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Andrew Feindel. Kickstart Your Corporation
Table of Contents
List of Tables
List of Illustrations
Guide
Pages
Kickstart Your Corporation. The Incorporated Professional’s Financial Planning Coach
Acknowledgments
About the Author
Introduction: The Value of a Coach
Chapter 1 Incorporation 101
What You'll Get Out of This Chapter
Why Incorporate?
What Does It Cost to Incorporate?
What's the Process to Incorporate?
Written Consent
Articles of Incorporation
Payroll Remittances
Employment Contracts
Transferring Assets
Real Estate
Insurance Policies
Choosing Your Corporation's Year-End and Maintaining Your Corporate Records
When Does It Not Make Sense to Incorporate?
What If You Have No Small Business Deduction?
How Does Purchasing a Home Fit into My Incorporation Timeline?
Saving for a Down Payment: Incorporated and Non-Incorporated Options
Can I Purchase My Principal Residence through My Corporation?
What about Shareholder Loans?
Does a Professional Corporation Give Me Creditor Protection?
How Could I “Supercharge” My Charitable Donation?
What Is the Lifetime Capital Gains Exemption (LCGE)?
Now That I Have Incorporated, Can I Deduct My Golf Membership Fees?
What Do I Do with My Corporation When I Retire?
Real-Life Case Example of Restructuring Shares
Redemption of Preferred Shares Prior to December 31, 2015
Key Takeaways from This Chapter
Top Questions to Ask Your Financial Planner
Notes
Chapter 2 The Compensation Decision: Salary or Dividends?
What You'll Get Out of This Chapter
Understanding the Roots of the Compensation Question
Salary as Compensation
Dividends as Compensation
Dividend-Splitting with Family Members. The Old Rules: Pre-2018
The New Rules: Tax on Split Income—2019 and Afterwards
Scenario 1: John and Jane with Salary
Scenario 2: John and Jane with Dividends
Tax Integration
Salary versus Dividend Examples. Scenario 1: John's After-Tax Cash Flow: With Salary
Scenario 2: John's After-Tax Cash Flow: With Dividends
Do You Want to Put Your Savings in an RRSP or in Your Corporation?
The Value in the RRSP/Corporation Today
The Tax Characteristics of Growth on the Investments
Will We Pass Away with Funds in Our RRSP or Corporation?
Other Factors. Increased Financial Control
Psychological Factors
Creditor Protection
Future Tax Law Changes
Do We Want to Participate in the Canadian Pension Plan (CPP)?
Beware the Overpayment Trap
CPP Trends to Watch
Bottom-Line Considerations
Do We Have Investments Inside the Corporation?
What Are Some Exceptions to these Rules?
Small Business Deduction (SBD)
Child Care Deduction
SR&ED
Other Specific Considerations
Key Takeaways from This Chapter
Top Questions to Ask Your Financial Planner
Notes
Chapter 3 Investing Inside Your Corporation
What You'll Get Out of This Chapter
Can I Invest through My Corporation?
What the Income Tax Act Says about Investing through a Corporation
Structuring Investments Inside the Corporation
Example
RDTOH (Refundable Dividend Tax On Hand)
Capital Dividend Account (CDA)
Example
New Passive Income Tax Rules
Reminder: Asset Allocation Still Matters
Scenario 1
Scenario 2
What Are Corporate-Class Investments?
The Power of Tax-Deferred Compounding
Working through the Example
Working through the Example
Rule Changes from Federal Budget 2016
Considerations with Corporate Class. Fees
Loss of Control
Little Fixed Income Exposure
Future Potential Rule Changes
What If I Want to Try Investing on My Own?
What If They Increase Capital Gains Taxes?
Key Takeaways from This Chapter
Top Questions to Ask Your Financial Planner
Note
Chapter 4 Valuing Permanent Insurance on the Holistic Corporate Balance Sheet
What You'll Get Out of This Chapter
A Review of the Basics—Permanent Life Insurance as Tax Arbitrage
The Benefits of Corporate-Owned Permanent Life Insurance. Pay Premiums with Corporate Dollars
Avoid New Passive Income Rules
Creating Cash Flow
Provide a Tax-Efficient Financial Legacy
A Real-World Example: My Plan in Action
Funding the Plan
The Growth of Funds in the Plan
Assumptions in the Projections
Rates of Return Assumptions
Beyond the First 10 Years
The Plan as an Investment
Understanding the Criticisms of Corporate-Held Permanent Life Insurance
Risk Review: Economic and Tax Considerations
Tax Policy Risk: “What if tax rates change?”
Economic Risk: “What if dividend rates or interest rates change?”
Appropriateness Review: Concerns about the Sales Process “This strategy is designed to maximize advisor sales commissions—if it's so good, why do so many people oppose it?”
“Shouldn't I help my kids today, instead of building an estate?”
This strategy is “an expensive way to buy insurance, and I can get higher investment returns elsewhere”—shouldn't I just “buy term and invest the difference?”
The True Cost of Term Insurance
Buying Term and Investing the Difference: A Review of the Facts and Assumptions
“What if something changes and I can't afford the premiums?”
Comparing U.S. and Canadian Scenarios
Key Takeaways from This Chapter
Top Questions to Ask Your Advisor
Chapter 5 Risk Management. A Careful Examination
What You'll Get Out of This Chapter
The Way We Think About Insurance
Wealth Insurance
Wealth Insurance on Parents
When You Pay the Premiums
Example
When an Estate Bond Pays the Premiums
Example
Risk Insurance (Life and Disability Insurance) Risk Insurance
Example
Life Insurance
How much life insurance do we need?
Example
Association Plan or Individual Plan Life Insurance?
Disability Insurance
Disability Insurance: Do We Need the Ferrari Disability Package?
The Good Insurance Rider
The Situational/Dynamic Insurance Riders
The Don't Always Recommend Riders
Example
Other Common Questions. Should we own insurance corporately?
I'm young and invincible; should I have disability insurance?
Should I get a lump-sum payout instead?
Critical Illness Insurance
Long-Term Care Insurance
Key Takeaways from This Chapter
Top Questions to Ask Your Financial Planner
Chapter 6 Borrowing to Invest. What Is Leverage?
What You'll Get Out of This Chapter
Who Are Good Candidates for Using Leverage?
Enhancing Returns in the Corporation with Leverage
Strategic Prudent Leverage: Timing
Some Basic Assumptions
Building a Non-Registered Portfolio
Example
Migrating Efficiently to a Non-Registered Portfolio
Withdrawing from the RRSP with the Use of an Offsetting Deduction
Make Your Mortgage Interest Tax-Deductible
Debt Swap Scenario 1: Making Your Mortgage Interest Tax-Deductible
Example
Debt Swap Scenario 2: Parents Helping Kids Help Themselves
Example
Investments That Use Leverage
Leveraged and Inverse ETFs
Example
Risk Parity Funds
When Does Leveraging Go Bad?
Some Built-In Conflicts of Interest
Examples
Key Takeaways from This Chapter
Top Questions to Ask Your Financial Planner
Note
Chapter 7 Investing: Active or Passive?
What You'll Get Out of This Chapter
What Is Active Investing and What Is Passive Investing?
Understanding Investment Trends
A Deep Dive into Passive Management
Fees—Passive Management
The Impact of Fees
Performance
What about Outside Canada?
Diving into Active Management. The Behavioral Gap
Better Risk Management
Fees—Active Management
Flexibility to Manage After-Tax Returns
Allowing Pursuit of Expressive Objectives
Market Return Does Not Equal Average Investor Return
Performance
Is Your Fund “Truly Active”?
The Growth of Passive Investments May Sow the Seeds of Their Underperformance
Access to IPOs May Become More of a Differentiating Factor
Wrapping Up the Debate
Fees
Performance
Behavior
Key Takeaways from This Chapter
Top Questions to Ask Your Financial Planner
Notes
Chapter 8 The Role of Trusts in Your Financial Plan
What You'll Get Out of This Chapter
Speaking the Language of Trusts
Trust Concepts
Residency of Trusts
Taxation of Trusts
The 21-Year Rule
Probate
Privacy
Inter Vivos Trusts
Example
Example
Discretionary Investment Trust for Grandchildren
Example
Bearer Trusts
Inter Vivos Cottage Trust
Testamentary Trusts
Establishment of Testamentary Trusts
Asset Protection
Tax Savings
Other Factors to Consider. Probate
Costs
Minor Children
For Family Members with Special Needs
Spousal Trust
Use of Spousal Trust
When a Testamentary Trust Loses Its Status
Key Takeaways from This Chapter
Questions to Ask Your Financial Planner
Chapter 9 Alternative Investment Strategies
What You'll Get Out of This Chapter
Capital Gains Strip
Suitability for Capital Gains Strip
Overall Bottom Line
Individual Pension Plans (IPP and PPP)
Why an IPP?
Considerations
Suitability
Next Steps
What's the Difference between an IPP and a PPP?
Overall Bottom Line
Retirement Compensation Arrangements
Steps to Implement an RCA
Advantages of the RCA
Disadvantages of the RCA
Investment Account
Withdrawals
Overall Bottom Line
Investing in Watches: Can I Buy My Rolex through the Corporation?
Overall Bottom Line
Art: Can I Buy My Pablo Picasso Painting through the Corporation?
Buying Art
Transferring Art
Selling/Donating Art
Overall Bottom Line
Private Health Services Plans
Health Spending Accounts
Key Takeaways from This Chapter
Questions to Ask Your Financial Planner
Notes
Chapter 10 Pulling It All Together: Your Financial Plan
What You'll Get Out of This Chapter
How long will your money last?
How much money do you need for a 30-year retirement?
The Value of a Financial Plan
Example
Plan Analysis Synopsis. Client Information
Family Member Information
Advisor Information
Plan Assumptions
Estate Assumptions
Income Information
CPP/QPP & OAS Information
Expense Information. Regular Expenses
Lump-Sum Expenses
Insurance Scenario Lump-Sum Expenses
Lifestyle Asset Information
Portfolio Assets
Liabilities
Life Insurance Policies
Disability Insurance Policies
Critical Illness Insurance Policies
Education Goals. Mark University Education: Expenses
Assets Allocated to Mark University Education
Chloe University Education: Expenses
Assets Allocated to Chloe University Education
Savings Strategies
Surplus Savings Strategies
RRSP Maximizer Savings Strategies
Transfer Strategies
Deficit Coverage Order During Pre-Retirement
Liquidation Order During Retirement
Private Corporation Synopsis. Dr. Michael Jones Corp.—Current Plan
Summary
Share Ownership
Preferred Ownership
Historical Data
Investment Accounts
Real Estate Assets
Contributions—Inter-Company Dividends Received
Withdrawals—Manual Dividend Distributions
Estate
Net Worth Statement. Current Plan
Net Worth Timeline. Current Plan
Net Worth Outlook. Current Plan
Cash Flow Outlook. Current Plan
Retirement Cash Flow Timeline. Current Plan
Retirement Need and Investable Assets. Current Plan
Detailed Estate Analysis. Current Plan
Utilizing Tax-Efficient Strategies
Recommendations. Net Worth. Proposed Recommendations—Utilizing Tax Efficient Strategies Available for Corporations
Cash Flow Outlook. Proposed Plan
Net Worth Timeline. Proposed Plan
Net Worth Outlook. Proposed Plan
Retirement Cash Flow Timeline. Proposed Plan
Retirement Need and Investable Assets. Proposed Plan
Detailed Estate Analysis. Proposed Plan
Closing Thoughts: Your Next Steps
Index
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