximizing your corporation.  There are ways to limit types of income to more favorable types of income, change the type of income you are receiving or distributing, flow capital gains through to beneficiaries (trusts), minimize tax on active and passive income, make tax on capital gains zero and much, much more!  Yes, you heard me right!  Email me if you have a question!