PLAN FOR MY BUSINESS
You built the business. Make sure the business is building something for you.
Business owners face financial decisions that employees often don’t.
How much should you pay yourself?
What should happen to excess cash inside the corporation?
What happens if you become disabled?
What happens if your business partner dies?
And eventually:
How does the wealth you’ve built inside your business become wealth for you and your family?
What are you trying to solve?
Protect the Business
Your business may depend heavily on you, a partner or a key employee.
An unexpected death, disability or serious illness can affect revenue, employees, customers, debt obligations and the future of the company.
Protection planning asks:
What happens to the business if one of the people it depends on suddenly isn’t there?
Learn about Business Protection →
Protect the Owners
Business owners often spend years protecting the company while overlooking their own financial security.
Life insurance, disability insurance and critical illness insurance can play different roles in protecting an owner’s family, income and business interests.
Learn about Owner Protection →
Buy-Sell Planning
What happens if your business partner dies?
Without proper planning, the surviving owner could find themselves in business with the deceased owner’s estate or family.
A properly structured buy-sell arrangement can establish what should happen to the shares and how the purchase may be funded.
Life insurance is commonly considered as one potential funding mechanism.
Learn about Buy-Sell Planning →
Key-Person Protection
What would happen if the person responsible for your largest clients, technical expertise or day-to-day operations suddenly disappeared from the business?
Key-person insurance can provide capital to help a company deal with the financial impact of losing someone critical to its success.
Learn about Key-Person Insurance →
I have money accumulating inside my corporation. Now what?
That’s a good problem to have.
But it creates another decision.
Should you:
- Leave the money inside the corporation?
- Invest it?
- Pay yourself salary?
- Pay dividends?
- Contribute to registered plans personally?
- Pay down debt?
- Reinvest in the business?
- Use corporate-owned insurance?
- Save it for retirement?
There isn’t one answer that works for every business owner.
Your corporate and personal financial plans should work together.
Salary or dividends?
It’s one of the most common questions incorporated business owners ask.
Salary and dividends are taxed differently and can affect other parts of your financial plan.
For example, salary can create RRSP contribution room and CPP participation, while dividends have different tax and cash-flow characteristics.
The right mix can depend on your income needs, corporate situation and long-term objectives.
This is an area where coordination with your accountant is particularly important.
What happens if my business partner dies tomorrow?
Ask yourself:
Who owns their shares?
Who inherits them?
Do I have the right to purchase them?
How will I pay for them?
How will the shares be valued?
Does our shareholder agreement match our insurance?
These questions are much easier to answer before something happens.
Corporate-Owned Life Insurance
A corporation can own life insurance on a shareholder or other insurable individual where appropriate.
Depending on the policy and circumstances, corporate-owned insurance can be used in areas such as:
- Buy-sell funding
- Key-person protection
- Estate liquidity
- Business succession
- Wealth transfer
Certain life insurance proceeds received by a private corporation may also affect its Capital Dividend Account, subject to Canadian tax rules.
Corporate insurance should therefore be considered as part of the broader corporate, tax and estate plan — not in isolation.
What is the Capital Dividend Account?
The Capital Dividend Account, or CDA, is a notional tax account available to certain Canadian private corporations.
Among other items, certain life insurance proceeds received by a corporation can increase the CDA, generally reduced by the corporation’s adjusted cost basis in the policy immediately before death.
Subject to the applicable rules and elections, capital dividends may then be paid to Canadian-resident shareholders tax-free.
This is one reason life insurance can become particularly interesting in corporate estate planning.
Learn about the Capital Dividend Account →
What happens when I eventually want out?
Every business owner leaves the business eventually.
The question is how.
You may:
- Sell to an outside buyer
- Sell to employees or management
- Transfer the business to family
- Sell to another shareholder
- Wind the business down
- Retain certain corporate assets for retirement
Succession planning isn’t something to begin six months before retirement.
The structure you build today can affect your options years from now.
Your business and personal plans shouldn’t compete.
Your corporation, investments, insurance, retirement plan and estate plan are interconnected.
The goal isn’t simply to build a successful business.
It’s to make sure the success of the business eventually benefits you and the people you built it for.
We can work alongside your accountant, lawyer and other professional advisors to help coordinate the financial and insurance components of your plan.
BOOK A BUSINESS PLANNING CONVERSATION →