When the operating account accumulates money that is not needed to run the business, the question is no longer whether to invest it, but how — and with what consequences for the corporation and for you.
A corporately held investment is one whose legal owner is your company rather than you personally. The money stays inside the corporation, is invested in its name, and tax on the income it generates is paid by the corporation under rules distinct from those that apply to your personal investments.
This is the situation most owner-managers end up in: cash piles up in the operating account because taking it out costs tax, while leaving it idle costs return.
There is no universal right answer. The choice depends on your time horizon, your liquidity needs, your risk tolerance, and the tax structure your accountant has put in place.
| Option | What it is | What to weigh |
|---|---|---|
| Business savings account | Cash stays accessible, return is low. | Simple, no commitment. The return rarely keeps pace with inflation. |
| Corporate investment portfolio | Mutual funds or securities held in the corporation's name. | Income generated is passive income for the corporation. Past a certain threshold, passive income can reduce the small business deduction — your accountant calculates the effect. |
| Corporately held segregated funds | An insurance contract with investment value, carrying maturity and death benefit guarantees. | Named beneficiary and potential creditor protection, subject to conditions. Fees are generally higher than an equivalent mutual fund. |
| Corporately owned permanent life insurance | A policy the corporation owns, pays for and benefits from. | Value accumulates tax-sheltered inside the policy. On death, part of the benefit may flow through the capital dividend account. Long horizon, limited short-term liquidity. |
I do not handle your corporate tax, I do not build your corporate structure, and I do not prepare your financial statements. That work belongs to your accountant and your tax specialist. My role covers investment and protection products, and whether they fit what your other professionals have already put in place.
That is also why you get a written recommendation: so your accountant can read it, challenge it, or sign off on it.
FAQ
The two are not mutually exclusive. An RRSP gives an immediate personal deduction and tax-sheltered growth; corporate investments keep the money inside the company without triggering personal tax on withdrawal. The right balance depends on your compensation, your unused contribution room and your horizon. This is a decision to make with your accountant.
Passive income is income generated by the corporation's investments — interest, dividends, realized gains — as opposed to operating income. Past a certain annual threshold, it can reduce the share of profits eligible for the small business tax rate. Your accountant calculates that effect for your specific situation.
A segregated fund contract can offer creditor protection where the beneficiary designation meets the conditions set out in law. That protection is neither automatic nor absolute: it depends on the designation, the timing of the purchase and the circumstances. It is assessed case by case, with legal advice where needed.
There is no official threshold. In practice the question becomes concrete once the corporation is holding surplus cash it will not use within the year and that is sitting in a chequing account. A first meeting is precisely about determining whether there is anything worth pursuing.
A first meeting is about understanding your situation. At the La Prairie office, by video or by phone. No fee, no obligation.