Structuring Your Incorporation for Maximum Benefits
When incorporating, you can own the common and preferred shares of the company directly or have the shares held indirectly by a family trust.
What is the benefit of owning the shares of the company directly?
Under this scenario, the voting common shares would likely be owned by you while non-voting preferred shares would be owned by your family members. The benefit is that the initial set-up cost is likely $2,000 less than if a family trust was set up. In addition, the corporate structure is simpler and easier to manage.
One downside is that it is costly to add or remove a shareholder.
What is the main motivation behind having a family trust?
A family trust creates flexibility as the beneficiaries do not own the shares of the company directly. As the main trustee of the family trust, you would have control over 100% of the company and would be responsible for determining how much income a beneficiary would be entitled to receive, if any.
Are there other benefits to having a trust or a holding company?
A trust and a holding company can also protect your money from creditors.
Your FWH advisor can help you decide whether you would benefit from setting up a trust or holding company.