Struggling with high taxes or protecting your business assets? A Canadian holding company can help. It offers tax savings, asset protection, and smoother business transitions. This page shares the key benefits of setting up a holding company in Canada.
Key Takeaways
- A Canadian holding company can reduce taxes. It allows tax-free intercorporate dividends if it owns more than 10% of another business.
- Asset protection is a big benefit. Moving funds to the holding company shields them from creditors and risks.
- This setup helps with family business transfers and saves on estate taxes. It also supports better wealth management using trusts.
- You can reinvest earnings without paying personal tax right away, keeping up to 45% more capital in the company.
- Separating assets like real estate simplifies selling a business and lowers risks for buyers and sellers alike.
What Is a Holding Company?
A holding company owns and manages assets, investments, or shares in other businesses. It does not sell products or services but earns passive income from these holdings.
It can own various assets like real estate, investment portfolios, vehicles, or even be a life insurance beneficiary. Dividends received from subsidiaries are tax-exempt if the holding company owns at least 10% of them.
These companies protect assets by separating liabilities between the main corporation and its subsidiaries.
Key Benefits of Setting Up a Holding Company in Canada
A Canadian holding company can offer smart tax strategies and protect your assets. It also helps with planning for the future and growing investments.
Tax Efficiency and Deferral
Tax-free intercorporate dividends can apply if the holding company owns over 10% of an operating corporation’s shares. This keeps income within the corporate structure, delaying personal taxes until withdrawals occur.
Retaining earnings in the holding company for reinvestment allows up to 45% more capital compared to personal withdrawal. Personal tax deferral also lets individuals time withdrawals during lower tax bracket periods, saving money.
Earnings from passive income above $50,000 may impact small business deduction eligibility but proper planning helps manage this issue.
Asset and Creditor Protection
Holding companies protect assets from creditor claims. Moving earnings from an operating company to a holding company as intercorporate dividends keeps those funds safe. Real estate owned by the business can also be placed in a separate holding company for extra security.
This setup shields the operating company’s assets from liabilities and risks. Separating real estate can make selling the business easier too. Buyers often prefer purchasing shares of the operating company while leasing or buying property later, reducing creditor risks further.
Estate and Succession Planning
A holding company helps with ownership transfer and estate tax planning. It allows easy transition of assets in family businesses. Shareholders can access the Lifetime Capital Gains Exemption during a sale, reducing taxes.
Family trusts work with holding companies to improve wealth management and protect funds. This structure simplifies business continuity by separating personal assets from operating ones.
Profit sharing is possible with family members while retaining control, making succession planning smoother.
Conclusion: Why Choose Hadri Law Professional Corporation for Your Holding Corporation Needs
Establishing a Canadian holding company offers great advantages. It can save taxes, protect assets, and help with future planning. Hadri Law Professional Corporation provides expert help for these needs.
Their team ensures you make the most of your business structure. Choose them to set up your holding company correctly.
Ready to move forward? Call Hadri Law at 437‑397‑2374, email contact@hadrilaw.com, or schedule your free consultation now.