- There are many issues that affect a business owner that can require the advice of a professional financial planner:
- If you are starting to make a good amount of income and you are a sole proprietor - if you are currently maxing out your TFSA and RRSP it can be a good idea to create a corporation. This allows you to pay a much LOWER TAX RATE and invest the money inside the corporation. It can then grow over time and be used for other things.
- If you are starting to make a good amount of income and you are already incorporated - a HOLDING COMPANY can be appropriate in this situation as it removes the assets from the operating company and can be a good form of creditor protection. You can then invest the money in the holding company and put it to other uses for diversification. Long term, the holding company can also be used for retirement purposes.
- Are you better off taking SALARY or DIVIDENDS from your corporation? If you take out dividends you can avoid paying into the Canada Pension Plan. However, when you get to retirement age you will not get the pension from it. These points have to be weighed against each other and it generally depends on where you are in your career.
- Can I SPLIT INCOME with my partner - if they work in the business then this is possible. It is not possible to pay your partner a salary, or even your children if applicable, if they are not actively working in the business.
Please contact Merrick Financial Inc. and we can help you with overall financial planning for your business or if you have specific issues you want to address.