Construction and trades
You keep the money in the company for bonding. The company pays for that every year.
Your bonding company looks at the balance sheet and at you. So retained earnings stay in, and get taxed on what they earn while they sit. Meanwhile the estimator, the site super and you are the whole bid.
Licensed across Canada. What to expect
Retained earnings that support your bonding line are still passive income to the CRA.
Contractors hold cash and working capital because the bonding company wants to see it. Inside the corporation that money earns interest, and the interest is taxed at about 50%. Past $50,000 a year of it, every dollar over strips five dollars of small business limit, up to $30,000 a year in extra tax.
A corporate-owned participating whole life policy is an asset on the balance sheet with a cash value that grows tax-deferred and does not count toward the line. For contractors with steady cash flow, an immediate financing arrangement keeps the capital deployed in the business while the policy builds.
See what leaving it there costs each year, on your own numbers.
An asset the bonding company can see
Guaranteed cash values and a guaranteed death benefit sit on the balance sheet as an asset, not a loss carried forward.
Not counted toward the line
Growth inside the policy is not passive income. The small business rate stays where it is.
Holdbacks and timing
Cash value can be borrowed against when a holdback is slow, without selling anything or triggering tax.
The bonding company asks who runs it if something happens to you. Most owners have never answered.
A bid is priced by one person, run by another, and backed by your signature. Bonding capacity is tied to continuity: the bonding company, the bank and the general contractor all want to know the job finishes. Eighty percent of people survive a stroke. The question is who is on site at six the next morning.
Corporate-owned critical illness pays the corporation a tax-free lump sum on diagnosis. Key person coverage on the estimator or the site super funds the search and the ramp. Both are answers with a number on them, which is what the bonding company is actually asking for.
The seat
If you are out for six months, who signs, who prices, who deals with the GC? Nine in ten owners have no written answer.
Covered by a lump sum that pays for interim managementThe guarantee
Equipment finance, the yard, the line of credit. Most of it carries your personal guarantee.
Covered by a benefit that services the debtThe partner
Two owners, one diagnosis, and a shareholder agreement with no money behind it.
Covered by a funded buy-sell
