A holding company is a corporation that is not active but holds shares of your other businesses. It can be suitable for large and small companies because of its various benefits.
You can transfer assets quickly as a shareholder of an active company and holding company. If you want to know why you should use a holding company in Canada, you’re in the right place.
Here are the top four benefits you must know.
1. Protects Your Assets
A holding company Canada offers can help you protect your business better. The primary benefit of keeping shares in a holding company rather than your active business is it will keep them safe from different creditors.
So you can take more risks with the operating company if your assets are safe in a separate holding company. You can enjoy better protection and fewer financial losses in case of economic downfall and other issues.
2. It Makes Tax Planning Easier
Tax planning becomes easier with a holding company because of various exemptions and ease of rules. For instance, SBD in Canada has reduced the tax rate on the first $500,000 of the active company income. You can also move money without any tax consequence because of tax-free dividends.
This is why tax planning for the year will be relatively easier. You can hire an accountant for such purposes to avoid breaking the rules. You can also achieve Lifetime Capital Gains Exemption by setting up a holding company.
3. Reduces Tax Burden
If you want to save on tax dollars, setting up a holding company Canada offers will benefit you. This is because you can transfer your earnings to the company and withdraw income whenever needed without negative consequences.
The main purpose of such income splitting is that your corporate tax rate will be lower than your personal rates. This will allow you to earn money more easily through various investments.
Of course, income splitting may have some restrictions. So you must consult with your business advisor or a professional firm before making any decision.
4. Easier Succession Planning
Succession planning is one of the top issues that many businesses face. Setting up a holding company will allow you to transfer earnings to new shareholders, such as your children, easily. This can be done through the estate freeze method using a holding company.
The best part about such freezing is that you can be in control of your business for the time being and gradually shift ownership to your own family without issues. So transferring assets will not be a hassle if you establish a holding company in Canada.
A holding company Canada offers can help you save money by reducing your tax rates. You can also protect your business and its ownership better through an inactive company. The best part is that performing transactions will become easier because of a holding company.
Of course, remember to hire a professional firm before setting up a holding company for advice and how you should proceed. An expert can guide you about the restrictions that you may face and help you avoid various issues.