Original post here.
This guide outlines four practical rules to help Canadian founders build a more tax-efficient business structure. Learn how entity type, compensation planning, holding companies, and future-ready structuring can reduce risk, increase tax savings, and support long-term growth.
Why You Should Optimize Your Business Structure
Your structure affects how much tax you pay, how protected your money is, and how flexible you are as you grow. Small adjustments can create long-term savings.
Rule #1: Choose the Right Entity Type
Your entity sets the foundation for everything: tax rates, liability, compensation options, and long-term planning.
Quick breakdown:
• Sole Proprietor – simple, but limited tax strategy
• Corporation – lower tax rates, access to dividends, HoldCo planning, LCGE eligibility, better risk separation
What’s in it for you:
If you want real flexibility with income, tax planning, and growth, incorporation is often the turning point.
Rule #2: Separate Personal & Corporate Income Streams Intentionally
Your structure should give you flexibility in how you pay yourself – not lock you into one method.
Consider:
• Salary (RRSP room, predictable cash flow)
• Dividends (generally lower tax rate, simpler administration)
• A mix of both based on cash needs and long-term plans
What’s in it for you:
More control when planning around income, taxes, and retirement.
Rule #3: Use a HoldCo to Protect Cash & Enable Strategic Planning
A Holding Company is a practical tool many founders use to manage risk and grow wealth more effectively.
What a HoldCo can help with:
• Move after-tax profits out of your OpCo
• Protect accumulated profits from business liabilities
• Reinvest capital
• Prepare for future tax planning
What’s in it for you:
Flexibility, protection, and more room to plan several years ahead.
Rule #4: Build a Structure That Supports Future Transactions
Even if you’re not planning to sell now, your structure should allow you to without a major cleanup later.
What this includes:
• Using the correct share classes
• Structuring the company to qualify for the Lifetime Capital Gains Exemption (LCGE)
• Planning for future investors or partners
• Keeping the business “clean” so it’s attractive to buyers
What’s in it for you:
Optionality. Your structure won’t limit future opportunities.
Your Next Step
Most founders only revisit structure when something breaks. The best ones review it before they scale.
If you want a structure that reduces tax, supports growth, and leaves room for future planning, we help Canadian founders rethink their financial foundation, simply and strategically.
