Investing under a business or corp

Corp: No benefit. Higher taxes. Harder to get your hands on $$. Cannot net capital gain/losses realized outside corp.

Unincorp business. No benefits. No tax advantage.

Use your own name.

leslie said:

Corp: No benefit. Higher taxes. Harder to get your hands on $$. Cannot net capital gain/losses realized outside corp.

Unincorp business. No benefits. No tax advantage.

Use your own name.

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Correct me if I am wrong, but for a business, I believed be it for investment income, or for operating income, everything is known as income. Add up the two and you have total income. Hence, the total income from the business will be taxed based on business tax, thereby lowering your income from dividend and capital gain IF you have been making a loss on your business.

If purely on dividend alone, I would think the tax credits on dividend received will benefit us more than the lower taxes from the money-losing business, butI have not done the calculation though,...

Rox said:

Correct me if I am wrong, but for a business, I believed be it for investment income, or for operating income, everything is known as income. .

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You are wrong.

CRA looks at the type of income, operational, investment, capital gains, etc., and taxes them differently. Leslie was correct in her assessment.

You now stand corrected.

Bc ccpc

In BC, the general corporate income tax rate is 10.5% for 2010 and 10% for 2011 which is also applied to retained earnings on business income.

Investment income within a SB corporation is 45.17% (2010) and 44.6% (2011) with 26.67% of the taxable investment income being eligible for a refund at a rate of $1 for every $3 of DIVIDENDS paid.

The lower corporate income tax rate essentially means substantially more money is available for investment initially and you can control how and when money is taken out of your corporation or your associated investment co.

Rox said:

Correct me if I am wrong, but for a business, I believed be it for investment income, or for operating income, everything is known as income.

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Like OE said, investment income on a business is taxed at 48%.

From my understanding, the only real way this can work out for you is if you make a substantial income from your business (i.e. you pay yourself enough to pay out in the 46% rate) and you are a CCPC.

It you keep the money in the business, you can take advantage of the small business rate (which I believe is 19%) to save you money up front so you initially have more to invest. Basically, you are deferring taxes.

I am using Ontario numbers here.

Dear Assetologist and dagman1, thank you. Yes, I have run-through some infos in the other sites too, and am well, catching a grasp of how they do it. Yeah, I would agree to the point that the tax is just being deferred, someting like the RRSP thing where we might still get taxed when we take out the money later, depanding on the age when we withdraw out.

If it's like that, then, well, as a newcomer and someone who is gradually getting used to the Federal and Provincial Taxation System, it's best to just put the investment income under a personal name, and if there is no other income being earned, then the tax benefits would be very high for eligible dividend income.

All of the above is of course, the person IS a Tax Resident.

OptsyEagle said:

You are wrong.

CRA looks at the type of income, operational, investment, capital gains, etc., and taxes them differently. Leslie was correct in her assessment.

You now stand corrected.

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Thank you.

May I ask then : why is it that CRA only gives out the full dividend tax benefits when a dividend-receiver does NOT have any other income besides from dividend ?

If it is as you said, then the dividend income should be assessed on its own, irregardless of other available income(s) - not sure if there is a plural form for income ?... meaning, applicable tax ladders shold also be accorded onto dividend on its OWN without any other consideration whatsoever ?

I do not mind being corrected - in fact, I thank the people who correct me, on the other hand, I mind being wrong and not being right for the Government that I choose to serve and pay tax to, and the place that I want my family to live in in future.