There are a few things business owners can put in place to save money now and in the future.

Incorporation: The corporate tax rate is 13.5% on small business income versus the highest marginal personal tax rate of 43.7%. Incorporating also provides the ability to income split with a spouse if they hold shares. Have your lawyer create several different classes of shares for flexibility saving money down the road when allowing employees or children to subscribe for shares without altering the share structure.

Family Trust: If you have children approaching or at 18 years of age, set up a family trust and have the trust own non-voting shares of the company. The family trust allows the income to flow to the kids without them holding shares and therefore any control over the company. Each child can receive $35,000 of dividends each year and pay virtually no tax, saving over $10,000 a year for each child.

Holding companies: If multiple shareholders, each shareholder can take dividends from the business by way of a holding company and take personal income depending on their personal cash flow needs independent of what the other shareholder does.

This article is contributed by Andrea Milne of Strategex Group Chartered Accountants. For more information, please visit www.strategexgroup.ca.