A holding company is a corporation or LLC that does not manufacture or provide any goods or services. The main purpose of a holding company is to hold the controlling stocks or membership interests in other companies.
If you are a businessman or businesswoman who is having a hard time setting up their holding company, don’t worry. We are here to help! With over 3 decades of experience, our expert accountants have been helping small business owners manage their finances and defend their deductions. Make sure to read the entire article to learn more about the benefits of a holding company. Don’t forget to click here and book a FREE consultation with our experts to discuss this further.
Benefits of setting up a holding company
Setting up a Holding company has many benefits, including the following:
· Lock in the Capital Gains Exemption
If a business accumulates a significant amount of cash held in investment accounts, it may no longer qualify for the lifetime capital gains exemption (LCGE). If you get too close to the limit, setting up a holding company can allow you to trigger a capital gain and ‘purify’ the corporation so that it can qualify for the LCGE when sold as long as the time tests are met.
· Estate planning
Holding companies can help ease succession planning, the transferring of assets or the ownership of a business to the next generation.
· Asset Protection
Having assets in a holding company, rather than an operating company, helps keep them safe from creditors just in case unforeseen circumstances arise.
· Tax-free dividends
The operating company may be able to pay tax-free inter-corporate dividends to the holding company, which the holding company can keep.
Should you incorporate your holding company?
A corporation is a form of legal entity. When a company incorporates, it becomes its own legal structure that is independent from the owners of the business. There are many benefits of incorporating your holding company.
Pros
· It is a separate Legal Entity that allows you to keep retained earnings separate from your personal income.
· One of the biggest benefits of corporations is having limited liability. This means that your personals assets are protected from your business activities.
· Small Business Deduction that allows you to pay a significantly lower tax rate.
· Corporation offer Tax Strategies to access any retained earnings in the company
Cons
· Corporations are more intricate to set up. For this reason, they require professional guidance.
How to incorporate with our help?
Incorporating your business for the first time may feel overwhelming. Often times, business owners opt to incorporate their business online. However, they do not consider that these online registries do not provide any advice or guidance specific to their business. Incorporating your business requires countless important decisions regarding directors, shareholders, share structure, effective date etc. These decisions have significant legal and tax implications. It is extremely difficult for business owners to make all these decisions without the guidance of an experienced professional.
But don’t worry! CPA4IT has got you covered. We provide our clients with guidance and strategies on how to leverage the tax benefits associated with incorporation. Our team of experts will help you choose the best corporate structure for your business. We also ensure all the relevant forms and filings of our clients are completed on time. With the help of our vast experience and industry knowledge, we enable our clients to get their new business off the ground and running quickly and easily.
Get in touch with us! We have also compiled a Corporation Guide that details all the tips and tricks associated with incorporation. Business owners often face the risk of being classified as a Personal Services Business by the CRA. Fortunately for our clients, our vast range of knowledge and expertise helps us ensure that they are taxed as a small business and not as a PSB. Click here to book a FREE consultation with our experts and discuss this further!
