Ontario corporation owners
Keep more of what the business earns.
Protect the people it runs on.
There is a better place for retained earnings than sitting in the account: still inside the corporation, growing tax-deferred, and passing to your family without the bill. And there is a way to keep the business running through the months a key person is out.
Licensed across Canada. What to expect
Two things that can quietly work against a corporation.
The money that sits, and the people it all runs on. Neither shows up on an invoice, which is why they often go unnoticed. Below, each one plays out over a single year, one point at a time. Here is what is coming.
Retained earnings, taxed three times before they reach you
$100,000 of profit, left in the corporation and put into stocks. Four points, then the alternative. Every year it sits, the cost repeats.
The year was good. The accountant said leave it in.
$100,000 of profit is taxed at 11.2% on the way in. $88,800 stays in the corporation. Sensible. It's why you incorporated.
It goes into stocks, inside the corporation.
Say the $88,800 returns 6% a year: $5,328, as 2% in dividends and 4% in realized gains. Inside a corporation the dividends are taxed at 38.33% and the gains at 25.09%. About $1,572 in tax, so the corporation keeps $3,756. Most of that tax is refundable, but only when the corporation pays you a taxable dividend, which is then taxed in your hands. Until then it is gone. The same thing happens every year it sits.
Do that every year for ten years, and there's about $1M in stocks inside the corporation.
Leave $88,800 in every year, growing at that after-tax rate, and after ten years it is about $1M. At the same 6% that is about $60,000 a year of investment income. The 11.2% rate on the first $500,000 of business profit is the small business deduction, and the federal rules tie it to passive income. For every $1 over $50,000, $5 of that $500,000 limit goes. Here that is $10,000 over, so $50,000 of business profit loses the federal small business rate: about $3,000 more this year. Ontario keeps its own low rate. At $150,000 of passive income the whole federal limit is gone, and that is up to $30,000 a year in extra tax.
Then one year you need some of it out.
Take the original $88,800 out as a dividend at the top bracket, 47.74%, and $46,400 arrives. The same $100,000: taxed on the way in, on what the stocks earned, and on the way out. Every step and every source is on one page.
The Alternative
There is a place inside the corporation where none of that happens.
- Grows Without Annual Tax. What the corporation paid about 50% on every year, it pays no annual tax on.
- Never Passive Income. It does not count toward the $50,000 line. The small business rate stays.
- Leaves Tax-Free Through The CDA. The death benefit above the policy's cost basis credits the capital dividend account, paid out tax-free.
Corporate-owned participating whole life. A dividend paid every year for more than a century. Every year it sits in the account instead is a year of tax that does not come back.
The month the business has to run without its owner
What can happen the month an owner or a key person can't work. Four points, then the alternative. Most owners find out which version they have after the diagnosis.
The stroke, the heart attack, the diagnosis. Most people come through it now.
A generation ago the exposure was a funeral and a cheque. Now it's an owner who is alive, will probably recover, and is not coming to the yard for a while.
A while turns out to be most of a year.
Eight months is the median time to a full return to work after cancer, across studies and occupations, and fewer than half get all the way back. Someone who has to be on site at six takes longer.
EI pays an owner nothing, unless they opted in a year ahead.
An employee in the same bed would get up to $18,954 over 26 weeks. Anyone who controls more than 40% of the voting shares is not insurable. An owner can register for EI special benefits on their own, wait twelve months, and then draw at most $729 a week. Most never do, and the ones who did are covering a week of payroll with $729.
Friday still comes.
Payroll goes out. So do the lease, the equipment payments and the loan on a personal guarantee. None of them know the owner is in a hospital bed. And the customers who only dealt with the owner start dealing with somebody else.
The Alternative
The other version: the money arrives in a month, and the business keeps running.
- Payroll Goes Out. So do the lease and the payments on your guarantee.
- Someone Sits In The Seat. Interim management, paid for, while you recover.
- Money Back If You Never Claim. Return-of-premium options return the premiums paid, on the rider's terms.
Corporate-owned critical illness on you. Key person coverage on the people it can't run without. It is underwritten on the health you have today, not the health you have later.
From the outside they look nothing alike. From the inside it's the same two questions.
What to do with the money that sits, and what happens to the people it all runs on. Where those questions show up depends on what you do all day, so each of these is written for the day you actually have.
Run something that isn't on this list? Tell us what you do. If we can help, we'll say so. If we can't, we'll say that too. Start with the review →
One review of your corporation. Four things it answers.
Not a brochure. Your answers, run against the numbers on your corporation, and walked through with you. The summary is yours to hand to your accountant.
Built for owners who take the long view: the tax this year, the people who depend on the business, and what it leaves behind.
No obligation. Licensed across Canada. If nothing fits, we say so.
- Your passive income positionWhere you sit against the $50,000 line, counted the way the CRA counts it: interest in full, half of capital gains, dividends in full.
- What the current structure costsThe tax on what it earns, what the small business limit grind takes, and what comes out on the way to you.
- What would change itWhether corporate-owned whole life fits, whether an IFA fits, and the funding level that keeps the policy exempt. Or neither, if that's the honest answer.
- Your protection gapWhat six months without you would cost the corporation, and what corporate-owned coverage on you and your key people looks like.