# Trusts? Corporate Structure to Minimize Taxes



## rnorman3 (Aug 30, 2012)

Hello all, I'm preparing to setup a corporation. I'm trying to determine the best structure to keep taxes to a minimum. I'm married and my wife currently has no income. My determination so far is that the immediate biggest tax savings will come from income splitting.

I have a good grip on the corporate tax and personal income tax and how they work together, i.e. running several scenarios with various combinations of salary payout, dividends, RRSP room/contributions, etc... to reduce the overall tax payout.

So the only question I have is about Trusts. People I talk to mention setting up a trust to reduce taxes. I assume the corporate income is somehow transferred to the trust, and then transferred to beneficiaries of the trust. Can anyone describe such a process?

(Before you ask, I'll state the obvious, no I do not have an accountant or lawer, should I get one? Probably.)

Thanks!
Richard


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## Homerhomer (Oct 18, 2010)

All the loopholes with trusts have pretty much been closed as far as I know and I doubt you will find any tax savings there, and yes you should find a good accountant and lawyer.


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## FrugalTrader (Oct 13, 2008)

+1 on getting a good accountant/lawyer combo to set this up for you. For us, we setup a corporation for dividend sprinkling. Basically various classes of shareholders so that the corp can dividend out to separate classes. You can read more about my setup here:

http://www.milliondollarjourney.com/tax-strategy-dividend-sprinkling.htm


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## rnorman3 (Aug 30, 2012)

*Accounting Costs?*



Homerhomer said:


> and yes you should find a good accountant and lawyer.


Thanks Homerhomer, while I'm not totally opposed to getting a lawyer and accountant, there's a lot to be said for someone that takes the time and effort to do it properly themselves, which also gives them a good understanding of what they can and can't do, should or should not do while running the business. I called large firms like PWC and BDO and they indicated such services could cost up to $6000/year depending on how much you were willing to do yourself and how complex the business is. What price range do you figure a simple business (corporation, paying 2 salaried employees monthly remittance, & year end dividends, year end T2, 2 personal tax's, GST payments, and initial incorporation, filing articles etc..., anything else I forgot, would run me?)


Thanks!!!


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## Young&Ambitious (Aug 11, 2010)

You will definitely need a tax accountant to arrange your set up re corporation, holding co and/or family trusts. If you have enough assets arranging for an inter vivos trust upon the death of yourself or your spouse may also be recommendable.


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## rnorman3 (Aug 30, 2012)

*Advise?*

Hi all, thanks for the replies so far...however...mostly they just say "get an accountant and lawyer". Is it just me or does it seem like saying that kind of negates the entire purpose of this forum?

My original question was does anyone know a process by which a trust can be used to reduce taxes at the personal or corporate level. Homerhomer doubted it could be done, any answers other than get an accountant and lawyer?

Thanks!


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## MoneyGal (Apr 24, 2009)

Young&Ambitious said:


> You will definitely need a tax accountant to arrange your set up re corporation, holding co and/or family trusts. If you have enough assets arranging for an inter vivos trust upon the death of yourself or your spouse may also be recommendable.


Do you mean a testamentary trust? You can't create an inter vivos trust at your death: by definition, it is a trust created while you are alive.


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## Brenner (Jan 17, 2012)

rnorman3 said:


> Thanks Homerhomer, while I'm not totally opposed to getting a lawyer and accountant, there's a lot to be said for someone that takes the time and effort to do it properly themselves, which also gives them a good understanding of what they can and can't do, should or should not do while running the business. I called large firms like PWC and BDO and they indicated such services could cost up to $6000/year depending on how much you were willing to do yourself and how complex the business is. What price range do you figure a simple business (corporation, paying 2 salaried employees monthly remittance, & year end dividends, year end T2, 2 personal tax's, GST payments, and initial incorporation, filing articles etc..., anything else I forgot, would run me?)
> 
> 
> Thanks!!!


Honestly the structure of the large accounting firms, like PWC and BDO, make them uncompetitive cost wise vs an independent accountant for small to medium business (Less than $10 mil net worth). The layers of management and specialists will inflate their bill to you without any added benefit. Basically you are being over charged to subsidize the cost of those people so they can stay competitive in their big corp and public sector accounts. They've been trying to get better lately, creating "small business" or "private enterprise" divisions but I still think you are better off finding a quality independent accountant, who on those rare situations can give a specialist a call if need be.


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## Homerhomer (Oct 18, 2010)

Brenner said:


> Honestly the structure of the large accounting firms, like PWC and BDO, make them uncompetitive cost wise vs an independent accountant for small to medium business (Less than $10 mil net worth). The layers of management and specialists will inflate their bill to you without any added benefit. Basically you are being over charged to subsidize the cost of those people so they can stay competitive in their big corp and public sector accounts. They've been trying to get better lately, creating "small business" or "private enterprise" divisions but I still think you are better off finding a quality independent accountant, who on those rare situations can give a specialist a call if need be.


I agree, large accounting firms are not a good fit for small corporations, they are better for large or publiclty traded companies.

The cost would largely depend on how much you do yourself but also on the complexity of your structure (which your post indicates that you may want to complicate a bit) as well as where you are, in Toronto you most likely will be charged more than if you are for example in Thunder Bay.
Based on the intial post I have impression that the initial set up and consultation may be a bit more expensive because you should get in touch not just with any accountant, but an accountant who is highly specialized in taxes, and those can run you over $300 per hour, however your annual cost assuming you do your own bookkeeping and have a clean file (you can do your own T4 and GST, these are easy), one T2 and couple of personal tax returns, cost should be $2000 or less, depending on where you are. The smaller the accounting firm the less overhead, hence better chance of getting good value. Mid size and large accounting firms don't always equal great service, many of their employees are simply students doing their hours, and in many cases they know less about tax then you ;-)


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## Homerhomer (Oct 18, 2010)

rnorman3 said:


> Hi all, thanks for the replies so far...however...mostly they just say "get an accountant and lawyer". *Is it just me or does it seem like saying that kind of negates the entire purpose of this forum*?
> 
> My original question was does anyone know a process by which a trust can be used to reduce taxes at the personal or corporate level. Homerhomer doubted it could be done, any answers other than get an accountant and lawyer?
> 
> Thanks!


I don't think so, there were many questions answered in this forum in details, however at times the forum like this should be used as nothing more than another piece of info and at the end of the day it is best to sit down with someone who may be able to give you best advise based on your exact situation.

I personally think that the usuefullness of trusts has been limited (if not eliminated) for the most part (except estates and so on) in the recent years, however I would be happy if someone can provide info to the contrary.
Obviously your accounting cost will go way up if you have a trust ;-)


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## andrewf (Mar 1, 2010)

Perhaps a related question, but what assets in a diversified portfolio are the best option for a holding company, from a tax perspective. Canadian equities?

Or is it better to try and wind down a private corp through dividends to shareholders and investing personally in a non-registered account?


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