Many business owners and incorporated professionals don’t properly utilize their corporations when it comes to current, future, and end-of-life investment and tax-saving opportunities.
If you own a corporation and want to maximize your investments and save on taxes today, during retirement, and at death, here are five ways you can use your corporation to invest and save taxes:
1. Pay yourself a dividend
Make sure you pay yourself a dividend and not a salary. Paying yourself a dividend will save you from having to pay into CPP. It will allow you to keep approximately $6,000 inside your corporation to invest however you want. With that, you can save $240,000 over 40 years, and have more control over your savings.
2. Keep as much money as you can inside your corporation
Do not pull money out of your corporation to put into RSPs. If you take money out of your corporation to put into RSPs, you’re going to pay taxes twice: first, when you take the money out of your corporation, and second, when you pull the money from your RSPs.
The same tip applies to saving for retirement. We recommend keeping any retirement savings inside your corporation and investing it from there.
3. Invest in capital gains-producing investments
Make sure to invest in capital gains-producing investments such as stocks, real estate, corporate class mutual funds. Capital gains are taxed at a much more favorable rate than dividend or interest income.
4. Pay life insurance with corporate dollars
Make sure that your corporation owns and pays for all your life insurance. Having your corporation as the owner and payer of your life insurance policies means you will pay the life premiums with dollars that are taxed at 11%, as opposed to your personal tax rate, which could be as high as 50%.
5. Consider investing in corporately owned whole life insurance
This final tip helps you and your family with taxes upon death. Look into corporately held owned life insurance. This is a great strategy to ensure that the money left inside your corporation will go to your family or the charity of your choice, as opposed to CRA. Corporately-owned life insurance can also be utilized to help create a tax-efficient retirement.
Using Your Corporation To Help Achieve Your Financial Goals
If you own a corporation and you’re not implementing most of these strategies right now, you’re missing out on saving money today, tomorrow, and at death. Ultimately, it will impact the quality of life and your ability to achieve your goals.
If you want to learn how to maximize your investments and save on taxes, visit our Contact Page to get in touch with us and we’d be happy to run you through our full financial Blueprint process.