Corporate Surplus Planning
Corporate surplus planning means deciding — deliberately — how corporate surplus is invested, protected and eventually moved to you or your family. For owners whose corporations hold more than the business needs, the focus is tax-efficient growth, extraction over time and value for your children. Outcomes depend on your circumstances and the strategy selected. Every strategy is evaluated with your accountant before it is implemented.
How it works in a Canadian corporation
Profits left in a Canadian corporation are taxed at the corporate rate, leaving more capital to invest than if the money were paid out immediately. But investment income earned inside the corporation is taxed at high rates and, past certain thresholds, can reduce the small business deduction available to your operating company.
Planning typically covers three questions: how the surplus is invested inside the corporation, how and when money moves out to you personally, and how the corporation is structured so the eventual transfer — to you, your family or a buyer — is as tax-efficient as possible.
Who it suits — and who it doesn't
A good fit if…
- Your corporation earns more than you need to live on, and surplus is accumulating
- You want a deliberate investment and withdrawal strategy, not an idle balance
- You're concerned about the passive income rules and your small business deduction
- You want your accountant involved in every decision
Probably not if…
- Your business is not incorporated
- You need to draw most of your corporate income for personal living expenses
- You're looking for accounting, bookkeeping or tax preparation services — we don't provide those
How we work with your accountant and lawyer
We do not provide accounting, tax or legal services. Your accountant and lawyer stay at the centre of every plan: we develop options, they confirm the tax and legal treatment, and nothing is implemented without their review.
If you don't have an accountant or lawyer, we can suggest questions to ask when choosing one — and with your consent, introduce you to independent licensed professionals.
FAQ
Frequently asked questions
How can corporate surplus benefit my children tax-efficiently?
Start with when and how you want your children to benefit: during your lifetime, through an inheritance, or through a business transfer. Structures and funding options depend on your circumstances and are evaluated with your accountant and lawyer.
How do the passive income rules affect my corporation?
Once passive investment income inside a corporation passes certain thresholds, it can reduce the small business deduction available to your operating company. Planning ahead — with your accountant — keeps you on the right side of those thresholds.
Can I get money out of my corporation tax-efficiently?
There are several approaches — salary, dividends, capital dividends, and strategies involving corporate-owned life insurance. Each has different tax consequences, which your accountant confirms before anything is implemented.
Do you manage investments?
No. We plan the structure and strategy, coordinated with your accountant and lawyer. Where investment management is needed, we work alongside your existing providers or introduce you to independent licensed professionals.
Your surplus deserves a deliberate plan.
For incorporated owners with $250K+ in retained earnings, or $100K+ in annual profit left in the corporation. Tell us about your surplus and your family goals so we can confirm whether we can add value.