Justin St. Louis, CFP, IG Wealth Management
Suite 600 - 390 Brant Street L7R 4J4 Burlington, ON, Canada

WHY can saving inside your Corp. be beneficial? First, if you are self-employed, you must pay CPP for both the EMPLOYER & EMPLOYEE ($5,796 in 2020). Regular employed individuals only pay HALF of this amount (Employee). Here's the catch, the CPP payout in retirement is the same, so you PAY DOUBLE for THE SAME.... When you pay yourself a dividend from your Corp, you do not have to pay into CPP (cost savings), but now you must save for retirement since you will not receive CPP payouts. The second benefit of saving inside your Corp is TAXATION of retirement income. In my last post, I explained that saving inside your Corp can create the opportunity to save up to 34% more annually. In retirement, retained earnings inside a Corp can be paid out as "Ineligible Dividends." In Ontario, individuals can receive approx. $35,000 of ineligible dividend income, and pay $0 tax. This assumes they have no other sources of taxable income (See table below for amounts). Ex. Person A & Person B (married) whom are both shareholders of Corp, can take out $70,000/yr in retirement dividends, and pay $0 tax, to cover their LIFESTYLE needs. This is the equivalent of needing to take out $81,400/yr from RRSPs. SAVE MORE today + USE LESS tomorrow = LARGER TRANSFER of wealth to your children

WHEN do you incorporate? Incorporating is not based on an INCOME threshold, but rather a LIFESTYLE need. START by knowing the required Annual income needs of your household, THEN work backwards. A couple, whom Person A earns $150K/yr, may not need any of the business income of Person B to manage their household expenses. This presents the opportunity to tax defer the business income of Person B. This is when having a corp can be extremely beneficial as PERSON B can elect to n...ot pay tax PERSONALLY, but rather keep their business income inside the corporation. In Ontario, a Canadian controlled private corporations (CCPC) that qualifies for the small business deduction pays tax at a rate of 12.2% on the first $500K of income, annually. This is a HUGE tax benefit for income that you do not need personally, but can rather retain inside your corp. 12% tax is the equivalent of earning $32,000/yr PERSONALLY, however in a corporation you can earn up to $500,000 and pay tax at the SAME rate. Look at the example below to understand the OPPORTUNITY when saving Personally vs inside your Corp. By simply saving inside your corporation, your ability to save increases by 34%/yr in this example. Forget chasing 5, 6, 7%/yr rate of returns on your investments. Focus on tax planning.

As we all stare at our screens conjuring up the possibility of outcomes of the US election, here is a great read by CIO Ben Reeves of our strategic investment partner Wealthsimple My takeaway is this, Presidents have less power over the economy than you think. Might as well get onto tax planning ahead of tax-time...... https://lnkd.in/e3XgMeQ #timeinnottiming #presidentialelection #staythecourse

In Canada, of the 1.18M businesses in 2017, approx. 1.15M were small businesses, which are responsible for hiring 70% of individuals who work in the private sector. Small business is Big business in the Canadian landscape. With numbers so staggering, it becomes very evident that Incorporating it is not exclusive to medium or large-size businesses.... What is incorporating? A corporation is a legal entity that is separate from its owners and shareholders. Incorporating gives the owner and/or shareholders the ability to participate in the business while CREATING a clear BOUNDARY between business & personal: assets, taxes & liabilities. If anything that 2020 taught us, it is the value of BOUNDARIES. Another huge benefit is Incorporating can CREATE a stronger likelihood of your business being sold to an arms' length person, because it is easily transferable, and the name does not die with the individual. So why would people go through the $1,500 set-up cost, on-going add'n accounting costs, and paperwork to incorporate? That will be covered in the upcoming posts. https://www.shopify.ca//7116328-the-ultimate-guide-on-busi #boundaries #boundariesarehealthy #boundariesmatter #wealthmanagement