Incorporated Professional
An incorporated professional with cash piling up in the company
Situation
A self-employed consultant billing through a corporation. Personal spending is modest, so retained earnings have grown well past what the business needs.
The Question
Should I pay this out as dividends, leave it in the company, or invest it inside the corporation?
The Planning
Set the salary-dividend mix with the accountant (salary creates RRSP room and CPP entitlement), keep the surplus invested corporately with attention to the passive-income rules, and consider a corporately-held policy for the portion not needed for decades.
The Outcome
The surplus is growing in the right place, and the eventual route out of the corporation is planned rather than improvised.
This case is a composite of common situations, with details changed; it does not describe a specific client. Actual results vary.