By Lawton Partners Wealth Management - Laurianne Osmak, CLU, CHS Financial Planner

Build Something Great

Investing as a Business Owner

Jun 11, 2019 | 5:48 PM

Many business owners have built up earnings in their business and are looking for tax efficient ways to pull the earnings out to achieve their personal and business financial goals such as building and protecting your savings while providing for loved ones and planning for retirement.

Factors a business owner should consider when investing as a corporation:

What’s the purpose of the investment? First, think about what you’ll be doing with your savings. This will help dictate what savings vehicle is best suited for your situation. Then consider the following factors:

Taxes: As a small business owner, you have access to the small business tax rate which is typically lower than your personal tax rate. Also, as of January 1, 2019, the Federal Budget decreased the small business limit for corporations with a set threshold of income generated from passive investments. Saskatchewan’s corporate general income tax rate is 12% and the small business corporate income tax rate is 2% with a $600,000.00 business limit. (see link for other jurisdictions)

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https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/corporation-tax-rates.html

Taxes on investment growth: Depending on what you invest in, you will want to review this as different asset types are taxed at different rates.

Timing: You can control the timing of the payout which means you could potentially defer paying out the money until you need it and determine if you’d like to pay it out as salary or dividend.

Creditor Protection: Sometimes, investments held inside a corporation can be vulnerable to creditors, therefore you may want to consider using a holding company or trust or pay out money to yourself personally. This can be complex and requires professional advice.

Capital Gains Exemption: If your investment grows too large, it may endanger your qualification for the lifetime capital gains exemption that ‘s available when shares of a qualified small business corporation are sold or transferred.

For business owners, before investing personally or corporately, it’s certainly worth speaking with your tax professional to ensure that it suits your individual circumstances.

For more information contact Lawton Partners 306-922-2020

https://patweir.ca/

Presented by Lawton Partners – Darcie Doell & Laurianne Osmak, CLU, CHS Financial Planner