What We Do...
According to a recent big bank report, at least 46% of Canadians don't have a financial plan. We're willing to bet that many of those that do have a plan are lacking a clear connection between their tax and investment strategies.
Tax can easily eat up the majority of your family's earnings and investment returns. In fact, a poorly designed financial plan can drain your returns by up to 53.53% in Ontario.
To put that into perspective, a 10% pre-tax return, if structured incorrectly, can end up being reduced to 4.65%. And that can be reduced to even less if money is moved between your corporation and yourself.
Let's look at an example...
Mr. and Mrs. Smith own a small, incorporated business generating a profit of about $150,000 per year after they pay themselves a reasonable salary and corporate taxes.In total, the Smiths lost $143,451 to tax in the first year of their rental operations, and will continue to lose about $6,500 per year thereafter.
The Smiths would like to build equity to support their retirements and build a legacy for their children. They've decided to start building a portfolio of investment properties.
In order to do so, they required a down payment of $150,000 for the first property. So, they withdrew the money from their corporation and paid personal taxes of $137,028, or 47.74%.
They found a property that generated a $12,000 annual pre-tax profit leading to $6,423 of annual tax, a whopping 53.53%!
This could have all been avoided with proper planning and structuring (CLICK HERE to learn more about properly structuring small business investments).
In fact, a proper structure could have deferred 100% of that taxation leading to a faster accumulation of wealth and a far more robust estate to leave as a legacy in the future. Yes, they could have reduced that tax bill to $0!
At Campanella McDonald LLP this is what we do. We integrate your tax and financial plans to help you and your family achieve long-term financial success.
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