Buy-Sell Agreements for Dentists
Why Dentists Need a Buy-Sell Agreement
If you’re a dentist in a partnership or group practice, having a clear buy-sell agreement isn’t just a good idea—it’s essential. A properly funded buy-sell agreement ensures your practice remains stable and your family, partners, and patients are protected in case of unexpected events like death, disability, or critical illness.
As a financial advisor who specializes in working with dentists, I help you put the right structure and funding in place so your dental practice can continue to thrive—even if life throws a curveball.
What is a Buy-Sell Agreement for Dentists?
A buy-sell agreement is a legally binding contract between dental practice owners. It outlines what happens if a partner dies, becomes disabled, retires, or chooses to exit the practice.
When dentists don’t have a buy-sell agreement in place, it can lead to:
-
Disagreements with surviving family members
-
Loss of patients due to uncertainty
-
A forced or rushed sale of the practice
-
Financial strain on remaining partners
Funding a Dental Buy-Sell Agreement
It’s not enough to have the agreement in writing—you need the money ready when it’s needed. That’s where insurance comes in. It’s the most efficient and cost-effective way to fund a buy-sell agreement for dentists.
Life Insurance: Provides a tax-free payout so surviving partners can buy out the deceased dentist’s share of the practice.
Disability Insurance: If a dentist becomes disabled, this policy provides funds to purchase their share, keeping the business running.
Critical Illness Insurance: Offers a lump sum in case of serious illness, allowing partners to buy out or restructure without financial stress.
Who Should Help Set Up Your Dental Buy-Sell Plan?
Setting up a buy-sell agreement for dentists involves a team of professionals:
-
Financial Advisor –Provides funding strategies using life, disability, and critical illness insurance.
-
Accountant – Assesses practice value and tax impact
-
Lawyer – Drafts the legal agreement and aligns it with your business structure
As your advisor, we can help coordinate the entire process so everything works together.
Why Dentists Trust Us for Buy-Sell Planning
We specialize in helping dentists across Canada protect their practices through customized buy-sell strategies. Whether you’re starting a new practice, bringing in a partner, or reviewing your current agreement, we’ll guide you every step of the way.
2025 Year-End Tax Tips and Strategies for Business Owners
2025 Year-End Tax Tips for Business Owners
As 2025 comes to a close, many business owners are thinking about wrapping up their books, reviewing results, and getting ready for a new year. But before December 31 passes, there’s one more important task to tackle — your year-end tax strategy.
A few smart moves now can reduce your tax bill, protect your company’s cash flow, and create new planning opportunities for 2026. Here’s how to make the most of the weeks ahead.
Strengthen Year-End Cash Flow
Strong cash flow is the foundation of good tax planning. Before year-end, take time to review how much cash your business needs to meet short-term obligations such as payroll, supplier invoices, or loan payments.
If your taxable income is higher than expected, look for ways to reduce or defer taxes by:
-
Accelerating deductible expenses (for example, professional fees, utilities, or rent).
-
Writing off bad debts or setting up reserves for doubtful accounts.
-
Paying out reasonable bonuses or salaries before year-end, if already declared.
You may also want to delay income into 2026 by deferring invoices or delaying the sale of appreciated assets, depending on your overall income picture.
Managing cash flow now can free up funds to reinvest in your business — or take advantage of new deductions and credits before they expire.
Optimize Your Salary and Dividend Mix
For incorporated business owners, one of the most important year-end decisions is how to pay yourself.
Salary provides earned income that creates RRSP contribution room and qualifies for Canada Pension Plan (CPP) benefits. Dividends, by contrast, are taxed at a lower rate in most provinces and don’t require CPP contributions.
For 2025, earning $180,500 in 2024 creates the maximum RRSP room of $32,490 for 2025. Looking ahead, for 2026 contributions, $187,833 in 2025 salary will be needed to reach the increased RRSP limit of $33,810. If you mainly use dividends, make sure you earn enough salary to keep building RRSP room. The RRSP deadline for 2025 is March 2, 2026.
A balanced mix often provides the best outcome — salary for savings and CPP, and dividends for flexibility. Review your compensation with your accountant before the year ends to lock in your approach.
Family Income and Compensation Planning
If family members are involved in your business, paying them can be a practical and tax-efficient option:
-
Salaries to Family Members: Paying a fair salary to family members who work for your business not only compensates them but also gives them access to RRSP contributions and CPP. You must be able to prove the family members have provided services in line with the amount of compensation you give them.
-
Dividends to Family Members: If family members are shareholders, dividends can provide them with tax-efficient income. The tax-free amount varies by province or territory, so it’s worth checking the rules where you live.
-
Income Splitting: Distributing income among family members can help reduce overall taxes. However, be mindful of the Tax on Split Income (TOSI) rules to avoid penalties. A tax professional can guide you through this process.
Deferring Income
If you don’t need the full amount for personal use, leaving surplus funds in the corporation could be a smart move. This keeps the money invested within the business, benefiting from lower corporate tax rates. Over time, this approach may allow the funds to generate more income compared to personal investing, depending on your goals and investment strategy. However, be mindful of passive investment income limits, as exceeding $50,000 in passive income could reduce or eliminate your corporation’s access to the small business deduction. Monitoring this threshold is essential to maintaining the tax advantages available to your business.
Other Compensation Strategies
It’s always a good idea to review how you handle compensation beyond base salary.
Consider these options:
-
Shareholder Loans: Borrow funds from your corporation with deductible interest but ensure repayment to avoid personal tax.
-
Profit-Sharing Plans: These can be a tax-efficient alternative to bonuses for distributing profits.
-
Stock Options: Only the employee or employer—not both—can claim a deduction when options are cashed out.
-
Retirement Plans: Explore setting up a Retirement Compensation Arrangement (RCA) to save for retirement tax-efficiently.
Passive Investments
Canadian-controlled private corporations (CCPCs) benefit from a reduced corporate tax rate on the first $500,000 of active business income, thanks to the small business deduction (SBD). The SBD can lower the tax rate by 12% to 21%, depending on your province or territory. Some provinces (e.g., NS, PEI) changed small-business limits in 2025, which may affect combined rates.
However, passive investment income over $50,000 in the previous year reduces the SBD by $5 for every additional dollar, potentially eliminating it altogether. To maintain access to the SBD, it’s important to keep passive investment income below this threshold.
Here are some strategies to help preserve your SBD:
-
Defer Portfolio Sales: Delay selling investments that generate capital gains if possible.
-
Optimize Your Investment Mix: Focus on tax-efficient investments like equities over fixed income.
-
Exempt Life Insurance Policies: Income earned within these policies isn’t included in your passive investment total.
-
Individual Pension Plan: This defined benefit plan is exempt from passive income rules and offers tax-advantaged retirement savings.
Carefully managing passive investments can help your business maintain access to the SBD and maximize its tax advantages for continued growth.
Use Your Capital Dividend Account (CDA) Wisely
The Capital Dividend Account lets private corporations pay tax-free dividends from specific sources, such as the non-taxable portion of capital gains or certain life insurance proceeds.
If your CDA has a positive balance, it may be worth paying out a capital dividend before realizing any capital losses, which can reduce the CDA balance. Once losses are recorded, your ability to pay tax-free dividends is reduced or eliminated.
A quick check with your advisor before year-end can ensure you don’t miss this opportunity.
Take Advantage of Purchases and Deductions
If you’re planning to buy equipment or technology for your business, timing your purchases before December 31 can offer valuable deductions.
Under current tax measures, certain business assets qualify for enhanced depreciation or immediate expensing. Select assets can qualify for a 100% first-year write-off under Budget 2025 proposals for property available for use before 2030. This measure allows businesses to accelerate deductions and reduce taxable income in the year the asset is placed in service.
Making these investments now may lower your 2025 taxable income while positioning your business for growth.
Apprenticeship and Training Incentives
Many provinces offer refundable credits for hiring and training apprentices in skilled trades. These credits vary by region but can offset a meaningful portion of training costs.
Taking advantage of these incentives supports your workforce, rewards innovation, and improves your bottom line.
Plan for Business Transition and Succession
If you’re thinking about selling or passing down your business in the future, 2025 brings several important planning opportunities.
The Lifetime Capital Gains Exemption (LCGE) lets you shelter up to $1.25 million (indexed after 2025) in capital gains from tax when selling qualified small business corporation (QSBC) shares.
Starting this year, the new Canadian Entrepreneurs’ Incentive (CEI) further reduces tax on eligible business sales by lowering the capital gains inclusion rate to one-third on up to $2 million of gains over your lifetime. This new incentive phases in gradually over five years.
If your shares qualify for these exemptions, you may wish to crystallize (lock in) the exemption now or review your ownership structure to ensure you meet all conditions. Proper planning can make the difference between a fully taxable gain and one that’s largely tax-free.
Build Long-Term Retirement Income
While many owners reinvest profits into their business, it’s important to plan for your own financial future as well.
Here are a few corporate-friendly retirement options to consider:
-
Individual Pension Plans allow for higher contribution limits than RRSPs, particularly for owners over age 40 with consistent income.
-
Retirement Compensation Arrangements let you set aside corporate funds for future retirement on a pre-tax basis.
-
Employee Profit Sharing Plans can be used to share profits with employees in a tax-efficient way.
Reviewing your long-term savings approach ensures that the wealth you build in your company also supports your personal retirement goals.
Donations
Making donations, whether charitable or political, can provide valuable tax benefits. To maximize these advantages, consider options like:
-
Donating securities
-
Giving a direct cash gift to a registered charity
-
Using a donor-advised fund for ongoing charitable contributions
-
Setting up a private foundation
-
Donating a life insurance policy by naming a charity as the beneficiary or transferring ownership.
Each option offers unique tax advantages depending on your situation.
Bringing It All Together
Year-end planning isn’t just about saving on taxes — it’s about making intentional financial decisions that support your business’s next chapter.
By reviewing your compensation, investments, and future goals before December 31, you can lower taxes today while setting the stage for long-term success.
Consider scheduling a meeting with your accountant or advisor soon to discuss which of these strategies fit your business best. A small amount of preparation now can make a big difference in 2026.
Sources:
CPA Canada, “2024 Federal Budget Highlights,” https://www.cpacanada.ca/-/media/site/operational/sc-strategic-communications/docs/02085-sc_2024-federal-budget-highlights_en_final.pdf?rev=6d565a6a66ef4e20b1e01dc784464c93, 2024.
Government of Canada, “Capital Gains Inclusion Rate,” https://www.canada.ca/en/department-finance/news/2024/06/capital-gains-inclusion-rate.html, 2024.
Advisor.ca, “Lifetime Capital Gains Exemption to Top $1M in 2024,” https://www.advisor.ca/tax/tax-news/lifetime-capital-gains-exemption-to-top-1m-in-2024/, 2024.
PwC Canada, “Year-End Tax Planner,” https://www.pwc.com/ca/en/services/tax/publications/guides-and-books/year-end-tax-planner.html, 2024.
CIBC, “2024 Year-End Tax Tips,” https://www.cibc.com/content/dam/personal_banking/advice_centre/tax-savings/year-end-tax-tips-en.pdf, 2024.
Government of Canada, “Federal Budget 2024,” https://budget.canada.ca/2024/report-rapport/tm-mf-en.html, 2024.
2025 Federal Budget Highlights
2025 Federal Budget Highlights
On November 4, 2025, the budget was delivered by the Honourable François-Philippe Champagne, Minister of Finance and National Revenue.
The 2025 Federal Budget focuses on stability, simplicity, and long-term growth. There are no broad tax increases or major new spending programs. Instead, the government is emphasizing restraint, modernization, and productivity.
For individuals and business owners, the goal is clear: help Canadians access benefits more easily, encourage investment in innovation and clean energy, and update trust and estate rules to maintain fairness across the system.
Economic Overview
Canada’s federal deficit is projected at $78.3 billion for 2025–26. The government aims to stabilize the debt-to-GDP ratio while maintaining funding for priorities such as housing, defence, and clean energy.
Spending will focus on programs that improve productivity, while efficiency reviews across departments are expected to reduce overlap and administrative costs. This marks a shift toward sustainable fiscal management and practical, targeted investments.
Personal and Family Tax Measures
Several measures are designed to make life more affordable, particularly for first-time home buyers, caregivers, and lower-income households.
Eliminating the GST for First-Time Home Buyers
First-time home buyers will not pay the 5 percent federal GST on new homes priced up to $1 million. For new homes between $1 million and $1.5 million, a partial GST reduction applies. This change provides meaningful savings and makes new construction more accessible for Canadians entering the housing market.
Home Accessibility Tax Credit
Starting in 2026, expenses can no longer be claimed under both the Home Accessibility Tax Credit and the Medical Expense Tax Credit. The rule prevents duplicate claims but continues to support renovations that make homes safer and more accessible for seniors or individuals with disabilities.
Top-Up Tax Credit
To balance the reduction in the lowest federal tax bracket—from 15 percent to 14.5 percent in 2025, and 14 percent in 2026—the government introduced a Top-Up Tax Credit to preserve the value of non-refundable credits such as tuition, medical, and charitable amounts. This temporary measure, available from 2025 through 2030, ensures Canadians receive the same credit value even as rates decrease.
Personal Support Workers (PSW) Tax Credit
A new refundable tax credit equal to 5 percent of eligible income, up to $1,100 per year, will be available for certified personal support workers beginning in 2026. The measure acknowledges the importance of care professionals and provides direct relief to those in long-term and community-care roles.
Automatic Federal Benefits
Starting in 2025, the Canada Revenue Agency will begin automatically filing simple tax returns for eligible Canadians who do not normally file. This will allow low-income earners and seniors to receive benefits such as the Canada Workers Benefit, GST/HST Credit, and Canada Carbon Rebate automatically. Those with more complex financial situations will continue to file regular returns.
Registered Plans, Trusts, and Estate Planning
The budget introduces several changes affecting trusts and registered plans—key tools in long-term financial and estate planning.
Bare Trust Reporting Rules
Implementation of new bare trust reporting requirements has been delayed. The rules will now apply to taxation years ending December 31, 2026, or later. This postponement gives individuals, trustees, and professionals more time to prepare for the new filing obligations.
The 21-Year Rule for Trusts
Trusts—particularly most personal or family trusts—are generally considered to have sold and repurchased their capital property every 21 years (a “deemed disposition”). This rule prevents indefinite deferral of capital-gains tax on assets that grow in value.
When property is moved on a tax-deferred basis from one trust to another, the receiving trust normally inherits the original 21-year anniversary date so that tax timing does not reset.
Some estate-planning arrangements have transferred trust property indirectly—for example, through a corporation or a beneficiary connected to a second trust—so that the transfer did not appear to be trust-to-trust. These arrangements effectively extended the period before capital gains would be recognized.
Budget 2025 broadens the anti-avoidance rule to include indirect transfers. Any transfer of property made on or after November 4, 2025, that effectively moves assets from one trust to another will retain the original 21-year schedule.
For families that use trusts in estate or business-succession planning, this change reinforces the importance of reviewing structure and timing. Trusts remain valuable for asset protection, legacy planning, and income distribution—this update simply ensures consistent application of the 21-year rule.
Qualified Investments for Registered Plans
Beginning January 1, 2027, all registered plans—RRSPs, TFSAs, FHSAs, RDSPs, and RESPs—will follow a single harmonized list of qualified investments. Small-business shares will no longer qualify for new contributions, though existing holdings will remain grandfathered. The update simplifies compliance and clarifies which assets can be held in registered accounts.
Business and Investment Incentives
For business owners, Budget 2025 provides opportunities to reinvest, innovate, and modernize operations, with emphasis on manufacturing, research, and clean technology.
Immediate Expensing for Manufacturing and Processing Buildings
Businesses can now claim a 100 percent deduction for eligible manufacturing and processing buildings acquired after Budget Day and available for use before 2030. This full write-off improves cash flow and encourages earlier expansion. The benefit will gradually phase out after 2033.
Scientific Research and Experimental Development (SR&ED)
The refundable SR&ED tax credit limit has increased from $3 million to $6 million per year, effective for taxation years beginning after December 16, 2024. This expansion strengthens support for small and medium-sized Canadian businesses investing in innovation and technology.
Tax Deferral Through Tiered Corporate Structures
To prevent deferrals of tax on investment income, new rules will suspend dividend refunds for affiliated corporations with mismatched fiscal year-ends. This ensures consistent taxation within corporate groups and aligns refund timing with income recognition.
Agricultural Co-operatives
The tax deferral for patronage dividends paid in shares has been extended to December 31, 2030, continuing to support agricultural co-operatives and their members.
Clean Technology and Clean Electricity Investment Credits
Clean-technology and clean-electricity incentives have been expanded to include additional critical minerals—such as antimony, gallium, germanium, indium, and scandium—used in advanced manufacturing and renewable energy production. The Canada Growth Fund can now invest in qualifying projects without reducing the amount of credit companies can claim, keeping the incentive structure attractive for green investment.
Canadian Entrepreneurs’ Incentive
The government has confirmed it will not proceed with the previously proposed Canadian Entrepreneurs’ Incentive. The existing Lifetime Capital Gains Exemption remains unchanged and continues to apply to the sale of qualified small-business shares.
Tax Simplification and Repealed Measures
To simplify administration and reduce complexity, two taxes are being repealed:
– Underused Housing Tax, beginning in 2025
– Luxury Tax on aircraft and vessels for purchases made after November 4, 2025
In addition, the Canada Carbon Rebate will issue its final household payment in April 2025, with no rebates available for returns filed after October 30, 2026. These changes are meant to streamline compliance and eliminate programs that were costly to administer.
Government Direction and Spending Priorities
Beyond taxation, the budget sets out the government’s broader policy priorities.
Downsizing Government: A comprehensive efficiency review is underway to eliminate duplication across departments and generate long-term savings.
Cuts to Immigration: To ease pressure on housing and infrastructure, temporary-resident levels will be reduced by about 20 percent over two years, while maintaining pathways for essential workers.
Defence Spending: Canada will invest an additional $7 billion over five years to strengthen NATO participation, Arctic defence, and cybersecurity. By 2030, defence spending is expected to reach 1.8 percent of GDP.
Oil and Gas Emission Cap: A phased-in cap starting in 2026 will allow companies to meet targets through carbon-capture and clean-tech investments rather than penalties.
Final Thoughts
For individuals, the most relevant updates include GST relief for first-time home buyers, improved benefit access, and continued tax relief for caregivers and support workers. For business owners, the focus remains on productivity—through immediate expensing, expanded SR&ED credits, and clean-tech investment incentives. For families using trusts or inter-generational structures, the clarified 21-year rule reinforces transparency in estate planning.
If you’d like to review what these changes mean for you or your business, please get in touch. We can look at your goals and make sure you’re well prepared for the year ahead.
Why a Critical Illness Insurance Top-Up Could Make a Big Difference
Most of us don’t expect to face a serious illness in our lifetime. But the truth is, health challenges such as cancer, heart disease, or stroke are more common than many people realize. In fact, about half of Canadians will develop cancer at some point in their lives. The question is—would your family or business be financially ready if something unexpected happened?
Critical illness insurance is designed to provide a lump-sum payment if you’re diagnosed with a covered illness. Many employees have some level of coverage through work, and some business owners purchase policies personally. But here’s the challenge: the amount of coverage included in a standard policy often isn’t enough to fully protect your income, household, or business. That’s where a “top-up” comes in.
Adding extra coverage can help close the gap, offering peace of mind and flexibility at a time when you’d want to focus fully on recovery.
Understanding the gap in coverage
Group insurance provided through an employer is a valuable benefit, but it usually comes with limits. For example, coverage amounts may be capped at a set level, such as $25,000 or $50,000. While helpful, this amount might not go far if you’re facing months away from work or costly medical treatments not fully covered by government health care.
For families, this shortfall can mean dipping into savings or going into debt just to keep up with everyday bills. For business owners, it could mean not having enough cash flow to keep operations running smoothly while stepping away to focus on health. A top-up ensures your coverage reflects your actual financial responsibilities, not just a general amount offered in a group plan.
Why families consider a top-up
If you’re raising children or supporting loved ones, an unexpected illness can bring financial stress on top of emotional strain. Mortgage payments, daycare costs, grocery bills, and education savings don’t pause when life takes a turn. A top-up can provide additional funds to help cover household expenses or even allow a spouse to take time off work to provide care.
Think of it as a financial cushion that allows your family to focus on what matters most—supporting your recovery—without the added worry of how to make ends meet.
Why employees might need more than their work plan
Relying only on your workplace benefits can leave you underinsured. Employer coverage usually ends if you change jobs, retire, or if your company makes changes to its benefits package. That means you could lose coverage at a time when it might be harder to qualify for new insurance.
By topping up your coverage personally, you’re not only increasing your protection—you’re also making sure you have something portable that stays with you, no matter where your career takes you. This stability can be especially valuable for professionals in industries where job changes are common.
Why business owners look at top-ups differently
For business owners, the stakes are even higher. A serious illness doesn’t just affect you personally—it can affect your entire company. From paying employees and suppliers to covering rent and utilities, your business may still need to run while you’re focused on treatment and recovery.
A top-up can provide a financial buffer to keep things running smoothly. It may also give you flexibility to hire temporary help, reduce workload, or take the time you need without rushing back before you’re ready. This not only protects your own livelihood but also helps safeguard your employees and clients who depend on you.
The benefits of a top-up
When deciding whether to add more coverage, here are some of the benefits families, employees, and business owners often value:
- Peace of mind: Knowing you’re covered beyond the basics can relieve stress.
- Financial flexibility: The lump-sum payment can be used for anything—from medical costs to everyday expenses.
- Control: Unlike some insurance benefits, you choose how the funds are used.
- Portability: A personal top-up stays with you, even if your job changes.
- Business continuity: For entrepreneurs, extra coverage can help keep the business stable while you recover.
At its core, a critical illness insurance top-up is about creating a stronger safety net. It’s about having the right level of protection for your specific needs, rather than relying on a “one-size-fits-all” amount that may fall short.
Life is unpredictable, but preparing for the unexpected can make a big difference. By topping up your coverage, you’re helping ensure that if illness strikes, you and your loved ones can focus on what really matters—healing and moving forward.
If you’re unsure how much coverage is right for you, it may help to review your current benefits, your family’s expenses, and any business obligations you’re responsible for.
This is for informational purposes only and does not constitute financial, legal, or tax advice. Always consult a qualified professional regarding your specific situation. We are not responsible for any actions taken based on this content.
2024 Year-End Tax Tips and Strategies for Business Owners
As a business owner, managing your finances well can make a big difference for your business’s future. Whether it’s choosing how to compensate yourself or making the most of opportunities like the small business deduction and lifetime capital gains exemption, thoughtful planning can help you save on taxes. This guide offers practical tips to help you make informed decisions.
Salary and RRSP Contributions
Taking a salary from your corporation can help reduce the company’s taxable income while creating RRSP contribution room for you. In 2024, a salary of up to $180,500 allows you to maximize your RRSP contribution room for 2025, which is $32,490.
Dividends
Dividends offer another way to take income from your business. They’re paid from the corporation’s after-tax income, but thanks to the dividend tax credit, they’re often taxed at a lower rate than salary.
Compensating Family Members
If family members are involved in your business, paying them can be a practical and tax-efficient option:
-
Salaries to Family Members: Paying a fair salary to family members who work for your business not only compensates them but also gives them access to RRSP contributions and CPP. You must be able to prove the family members have provided services in line with the amount of compensation you give them.
-
Dividends to Family Members: If family members are shareholders, dividends can provide them with tax-efficient income. The tax-free amount varies by province or territory, so it’s worth checking the rules where you live.
-
Income Splitting: Distributing income among family members can help reduce overall taxes. However, be mindful of the Tax on Split Income (TOSI) rules to avoid penalties. A tax professional can guide you through this process.
Deferring Income
If you don’t need the full amount for personal use, leaving surplus funds in the corporation could be a smart move. This keeps the money invested within the business, benefiting from lower corporate tax rates. Over time, this approach may allow the funds to generate more income compared to personal investing, depending on your goals and investment strategy. However, be mindful of passive investment income limits, as exceeding $50,000 in passive income could reduce or eliminate your corporation’s access to the small business deduction. Monitoring this threshold is essential to maintaining the tax advantages available to your business.
Compensation
It’s always a good idea to review how you handle compensation beyond base salary.
Consider these options:
-
Shareholder Loans: Borrow funds from your corporation with deductible interest but ensure repayment to avoid personal tax.
-
Profit-Sharing Plans: These can be a tax-efficient alternative to bonuses for distributing profits.
-
Stock Options: Only the employee or employer—not both—can claim a deduction when options are cashed out.
-
Retirement Plans: Explore setting up a Retirement Compensation Arrangement (RCA) to save for retirement tax-efficiently.
Passive Investments
Canadian-controlled private corporations (CCPCs) benefit from a reduced corporate tax rate on the first $500,000 of active business income, thanks to the small business deduction (SBD). The SBD can lower the tax rate by 12% to 21%, depending on your province or territory.
However, passive investment income over $50,000 in the previous year reduces the SBD by $5 for every additional dollar, potentially eliminating it altogether. To maintain access to the SBD, it’s important to keep passive investment income below this threshold.
Here are some strategies to help preserve your SBD:
-
Defer Portfolio Sales: Delay selling investments that generate capital gains if possible.
-
Optimize Your Investment Mix: Focus on tax-efficient investments like equities over fixed income.
-
Exempt Life Insurance Policies: Income earned within these policies isn’t included in your passive investment total.
-
Individual Pension Plan (IPP): This defined benefit plan is exempt from passive income rules and offers tax-advantaged retirement savings.
-
Consider Corporate Class Mutual Funds: These funds offer tax-efficient growth by deferring taxable distributions. While recent tax changes have limited their benefits, they remain a viable option for minimizing taxable passive income.
Carefully managing passive investments can help your business maintain access to the SBD and maximize its tax advantages for continued growth.
Capital Gains Inclusion Rate Increase
With recent changes to the capital gains inclusion rate, business owners personally holding investments with unrealized gains may want to consider realizing up to $250,000 in capital gains in 2024. This approach allows you to benefit from the lower tax rate on gains within this threshold, provided it aligns with your overall financial strategy.
Tax-Free Dividends
If your corporation has investments with losses that haven’t been sold yet, it’s a good idea to check the balance of its Capital Dividend Account (CDA) before selling. The CDA keeps track of the non-taxable portion of capital gains and some other amounts. You can pay tax-free dividends to shareholders using this account if you don’t go over the balance. However, if you sell investments at a loss, the CDA balance will go down, which might reduce or even remove your ability to pay these tax-free dividends. To avoid this, think about paying out any available tax-free dividends before selling investments at a loss.
Business Transition
If you’re planning to transition your business and believe its value has decreased, now might be a good time to explore options like an estate freeze or refreeze as part of your strategy.
Lifetime Capital Gains Exemption (LCGE)
The 2024 Federal Budget increased the LCGE from $1,016,836 to $1.25 million as of June 25, 2024. This allows you to benefit from tax savings on up to $1.25 million in capital gains over your lifetime when selling qualifying small business shares, farm properties, or fishing properties. Ensuring your corporate shares qualify for this exemption can help reduce the tax burden when selling or transferring your business.
Canadian Entrepreneurs’ Incentive (CEI)
The 2024 Federal Budget also introduced the Canadian Entrepreneurs’ Incentive (CEI) to lower taxes on selling qualifying shares. Starting June 25, 2024, the CEI reduces the taxable portion of capital gains to one-third for gains over $250,000 on qualifying sales.
In 2025, the CEI will go even further, lowering the taxable portion of capital gains to half the usual amount for up to $2 million in lifetime gains. This $2 million limit will start at $400,000 in 2025 and increase by $400,000 each year until it reaches $2 million in 2029.
To use the CEI, the shares must meet certain rules. However, it does not apply to shares of professional corporations or businesses focused on financial services, insurance, real estate, food and accommodation, arts, recreation, entertainment, consulting, or personal care services.
Together, the LCGE and CEI offer tax savings for business owners when selling or passing on their businesses.
Employee Ownership Trusts (EOT)
An EOT is a way for employees to own a business. A trust holds shares of the business on behalf of the employees, so they don’t have to pay directly to buy shares themselves.
Starting in 2024, EOTs are allowed in Canada. If a business is sold to an EOT in 2024, 2025, or 2026, the first $10 million in capital gains from the sale is tax-free, if certain conditions are met. This $10 million limit applies to the entire business, not to each individual shareholder. If multiple people sell shares to an EOT as part of the sale, they can each claim part of the exemption, but the total claimed by everyone combined can’t be more than $10 million. All sellers must agree on how to split the exemption.
Depreciable Assets
Purchasing depreciable assets can be a smart tax planning move, as they allow you to claim Capital Cost Allowance (CCA) to reduce taxable income.
To maximize the benefits:
-
Take advantage of the Accelerated Investment Incentive, which offers an enhanced first-year CCA for eligible assets.
-
Postpone selling depreciable assets if it could trigger recaptured depreciation in your 2024 tax year.
Timing your asset purchases and sales can help optimize your tax savings.
Donations
Making donations, whether charitable or political, can provide valuable tax benefits. To maximize these advantages, consider options like:
-
Donating securities
-
Giving a direct cash gift to a registered charity
-
Using a donor-advised fund for ongoing charitable contributions
-
Setting up a private foundation
-
Donating a life insurance policy by naming a charity as the beneficiary or transferring ownership.
Each option offers unique tax advantages depending on your situation.
Final Corporate Tax Balances
Pay your corporate taxes within two months of year-end (or three months for some CCPCs) to avoid interest charges that can’t be deducted.
Contact Us
For guidance on implementing these strategies, connect with your trusted tax professional. If you’d like to discuss how these tips align with your overall plan, let’s schedule a meeting.
Sources:
CPA Canada, “2024 Federal Budget Highlights,” https://www.cpacanada.ca/-/media/site/operational/sc-strategic-communications/docs/02085-sc_2024-federal-budget-highlights_en_final.pdf?rev=6d565a6a66ef4e20b1e01dc784464c93, 2024.
Government of Canada, “Capital Gains Inclusion Rate,” https://www.canada.ca/en/department-finance/news/2024/06/capital-gains-inclusion-rate.html, 2024.
Advisor.ca, “Lifetime Capital Gains Exemption to Top $1M in 2024,” https://www.advisor.ca/tax/tax-news/lifetime-capital-gains-exemption-to-top-1m-in-2024/, 2024.
PwC Canada, “Year-End Tax Planner,” https://www.pwc.com/ca/en/services/tax/publications/guides-and-books/year-end-tax-planner.html, 2024.
CIBC, “2024 Year-End Tax Tips,” https://www.cibc.com/content/dam/personal_banking/advice_centre/tax-savings/year-end-tax-tips-en.pdf, 2024.
Government of Canada, “Federal Budget 2024,” https://budget.canada.ca/2024/report-rapport/tm-mf-en.html, 2024.
How to Choose and Customize a Group Benefits Plan for Small Businesses
Building a Bright and Sustainable Future Together
As a small business owner, you recognize the significance of looking after your team and fostering a nurturing work environment. One method to demonstrate this is by providing a robust group benefits plan. This not only reflects your dedication to your team’s well-being but also is instrumental in drawing and retaining the best talent. Dive into the realm of group benefits and discover how to select and tailor the ideal plan for your small enterprise.
Understanding the Basics of Group Benefits
Group benefits plans are crafted to offer a variety of health, financial, and wellness advantages to your team members. These packages can encompass health and dental insurance, life and disability insurance, retirement savings alternatives, and more. The main benefit of a group benefits plan is its ability to distribute the risk among your team, making coverage more cost-effective and reachable for all.
Step 1: Assess Your Business Needs
Before diving into a group benefits plan, it’s vital to evaluate the requirements of your business and your team. Ponder over these questions:
- What’s the profile of your workforce? Think about age, family composition, and health statuses.
- Which benefits are most cherished by your employees? Is it health insurance, dental care, or retirement savings?
- How much can you allocate for group benefits? Keep in mind, offering benefits is a commitment to your team’s welfare.
Step 2: Collaborate with a Benefits Specialist
Teaming up with a benefits specialist is akin to having a navigator on your quest to devise the perfect plan. They will assist you in traversing the intricate landscape of insurance choices, rules, and compliance mandates. They’ll engage closely with you to grasp the distinct needs of your business and craft a plan that matches your budget and principles.
Step 3: Customize Your Plan
Adaptability is paramount when shaping a benefits plan that appeals to your team. Here are some avenues for personalization:
- Benefit Choices: Opt for a blend of health, dental, vision, life, and disability insurance based on what your team values.
- Wellness Initiatives: Mull over introducing wellness programs such as fitness center memberships, mental health resources, and stress alleviation workshops.
- Retirement Schemes: Offer retirement savings avenues like a Group RRSP or a staff pension scheme.
Step 4: Educate Your Employees
The efficacy of a group benefits plan hinges on transparent communication and enlightenment. Ensure your team comprehends the worth of the benefits provided and the methods to utilize them optimally. Arrange seminars, online sessions, or informational meetups to aid them in making knowledgeable choices about their coverage.
Step 5: Regularly Review and Adjust
The dynamics of your business and the needs of your team will transform over time. Hence, it’s crucial to revisit your group benefits plan annually and make requisite modifications. This guarantees that your plan stays in sync with your objectives and consistently delivers value to your team.
Building a Sustainable Future Together
As you embark on the path of picking and personalizing a group benefits plan for your small enterprise, bear in mind that your collaboration with your team is central to the process. By placing their welfare at the forefront and presenting a comprehensive benefits package, you’re not merely paving a brighter path for your team but also cultivating a sustainable work setting that promotes allegiance, efficiency, and expansion.
What is disability insurance?
If you cannot work because you are seriously injured or ill, disability insurance will provide you with a monthly, tax-free income to help replace your lost wages. An injury does not have to be as blatant as a broken leg or arm – suffering from chronic pain or dealing with mental health issues can also qualify you for a disability insurance payout.
Why do I need disability insurance?
Unfortunately, people become disabled – whether temporarily or permanently – quite often. In 2017, over 20 percent of Canadians had one or more disabilities.
If you’re disabled, you may lose one of your most valuable assets – your ability to work and bring in a paycheck. Disability insurance can help replace that paycheck for as long as you need it to. Being able to rely on a disability insurance payout means you won’t have to dip into your savings if anything happens to you.
Disability insurance is especially important if you are self-employed, particularly if you are the family’s sole income earner.
What if I already have disability insurance through work?
If you have disability insurance through work, that’s great – but it may not replace 100 percent of your paycheck, especially if you’re off work for a long time. If you purchase private disability insurance, you can:
- Choose how much coverage you want.
- Adjust your coverage as needed.
- Not have to worry if you leave your employer – you won’t lose your disability insurance coverage.
Having private disability insurance will give you peace of mind that you either have additional coverage if you are employed and at least some disability coverage if you lose your job.
How does disability insurance work?
We’d be happy to answer any questions you have about disability insurance. There are five main steps to disability insurance:
- Determine the amount of coverage you want. The higher your salary, the more coverage you should get.
- Pay your monthly premiums. Factors like your health, your age, and the amount of coverage you have will all impact the cost of your premiums.
- File a claim if you become disabled – we can help you with this.
- Receive your monthly payments once your waiting period has passed – a longer waiting period can lower your premiums, but it does mean you’ll go longer without any income.
- When you are healthy enough to return to work, or your coverage period runs out, you will stop receiving disability insurance payments.
We’re Here To Help
If you’d like to know more about disability insurance – from how much it would cost you to what you can file a claim for – we’re here to help! Give us a call today.
Network of Professionals
Our Network of Professionals
As a financial advisor, my primary goal is to help you achieve financial clarity. I do this by accessing a network of dedicated professionals, each bringing their unique expertise to the table. Together, we provide personalized advice and services that help you make informed decisions and secure your future.
Financial Advisor
Think of me as your financial coordinator. I help you figure out your goals, create plans to achieve them, and keep everything on track. Whether it’s planning for retirement, managing investments, or saving for a major purchase, I have access to a network of professionals who ensure every aspect of your financial life works together smoothly.
Accountant/Tax Professional
Having an accountant or tax professional in your financial network is essential for keeping your financial records in order. They handle tasks like bookkeeping, preparing financial statements, and assisting with tax planning. Their role is particularly important during tax season. They help you file your taxes accurately and on time, taking the stress out of the process. By optimizing your tax strategies and ensuring everything is reported correctly, they help you save money. Their skills are invaluable for both your immediate needs and long-term financial planning.
Investment Advisor
Investment advisors focus on building and managing investment portfolios tailored to your short-term, medium-term, and long-term goals. They thoroughly research the market, evaluate investment opportunities, and offer valuable insights to help you create a well-rounded portfolio. Whether you’re saving up for a major purchase, planning for retirement, or aiming for other financial milestones, they assist in choosing the right investment vehicles, such as RRSPs, TFSAs, RRIFs, and non-registered accounts, to support your financial stability and future needs.
Life Insurance and Living Benefits Advisor
Life insurance and living benefits advisors are here to help you protect your greatest asset: yourself. Their job is to make sure you and your family are financially secure if unexpected events occur. These advisors walk you through different insurance options, including disability insurance, critical illness insurance, and life insurance, to find the coverage that fits your needs best. By understanding your unique situation and recommending the right policies, they provide you with peace of mind, knowing that you have a safety net in place for life’s uncertainties.
General Insurance Specialist
General insurance specialists cover a wide range of insurance needs, including auto, property, travel, and liability insurance. They assess your risks and recommend policies that provide the protection you need. Their advice helps you understand your options, compare quotes, and select the best policies to safeguard your assets, ensuring you are well-protected in various aspects of your life.
Banker
Bankers are there to help you navigate a wide range of financial services, especially when it comes to getting loans and credit products. They offer advice on securing personal loans, understanding credit options, and managing debt effectively. Whether you’re looking to finance a major purchase, consolidate debt, or build your credit, bankers provide the support and guidance you need to make informed financial decisions.
Mortgage Broker
Mortgage brokers assist you in securing financing for property purchases by accessing multiple lenders on your behalf. They assess your financial situation, compare mortgage products from various sources, and recommend the best options for you. With their ability to shop around and understand different interest rates, loan terms, and application processes, they ensure you get the best possible mortgage deal, making homeownership more accessible and affordable.
Realtor
Realtors are your go-to professionals for buying or selling property. They provide market insights, negotiate deals, and manage the legal aspects of real estate transactions. With their knowledge of local market trends and property values, realtors help you make informed decisions whether you’re purchasing a home, investing in real estate, or selling property.
Legal & Estate Professional
Legal and estate professionals play a vital role in your financial planning by handling the legal side of things, such as estate planning, wills, trusts, and probate. They make sure your assets are distributed according to your wishes and that all the necessary legal documents are properly set up. Their guidance helps you reduce estate taxes and smoothly navigate the legal processes, ensuring your wealth is transferred to future generations just as you intended.
Having a network of financial professionals is essential for achieving financial well-being. Each member brings their own expertise to address different aspects of your finances, from investments and insurance to legal and real estate matters. As your financial advisor, I act as the coordinator, ensuring that all these professionals work together seamlessly. By leveraging their combined knowledge and skills, you can gain financial clarity and know that every aspect of your financial life is taken care of.
Ready to take control of your financial future? Contact us today.
