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Passive investment of surplus fund from CCPC


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  • 2 months later...

You should be speaking to an accountant and possibly a financial planner, though that may depend on the size of your portfolio. I am always overtly cautious of financial advisors/planners as I believe a lot of them are sharks and many of them charge high fees for doing essentially nothing. That said at a certain level of portfolio size and/or complexity of investments they begin to make more sense especially as the fees comparatively go down.

Personally I'm still fresh in my career so I do the grand majority of my investment myself, but the PC holds its own non-registered investment account. Under new (quite dumb) rules though, once you hit $50,000 a year in passive investment income your small business deduction (the amount of active income eligible for the small business tax rate) starts to go down $5 for every $1 above $50,000 of active income you've made. Note that this $50k level is before the tax on the active investment income (which is as high as 50%). If you're not earning close to $500k a year it may not affect you immediately but at a certain point your investment portfolio can give yields that are too high and possibly detrimental to your tax situation. That's when people usually start buying life insurance within the corporation.

You've got to chat with an accountant and planner to figure out what's good for your specific situation which will highly depend on your typical annual gross, how big your investment portfolio is (or planned to be) and the gains you make each year. 

Another argument is that if you have a surplus of funds, look into paying yourself more salary (if you aren't already) and less dividend. Try to maximize RRSP, CCP contribution room if you haven't already; attack your investments from multiple angles 

Other than that, just keep a healthy stash of cash in it for expenses (travel, CE, gifts, meals, etc.).

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