• Last Updated:
  • Jul 12th, 2017 5:49 pm
[OP]
Member
Jul 5, 2006
379 posts
99 upvotes

Money in business account

I have some money in my business account. I cannot take it out due to tax inefficiency. I wonder what I can do with this money. I was told the tax charged on the stock/mutual fund investment is very high since it is not from core business. I would like to find an efficient way to invest the money. Leave the money in the business account until I retire and then withdraw as dividend. It works somehow like RSP. Is my understanding correct?
6 replies
Deal Addict
Jul 21, 2005
1030 posts
262 upvotes
right4you wrote:
Jun 24th, 2017 9:19 pm
I have some money in my business account. I cannot take it out due to tax inefficiency. I wonder what I can do with this money. I was told the tax charged on the stock/mutual fund investment is very high since it is not from core business. I would like to find an efficient way to invest the money. Leave the money in the business account until I retire and then withdraw as dividend. It works somehow like RSP. Is my understanding correct?
Are you planning on keeping the company running until you retire? I don't really have investment advice, but from the sounds of it, it seems like the company isn't generating any future cash flow from business activities? If you are keeping the company alive just to not payout the dividend now, it seems like you will be wasting more over time in terms of tax returns/business license fees ect.
Deal Addict
Oct 7, 2007
3024 posts
675 upvotes
right4you wrote:
Jun 24th, 2017 9:19 pm
I have some money in my business account. I cannot take it out due to tax inefficiency. I wonder what I can do with this money. I was told the tax charged on the stock/mutual fund investment is very high since it is not from core business. I would like to find an efficient way to invest the money. Leave the money in the business account until I retire and then withdraw as dividend. It works somehow like RSP. Is my understanding correct?
You can invest it according to your risk tolerance within your business account assuming your business is incorporated. However, if the business is not producing active business income but only investment income you may find that any earnings in the business are taxed at the same rate as your investments outside the business. Nonetheless, you can leave the money in there and withdraw funds in years when your earnings are low to manage your taxes appropriately. You are correct in thinking of it like an RSP. It is money that must be managed properly to ensure your taxes are appropriate.
Deal Addict
Sep 12, 2006
1149 posts
182 upvotes
right4you wrote:
Jun 24th, 2017 9:19 pm
Leave the money in the business account until I retire and then withdraw as dividend. It works somehow like RSP. Is my understanding correct?
Kind of like a cash RSP, yes. You don't pay tax on this money until you take it out, at which point you'll be in a lower tax bracket.

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