Author Topic: Investing within a corp  (Read 2157 times)

requiredwhen

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Investing within a corp
« on: November 07, 2019, 07:04:42 PM »
For the last 3 years I have been growing an E-comm business selling products on Amazon. The time has come to cash out and I'm looking at a 1.6 million CAD payday. This is an asset sale, not a sale of the corporation.

I won't be starting a new Amazon business (WAY to stressful). I also own a farm (sole prop) where I live off grid in a cabin with my girlfriend. I'm planning to focus my time here and puttering around in "retirement".

I'm wondering, how should I structure the investment of the asset sale funds that are in the corp and then get the interest out to my personal account?

I'd like to purchase some equipment for the farm as well (about $75,000 worth). Is there a way to buy it through the corp?

Any advice or resources would be appreciated. I do plan to talk to my accountant and financial advisor. I'd like to go there with some general understanding of my options first.

Thanks


Sisko

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Re: Investing within a corp
« Reply #1 on: November 08, 2019, 01:48:19 AM »
Congratulations!

For the investing part - you can DIY invest in your corporation. I use Questrade in my corporation, it was easy enough to setup. Canadian equities are fairly tax efficient when invested in a corporation (something like VCN).

To get money out of the corporation - you'll want to pay yourself dividends spread out over many years. Make sure to use up your lower tax brackets every year.

You'll definitely want a accountant, the taxes involved in investing in a corporation are much more complicated than doing it personally. Hopefully your accountant has dealt with similar situations before (for example, retired doctors with a stack of cash in their corporation)

As for the financial adviser... I stay as far away from them as possible. I suppose one benefit could be if they understand which investments work better in the corporation and which work better in your personal accounts - for a slight tax advantage. But... the benefit of this would still be way less than their fees, and most financial advisers wouldn't do it correctly anyways.

One resource that I like that deals with investing money in Canadian corporations is looniedoctor.ca. For example https://www.looniedoctor.ca/2018/07/27/professional-incorporation-benefit/

Mighty Eyebrows

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Re: Investing within a corp
« Reply #2 on: November 09, 2019, 01:08:52 AM »
To get money out of the corporation - you'll want to pay yourself dividends spread out over many years. Make sure to use up your lower tax brackets every year.

I agree, this is the right approach. However, there may be a capital gain from the sale of operating assets. In that case there may be a tax-free "capital dividend" available as well.

You'll definitely want a accountant, the taxes involved in investing in a corporation are much more complicated than doing it personally. Hopefully your accountant has dealt with similar situations before (for example, retired doctors with a stack of cash in their corporation)

Yes, definitely get a good accountant. Many small businesses become holding (investment) companies when the owner(s) approach retirement. Any decent corporate accountant should have seen situations like yours before.

As for using the company to invest in your farm, it might work if you can justify the farm as a part of your incorporated business, and have some expectation of profit. CRA may examine how much "personal" use is made of company assets.

Missy B

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Re: Investing within a corp
« Reply #3 on: November 10, 2019, 12:51:10 PM »
Congratulations!

For the investing part - you can DIY invest in your corporation. I use Questrade in my corporation, it was easy enough to setup. Canadian equities are fairly tax efficient when invested in a corporation (something like VCN).

To get money out of the corporation - you'll want to pay yourself dividends spread out over many years. Make sure to use up your lower tax brackets every year.

You'll definitely want a accountant, the taxes involved in investing in a corporation are much more complicated than doing it personally. Hopefully your accountant has dealt with similar situations before (for example, retired doctors with a stack of cash in their corporation)

As for the financial adviser... I stay as far away from them as possible. I suppose one benefit could be if they understand which investments work better in the corporation and which work better in your personal accounts - for a slight tax advantage. But... the benefit of this would still be way less than their fees, and most financial advisers wouldn't do it correctly anyways.

One resource that I like that deals with investing money in Canadian corporations is looniedoctor.ca. For example https://www.looniedoctor.ca/2018/07/27/professional-incorporation-benefit/

This is an awesome resource, thanks for posting it.