Setting up a holding company can be a great way to save on taxes, creditor-proof your assets, and split income with family members. For Canadian business owners, the decision to set up a holding company should not be made lightly, as there are also potential drawbacks associated with this strategy. This post will talk about what a holding company is and how it helps business owners save money on taxes.
Canada Tax Consultants can help with this, contact us to book a free consultation call and get started today.
So What Is A Holding Company?
Business owners create a holding company to hold all the shares of the original operating company. Typically, when setting up a holding company, they transfer valuable assets, like cash or marketable securities, from their existing business into their new corporation before any dividends are paid out. This allows them to protect these assets from creditors or potential lawsuits, as the new holding company won’t be targeted by legal claims.
You Want Your Assets Creditor-Proof. But What Does That Mean?
In simple terms, creditor-proofing means protecting your valuable business assets from debt collectors and lawsuits. To accomplish creditor-proofing, your business should regularly pay a tax-free dividend to a holding company. By transferring your assets out of your business, you’ve protected it from creditors.
How To Give A Family Member Some Income With Your Holding Company:
By transferring shares of your corporation into the names of other family members, they become shareholders and can receive dividends paid out by the corporation. This strategy can help reduce taxes in certain cases since dividend income is taxed at a lower rate than regular income.
To Set This Up, Chat With An Accounting Expert.
In order to fully realize the tax benefits of setting up a holding company, it’s important that business owners consult with their accountant or financial advisor. With the accountants at ACM CPA, we ensure you use all the available deductions and credits offered by the government. We pride ourselves on providing our clients with the best advice and direction on maximizing their tax savings. Contact us today for a free consultation and start reaping all the benefits of setting up a holding company.
