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Deferred tax asset example4/6/2024 ![]() Your ABC can pay dividends to each of the holding companies on a tax-free basis, and then each holding company can pay dividends to its shareholders based on his or her personal cash requirements. Think of each holding company as a tap to control the payment of dividends to each of you personally. Multiple shareholders: If you're one of multiple shareholders in your ABC, setting up a personal holding company for each shareholder can provide flexibility to each of you. What strategies should you be thinking about? If, on the other hand, you have a personal holding company that owns your shares in your ABC, you can pay a dividend to your holding company that will, in most cases, be tax free to your holding company. You see, if you own the shares of your ABC directly, then any payment of dividends from that corporation to you will be taxable in your hands personally in the year you receive those dividends. How? By establishing a holding company to own the shares of your active business corporation (ABC). If you happen to own a corporation that carries on an active business, give some thought to setting up your affairs to allow for a deferral of tax. Specifically, share with them that holding companies can help them to defer tax. I can tell you from experience that you'll bore them to tears with the conversation, but they'll thank you later when the tax savings start rolling in. This summer when you're standing around the barbecue with your business-owner neighbours, impress them with your knowledge of tax planning. ![]()
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