(780) 945-2881 info@cordisfinancial.ca

Executive Summary

Most people don’t understand the responsibilities of owning a business; there is no one else to rely upon to shoulder decisions. Dedicated staff and key managers contribute tremendously to the success of the business, but their names aren’t over the door (or in the Minute Book or in the Shareholders’ Agreement).

Each and every day, a business owner essentially risks everything as they hand their hard-earned capital over to employees who are responsible for meeting with customers, fulfilling orders, delivering goods and services, making purchasing decisions and hopefully making sales.

Your investments should reflect the inherent risks of your marketplace: changing customer needs, enhanced competition, rising costs, price pressures, new and old competitors. Your personal and corporate capital should be invested in a way that is unique to you and your business, as well as account for the unique situations you face daily.

What you Need to Know

Business owners’ investment portfolios typically have a much higher risk profile than they should. If the shares of their own private company are included within a discussion of their entire portfolio, these high-risk shares need to be offset with lower risk publicly traded stocks, funds, bonds, and other fixed income vehicles, for example.

For the investable funds left inside the business, liquidity matched with low-risk is the answer for most. The ability to convert an earning investment quickly and inexpensively to cash to meet near-term obligations like equipment purchases, supplies, hiring costs is paramount.

Additionally, it is necessary to minimize the amount of realized investment income inside a corporation. This ‘non active’ income is taxed on a federal level at 38%, versus 10.5% for active income. Each province and territory taxes ‘non active’ income heavily, approximately 10% higher, for a total Federal and Provincial rate of about 50%.

Financial Advisors should work directly with a business owner’s accountants on compensation strategy. Fine-tuning income-splitting between spouses is the beginning. Other options include extracting funds to you personally in order to reduce overall tax, declaring dividends on special shares established for children, and optimizing declared income to earn RRSP contributions that shelters investment growth from taxation.

The goal is to maximize your family, after-tax, take-home pay while minimizing the amount withdrawn from the business.

Bottom Line

Most people, including business owners, don’t understand that my investment practice operates exactly like a small business. Each month revenue must cover all of my business expenses, and what is left-over is available to me and CRA. I understand your challenges, I face them myself. A short chat is all that is necessary to begin the process of me working on your behalf.