What are the tax benefits of a holding company?

Allan Madan, CA
 Aug 26, 2014
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Are you wondering what are the tax benefits of a holding company? Setting up a holding company can provide you with some benefits. The first is that it provides creditor proof. The second benefit is that the holding company can be used for income splitting purposes thus reducing your overall tax liability.

holdingcompany

A holding company can be used to creditor proof your business’s assets in particular business cash and business marketable securities. In simple terms, creditor proofing means protecting your valuable business assets from debt collector and lawsuits. To accomplish creditor proofing, your business should regularly pay a tax free dividend to a holding company. By transferring cash out of your business, you have protected it from creditors. Secondly, a holding company can be used to income split with family members, by making your family members as shareholders of your company; you can pay dividends to them.

So here’s the tip, if you’re worried about protecting your business assets from creditors or if you would like to income split to save taxes then consider asking your accountant to incorporate a holding company for you.





Disclaimer

The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.

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Comments 2

  1. Hi Allan,

    Could you please tell me how to set up a holding company? same as to set up an incorporation? or any difference?

    If I add my family members as shareholders in the holding company, should I hire a lawyer to prepare any legal documents and handle legal issues for each shareholder?

    Thanks!

    1. Hi Jack,

      Thanks for contacting me. A holding company is not a legal term, but refers to a corporation that owns the shares of another corporation. You can incorporate a holding corporation yourself, but it’s best to hire a professional accountant to properly set it up. Whoever you hire, please ensure that the following incorporation documents are prepared:

      * Certificate and articles of incorporation
      * Corporate by-laws
      * Minute book
      * Officers, shareholders, and directors registers
      * Share certificates
      * Share transfer ledger
      * Directors resolutions

      See http://madanca.com/services/corporate-and-business-tax/incorporating/ for additional information on the incorporation services that our accounting firm offers

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