Investing for Business Owners

Many business owners have built up earnings in their corporation 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

  • providing for loved ones

  • planning for retirement

Factors to 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. (See table below.) 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.

  • 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.

Source: https://www.taxtips.ca/smallbusiness/corporatetax/corporate-tax-rates-2019.htm

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

Financial Planning for business owners is often two-sided:

Personal and Business Financial Planning.

Business owners have access to a lot of financial tools that employees don’t have access to; this is a great advantage, however it can be overwhelming too. A financial plan can relieve this.

A financial plan looks at where you are today and where you want to go. It determines your short, medium and long term financial goals and how you can reach them. For you, personally and for your business.

  • Why do you need a Financial Plan?
  • Worry less about money and gain control.
  • Organize your finances.
  • Prioritize your goals.
  • Focus on the big picture.
  • Save money to reach your goals.

Business owners – Personal and Business finances are connected

What does a Financial Plan for a Business include?

There are 2 main sides your business financial plan should address: Growth and Preservation

Growth:

  • Cash Management- Managing Cash & Debt
  • Tax Planning- Finding tax efficiencies
  • Retaining & Attracting Key Talent

Preservation:

  • Investment- either back into the business or outside of the business
  • Insurance Planning/Risk Management
  • Succession/Exit Planning
  • What does a Personal Financial Plan include?

What does a Financial Plan for a Personal side include?

There are 2 main sides your financial plan should address: Accumulation and Protection

Accumulation:

  • Cash Management – Savings and Debt
  • Tax Planning
  • Investments

Protection:

  • Insurance Planning
  • Health Insurance
  • Estate Planning

Talk to us for your Business Investing Needs