Hot Tips (Estate Planning) Asset Protection Tip Consider issuing security to protect shareholders loans and advances to the company. Personal Guarantees Tip Always seek competent legal advice before signing guarantees. Especially when giving spousal guarantees. Incorporation Tip #1 Provide for one of more classes of fair market value shares to deal with a future estate freeze, reorganization or transfer of assets. Incorporation Tip #2 - Family Law and Creditor Considerations, Asset Protection Consider having parents, relatives or siblings incorporate your company and own the shares. You would of course be the director or an alternative designate to be liable for all issues pertaining to directors' liability. Before considering or completing the above there are additional critical steps to ensure preservation and control of your estate. Incorporation Tip #3 When incorporating a holding company or doing an estate freeze, use different classes of participating shares to be held by holding company and individual shareholders. This allows the operating company to pay dividends to the holding company tax free. This also maintains individual entitlement to the capital gains exemption. Incorporation Tip #4 - Directors Liability, Asset Protection Think of a director as a guarantor of all government remittances, payroll and related corporate liabilities. Be extremely cautious when acting as a director. Too often family members are inadvertently dragged into someone else's business failure. Why Incorporate your business? Advantages Flexible Year End - choose the year end that is right for your business. Unincorporated businesses must use December 31; not exactly the best time to plan for bonuses and RRSP contributions. · More opportunities for year end and personal planning · Ability to shelter your highest marginal income in a low tax bracket · Creditor proofing by filing a general security agreement · Income splitting by shares and dividends · Use of a Family Trust for share ownership · Capital Gains Exemption · Protect your personal credit rating · Creditor proof your personal estate · Limited Liability · Ability to limit your liability with respect to Government Remittances · Family Law and Spousal proofing, ability to shift assets or business. · Sometimes easier to bank · Ability to crystallize losses and to better smooth out business fluctuations in income · Inter-generational business continuity · Employee incentives through Phantom Stock plans · Clear separation of business and personal assets Disadvantages · Requirement to file corporate income tax returns in addition to personal returns · Cost of maintenance, minute books, accounting and legal fees · Must pay a salary or dividend to the shareholder and make monthly remittances · Potential for double taxation in both the estate and with any assessed personal benefits See Also:  Income Tax  |  Other Tips