Investing As An Incorporated Professional Simplified
As an incorporated professional, you may have built up wealth in your corporation and are trying to find a tax-optimized way to access your retained earnings.
Whether you’re looking to provide for your loved ones or plan for your retirement years, we can help take the mystery out of how to invest as an incorporated professional.
We’ll explain what you need to consider when investing as a corporation vs investing personally and a few things you need to keep in mind either way!
What do I need to keep in mind when investing as a corporation?
For any investments you make as a corporation, you need to think about the following:
- The purpose of the investment. For example, to bring in a steady income stream or help your business expand.
- How taxes will impact the investment. You have access to the small business tax rate as a small business owner, which is generally lower than your personal tax rate; however, when it comes to passive investment income, you’ll be taxed at the top rate. We can help you understand your best choices for investing when it comes to avoiding high tax rates.
- When and how do you want the investment to pay out? You may have some control over how the investment pays out, and you can have it paid out as a salary or a dividend.
- How to protect yourself from creditors. One risk of holding investments inside a corporation is that they can be vulnerable to creditors. However, there are ways to protect yourself, such as using a holding company or trust.
- Capital gains exemption. If your investment grows too large, it can endanger your lifetime capital gains exemption qualification.
What do I need to keep in mind when investing personally?
For any investments you make personally, you need to think about the following:
- The purpose of the investment, such as saving for a house or your retirement.
- Tax planning. Any funds paid out to you from your corporation will be taxed at your personal marginal tax rate. Consider the use of tax-advantaged savings plans, including RRSPs and TFSAs.
What do I need to consider for investments?
For all investments, consider the following factors:
- How high is your risk tolerance? Can you tolerate some loss in the short term in exchange for long-term gains?
- How long will you keep your money invested?
- How often will you need access to your funds, and how quickly?