10 Essential Decisions for Business Owners

10 Essential Decisions for Business Owners

Business owners are busy… they are busy running a successful business, wearing lots of hats and making a ton of decisions. We’ve put together a list of 10 essential decisions for every business owner to consider; from corporate structure to retirement and succession planning:

  • Best structure for your business (ex. Sole Proprietor, Corporation, Partnership)

  • Reduce taxes

  • What to do with surplus cash

  • Build employee loyalty

  • Reduce risk

  • Deal with the unexpected

  • Retire from your business

  • Sell your business

  • Keep your business in the family

  • What to do when you’re retired

As a financial advisor, we are uniquely positioned to help business owners, talk to us about your situation and we can provide the guidance you need.

Insurance Planning for Young Families

For young families, making sure your family is financially protected can be overwhelming, especially since there’s so much information floating online. This infographic addresses the importance of insurance- personal insurance.

The 4 areas of personal insurance a young family should take care of are:

  • Health

  • Disability

  • Critical Illness

  • Life

Health: We are so fortunate to live in Canada, where the healthcare system pays for basic healthcare services for Canadian citizens and permanent residents. However, not everything healthcare related is covered, in reality, 30% of our health costs* are paid for out of pocket or through private insurance such as prescription medication, dental, prescription glasses, physiotherapy, etc.. Moreover, if you travel outside of Canada, medical emergencies can be extremely expensive.

Disability: Most people spend money on protecting their home and car, but many overlook protecting their greatest asset: their ability to earn income. Unfortunately one in three people on average will be disabled for 90 days or more at least once before age 65. Disability insurance can provide you with a portion of your income if you were to become disabled and unable to earn an income.

Critical Illness: For a lot of us, the idea of experiencing a critical illness such as a heart attack, stroke or cancer can seem unlikely, but almost 3 in 4 (73%) working Canadians know someone who experience a serious illness. Sadly, this can have serious consequences on you and your family, with Critical Illness insurance, it provides a lump sum payment so you can focus on your recovery.

Life: For young families, if your loved ones depend on you for financial support, then life insurance is absolutely necessary, because it replaces your income, pay off your debts and provides peace of mind.

Talk to us about helping making sure you and your family are protected.

Life Insurance as an Investment for Canadian Corporations/Holding Companies: What They Are and How They Work

Investment grade life insurance is the best passive investment vehicle available for Canadians to use inside corporations and holding companies. The main reason? It’s tax-exempt.

 

But first, let’s back up and look at other passive investments. The growth on passive investments in Canadian Corporations and Holding Companies such as stocks, bonds, mutual funds, ETFs and real estate are taxed at 50% in Ontario.

 

By comparison, money inside life insurance grows tax-free whether it is owned personally or owned by Corporations and Holding Companies.

 

Tax efficiency is why life insurance generally performs better than most other asset classes. In order for a Canadian entrepreneur to outperform life insurance in a 50% tax environment, they would need to take large investment risks. Oftentimes, taking that amount of risk can result in negative returns in any particular year. It’s an easy way for an investor to lose his shirt.

 

Let’s look at the real facts and numbers. Here’s a quick breakdown, over the last 20 years, of the performance of the main asset classes familiar to Canadian investors:
One particular thing highlighted in the chart is the annualized rate of return of average investors being at 2.6%. This is mainly attributed to “emotional investing”, meaning that most investors buy high (when the market is doing well) and sell low (when the market is in a correction).

 

Now, for an idea of how whole life insurance generally compares, let’s take a look at Equitable Life’s whole life dividend scale (one of the best whole life contracts in Canada):

The numbers don’t lie. Whole life insurance has outperformed most investment types in the last 20-25 years. As a matter of fact, whole life insurance has had an average rate of return of about 9% per year in the last 60 years.

 

But there’s more to it. Whole life insurance as an investment also prevents investors from making major emotional mistakes. When stock markets are collapsing, typical investors fear losing all their money and when markets are performing extremely well, investors have a fear of missing out on great rates of return.

 

This general behaviour leads investors to buy high and sell low. A big advantage with whole life insurance is that it offers consistent rates of return on an annual basis. Once the cash value and death benefit of your insurance is at a specific value, it will not go down. The cash value and death benefit will keep going up and up each year.

How Life Insurance Works Inside Corporations/Holding Companies

The major advantage that life insurance has over other assets is it tax-haven status. Life insurance in Canada is the only tax shelter available for passive investments inside corporations or holding companies that are normally taxed at 50%. If you add the 50% passive investments tax on other asset types, it is clear that whole life insurance is the best performing after-tax asset class in Canada in the last 20-25 years.

 

Additionally, whole life insurance is much less volatile than other asset classes. Canadian life insurance companies have offered whole life insurance for over 100 years and they have paid dividends each and every year. Whole life insurance has gone through two world wars, the great depression, the tech bubble crash in the early 2000s, and the financial market crash of 2008 without seeing a negative rate of return.

 

Many Canadians think that life insurance isn’t a great investment vehicle because they believe the cash invested inside of life insurance will be used by their beneficiaries rather than used as retirement income.

 

However, that is entirely false. The cash value inside life insurance can be utilized to supplement retirement income on a tax-preferred basis.

 

Now, I’m certainly not saying that you should invest all your holding company assets inside life insurance. However, I’ve seen incorporated business owners experience a lot of success in the past when including whole life insurance as an asset class in their portfolio.


If you’re interested in learning more about how you can help grow and protect your wealth tax-free, book a complimentary one-on-one online meeting with me today. As your Certified Financial Planner, I’ll gather quotes from independent life insurance companies to find the best value for your specific situation (it can often be a six-figure difference or more). Then, we’ll work together to put your wealth to work for you.

Click here to schedule a complimentary 1-on-1 online meeting with me today.

Long Term Care Insurance

Did you know that your changes of living to 100 years old are better than ever? While living a long life may be seen as a great gift, we also need to be prepared financially to pay for your future long-term care needs.
Read more

The Best Mortgage Insurance

The best way to purchase mortgage insurance from Bryan Wilson. We outline the differences between insurance from the bank vs. us.

CBC Marketplace: In Denial