Episode 209: My Money’s Stuck in My Corporation — How Do I Actually Use It Tax Efficiently?

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How can you access the wealth trapped inside your corporation—without triggering a massive tax bill?

Many successful Canadian business owners hit a surprising wall: their company’s thriving, their retained earnings are healthy, and yet their personal dreams—like buying that dream home by the beach—feel just out of reach. You’ve done everything “right”: paid yourself a smart salary, minimized taxes, built up savings inside the corporation. But when it’s time to use that wealth personally, the corporate veil suddenly feels like a barrier. This episode unpacks how to bridge that gap strategically, so you can enjoy the fruits of your business success without an unnecessary tax hit.

In this episode, you’ll learn:

1. How to structure a “Wealth Reservoir”—a financial system that gives you liquidity and flexibility while keeping your money working inside your corporation.
   
   
2. A powerful way to access corporate wealth personally using a high-cash-value life insurance policy and third-party leverage—without prematurely pulling money out and losing tax advantages.
   
   
3. Why proactive “upstream planning” sets you up for financial freedom later—and helps you avoid reactive, last-minute decisions that cost you thousands in taxes.

Press play now to learn how to unlock your corporate wealth and turn your business success into real-life financial freedom.

Resources:

• Ready to take a deep dive and learn how to generate personal tax free cash flow from your corporation? Enroll in our FREE masterclass here. 
• Book a Discovery Call with Kyle to review your corporate (or personal) wealth strategy to help you overcome your current struggle and take the next step in your Canadian Wealth Building Journey!
• Discover which phase of wealth creation you are in. Take our quick assessment and you’ll receive a custom wealth-building pathway that matches your phase and learn our CRA compliant tax optimized strategies. Take that assessment here.
• Dig into our Ultimate Investment Book List
• Follow/Connect with us on social media for daily posts and conversations about business, finance, and investment on LinkedIn, Instagram, Facebook [Kyle’s Profile, Our Business Page], TikTok and TwitterX. 
  

Calling All Canadian Incorporated Business Owners & Investors:

Consider reaching out to Kyle if you’ve been…

• …taking a salary with a goal of stuffing RRSPs;
• …investing inside your corporation without a passive income tax minimization strategy;
• …letting a large sum of liquid assets sit in low interest earning savings accounts;
• …investing corporate dollars into GICs, dividend stocks/funds, or other investments attracting cordporate passive income taxes at greater than 50%; or,
• …wondering whether your current corporate wealth management strategy is optimal for your specific situation.

Canadian business owners seeking financial freedom in Canada can unlock powerful results by integrating corporate wealth planning with smart personal finance strategies. By building a wealth reservoir—a system that leverages corporate assets for liquidity and tax advantages—entrepreneurs can achieve both business growth and long-term financial independence. Through financial vision setting, investment bucket strategies, and tax-efficient investing, business owners can align their financial planning with goals like early retirement, a modest lifestyle of wealth, or legacy planning in Canada. Whether optimizing RRSP room, balancing salary vs. dividends, or exploring real estate investing in Canada, the key lies in corporate structure optimization and diversified wealth management. With the right financial systems for entrepreneurs, Canadians can turn retained earnings into opportunity—building sustainable, long-term wealth while minimizing corporate and personal tax burdens.

Transcript:

We’re gonna talk about a very common problem, question, wonder that many of us business owners, Canadian business owners have when we have a successful business. So when we’re thinking about, we’ve got this place where, hey, my business is humming, my business is running, I’ve got significant retained earnings, I’ve been trying to do all the right things, I’ve been trying to be tax advantage, I’m paying myself a healthy salary to make sure that I’m being tax advantageous. But then these, you know, These questions come up, and this is one of the common questions we get from clients, questions that we get when we’re on our discovery calls, when we’re meeting business owners like yourself, is how do I access that capital? Like it’s in the business, there’s the corporate veil, I’ve got my personal side, I’ve got my business side, but when personally I wanna be able to utilize this wealth that I’ve created, how do I do that? And so for example, your one one call we’ve had recently is actually a problem that we were discussing a year ago is to say like, look, I want to move to the beach. I want to be able to buy and upgrade my home. I want to be able to go from here to here. And I’ve been doing all the right things to make sure that my salary looks good on paper, my business looks good on paper. And all of a sudden, it’s like, And I know I’ve got wealth sitting inside the business. To buy my home, I need a million dollars to go and buy a place on the beach. Because this is like my dream place, my dream house. How do I do that tax advantageously? know, like do I just pay myself the money and then go and buy the house? Or do I try to get my mortgage? You know, I’ve got, it looks good on paper. I should be able to go get a mortgage, but does that make sense? Do I, you know, do I figure out where I can get a loan somewhere else? Like how do I make use of this wealth on the personal side when I have it the corporate side? Because the easy move is to like just pay yourself, but you’re gonna all of a sudden take a huge tax hit to do that, and I think a lot of people do because it’s easy, but that’s what we wanna talk about here. What are the moves that we could make? And knowing the moves is the power here. That’s the big takeaway I think we hope you have here is knowing more moves you have access to will put you in a better position to solve these types of problems when they come up. And we’re gonna unpack that here today.

Yeah, yeah. I love it. I love it. And actually, you know, what triggered this was a call a couple of weeks ago, we had someone, a listener of the show reached out in there in that exact same spot, right? And I said, Hey, you know, John was, you know, discussing this idea because he does want to move to the beach, to the water, you know, at some point. And, you know, this is one of those pieces where when we think about our four stages, right, in the first stage, we talk about vision, your vision for your financial future. That’s a part that’s so important because the better and the more clear we are, the better we can prepare ourselves in order to be well suited for a move like this, right? Whereas if you wake up one day and you sort of decide I’m ready to upgrade the home or I’m ready to buy that amazing vehicle, right? With the vehicle, people suddenly go, well, can I make it a business expense? Can I do this? You know, we talk about that rabbit hole. That’s probably not worth it for most people, but you know, we’ll use the home, the primary home as a great example, because I think a lot of people have been in that position. And you know, this is why over time we’re always thinking about, how do we structure things so that we’re constantly maximizing our tax efficiency, right? So we talk about each and every year trying to take out at least a certain amount of money out of our corporations to at least break even on the tax we’re going to pay. For some people, that’s going to be like $40,000 $50,000. For others who are earning more than the small business tax credit of $500,000 in their corporation, that’s going to be more like $135,000 minimum. Nowadays, most people are probably going, you know what? I have to take more than $135,000 anyway, just because that’s how life is right now with inflation. But the difference is, like, what do we do with that money? over time, if we’re doing it strategically and we’re trying to take a little bit of money out every year and build up some assets personally, that’s one way. But that could take a really long time. And the other part that I think is really important is that every dollar that we take out above what we need to pay in taxes, either corporately or personally, we are essentially giving up the tax deferral on that dollar. Right. And I think that’s the big piece here is like, we have to be very strategic when we are planning from year to year to decide which dollars do we want to defer tax on and which dollars do we want to pay that tax now. And it’s never an all in or an all out, you know, but one, for example, I think is the RRSP. Like people look at the RRSP and it’s like when I put dollars in there, you’re making like a longer term decision to defer tax on those dollars. Well, the same is true with the dollars we leave in corporations. The only difference is, that at any point in time, I typically can pull those extra dollars out and I also don’t feel bad about it, even though the tax implications are essentially the same, right? So I think this is where planning ahead. And thinking about our third stage in the process, which is building your wealth reservoir along the way can be significantly helpful in dealing with something like a large purchase that you plan to make personally, like buying a home.

Yeah, yeah, and you the wealth reservoir is, and there, you can, whatever form you put that in, right? Like somebody might say, like my wealth reservoir is a savings account and I just put money over here. you’re building that over time. You’ve listened to episodes before, then you know that our recommendation for a wealth reservoir is a high cash value life insurance policy in whether it’s personally or corporately owned, we’re gonna talk about that specifically about this example, but like that could be the structure your wealth reservoir is. Or maybe it’s like you’re putting in GICs and then you’re staggering them so that they come out every so often so that you have liquidity and access. You could be buying real estate and putting it in real estate, whether it’s personally or corporately and then refinancing and putting that in different places. Like no matter where your corporate wealth reservoir is, what you’re really doing Right? Like what we’re really buying is the flexibility of being able to make decisions when you want. Like this is, this is what this kind of conundrum is. It’s like without a wealth reservoir, right? Without say a structure to be able to be really free is you’re then restricted to say, I don’t have a reservoir currently to go buy the home at the beach or upgrade my home or put an addition on my home. I have to now go to the bank and I have to say like, look, I got all my documents in order. I make a lot of money. Look, how much can you give me? You’re at that. But when you have the wealth reservoir, you’re not dependent on anyone else. You have access to it. Even like when you’re thinking about, what about those structures? Those GICs are all gonna trickle in. That’s your money. I mean, if you have it personally or corporately owned in terms of a whole life policy, That’s still, no one is asking to see documents when you do a loan or a policy loan against the cash value of that. It’s it’s liquid in a way for you to say, like, I’m gonna borrow against the cash value and it just shows up in our bank account. So you have the flexibility and that’s the benefit of the wealth reservoir. You can’t make good financial decisions to build assets or personally to live the life you want without your corporate or your personal own wealth reservoir. So let’s talk about some unique strategies, Kyle, using our reservoir, knowing it’s an important move for our financial health so that we can help this individual go and make an upgrade on their home. Or I could go and buy that property on the beach knowing I’ve made a really important decision and good decision knowing that I had my, like if I have my reservoir in place. or I could go to the bank or I could have in cash like, or I could just pay myself like, these are the options we have. are some of the advantages of these options and what really should we be looking at? Because if we’re planning for the future, if we’re planning for the reservoir, that’s us forward thinking. So let’s imagine, let’s fast forward, we have it. How are we gonna use it to like solve these problems?

Yeah, well, I want to go back in and just kind of highlight something because it’s very different if you are a T4 employee versus if you’re incorporated business owner with the wealth reservoir and the flexibility that you have in where you store those dollars. So for example, you’ve mentioned the savings account, the GICs, something that’s, you know, fairly liquid money market, you know, whatever. Those things are great. And if it’s personally in your personal name because you are a T4 employee, any of those things are gonna work for that purpose. Now, certain tools are going to offer additional advantages, right? And the permanent insurance, for example, is gonna offer other wealth and legacy planning advantages, and that’s why we typically pick that piece. The difference though for an incorporated business owner is that if we build our wealth reservoir, most incorporated successful incorporated business owners, have a wealth reservoir of some sort, but many have it in a checking account, savings account, GIC, something like that, or a permanent insurance policy. The problem though, that an incorporated business owner runs into, is that all of those dollars, if we wanna take them and use them personally, we still have to cross that corporate veil through a salary or dividend, and therefore, that reservoir is a whole lot smaller than we might be imagining in our minds. So when I have a million dollars sitting in a savings account in my incorporated business or in the corporate account, those million dollars are really only worth around $600,000 personally, if I was to go and take all of them out in one fell swoop. So that’s a problem. So this is why when we’re talking about building a wealth reservoir in the corporation, we almost always recommend, I say almost always, there’s always exceptions to every rule here, but we encourage people to strongly consider building that reservoir around a high early cash value policy, because we introduce the idea of flexibility, right? We have the opportunity to do quite a few different things, one of which is leverage. Now you had mentioned, There’s no questions asked if we leverage against that policy from the insurance company. However, there is a nuance if we’re doing that, they can only send the money back to the corporation. So we’re kind of stuck in the, you know, savings account situation. However, we go to a third party lender, we can set up personal leverage strategies so that we can try to essentially defer the tax as long as possible. I wanna be clear here. This isn’t tax avoidance by any means because the reality is, is those dollars still exist inside the corporation. The cash value exists inside the corporation and a lender, a third party lender is giving you a third party loan because you own shares in that particular business.

Wait, okay. So let’s unpack this just to make it clear. So I am a business owner and on my balance sheet, I have a high cash value life insurance policy with a surrender value. Boom, it says this is what it’s worth on paper. I go to a third party lender and I get approval because what they’re doing is they’re looking at my balance sheet to say, and probably my revenue and going all of those pieces that normally happen and go. Hey, we know we’re gonna get paid back because you’ve got this really great asset sitting on your balance sheet. We know you’re gonna kick the bucket at some point and therefore we will get paid because we’re gonna be, those will be a lien on say that value that we get paid out and we know that you’ll get paid out too. So it’s all great. So what you’re saying though is they will choose looking at those documents to say yes or no, we wanna take a loan against that and they’re gonna give it to me personally. So the million dollars that I need to go buy the beach house, if my documents say I have that value sitting there because of my wealth reservoir inside my corporation, the third party is gonna say, all right, here’s your million dollars to go buy your beach house personally and now. You’ve got a loan with us, but we’re using your corporate assets as collateral.

Exactly, exactly. so this is one of those debt strategies that we are very, very favorable and that we support people considering depending on their situation. Now, for some people, go, they don’t like the idea of debt. Well, mean, in this particular case, this is a very, important use of debt because we have a very strong asset that is non-volatile inside that corporate structure and you’re able to access more of those dollars at a personal level, noting that it has to get paid back at some point. For some people, they pay down the debt like they would a mortgage. For some people, they choose to only pay the interest because the policy itself is growing at a similar interest rate. I say similar. It’s not going to be an arbitrage here. We’re not looking to make out you know, better by trying to borrow against the policy and so forth. We’re just trying to keep all of those dollars whole and essentially what it is that tax deferral strategy for down the road. But what the one nuance here is by using this particular wealth reservoir tool being the high early cash value policy is that down the road when I do pass on assuming I’m the person that is insured here. we get one massive tax benefit and that is a tax-free death benefit paid to the corporation and a very large net death benefit credited to the capital dividend account, which actually helps to resolve a significant portion of the taxes that are owed on retained earnings on those balance sheets. So what we have here is an opportunity to use the Income Tax Act to our advantage. This isn’t doing something that we’re not able to do. We have not taken a salary or dividend from our corporation. The balance sheet is actually growing on the corporate balance sheet and we’re using an estate and legacy planning tool to help us think ahead to go, how can I keep more of that million dollars whole instead of turning it into 600,000 in order to allow me to achieve the same cashflow needs at a personal level? and by allowing my business to resolve some of those retained earnings tax problems by pushing that problem further down the road. And here’s the nuance. The actual policy, your wealth reservoir, if you select this as the tool, it is the only asset in the known universe that actually grows in value when we pass away tax free instead of actually going backwards because of capital gains tax or any other type of tax in order to get those dollars out. So what we’ve essentially done is we’re taking this, we’re doing long range tax planning, but we’re actually not negatively impacting our personal access to cashflow at the very same time. And that is a right. It is a fundamental right we have as Canadians to utilize the income tax act to our advantage. And that’s all that we’re trying to do when we set up a wealth reservoir just like this one.

Now, it’s like, I’m, because you’re being proactive and because you’re like, knowing that this is an option, really what you’re doing is you’re saying future Kyle or future John or future me, it’s going to get, you know, the cash value of that. Like you’re earmarking it. You’re saying down the road, you know, that will trickle to my estate and I’m borrowing from my estate now so that we can live the lifestyle we want to live. And in order for you to get there, right, because like you’re saying, it all trickled to the right spots and everything gets paid out and therefore you had flexibility, you had freedom, you used your corporate wealth that was sitting there and you used it in a tax advantageous way. In order to create that, you had to have this proactive thinking now because if you don’t have your corporate wealth reservoir yet and structured that way, you’re not gonna get those advantages. Right? So like, you have to like go, I want to start planning for that. And like, that’s why our four stages are so important because you have to have the vision. You have to go like, well, what do I, what am I looking for down the road? Am I okay with these types of moves? Are you okay with these types of decisions? Can I then start my structure building now? Because sometimes this takes that process. You can’t just say tomorrow, I want this, that type of structure and get all these advantages with it. If you want the money tomorrow, you’re kind of locked into your choices of saying like, how do I get that money tomorrow if I haven’t done any of this work or planning? So it’s like the planning has to start, which means like you’re doing this, like what we call like upstream thinking. You’re doing upstream planning and not downstream reactive planning. Cause right now, if you’re downstream planning, you’re going, I just react to decisions. I want to do that, but I haven’t done any actual like pre-planning, which is the important part of the vision is. is I just, have, I need money to solve this problem or I need money to solve this problem, but I haven’t done some of that work. Whereas if I’m upstream, which means like I’m not at the bottom of the stream kind of taking all the hits, I go upstream and I make a dam or I go upstream and solve a problem there. Then at the bottom of the downstream life is so much easier. I don’t have to solve all these problems because I’ve upstreamed and did all that work up, which means like you have to do the work upfront. Like that’s, there’s the difference. Do you want to do the downstream work or you want to do the upstream work? And that’s really what we’re talking about here. And I think that’s the big takeaway is like what, and this is bigger than just this one problem about buying a beach house. This is saying in your life, what upstream thinking and planning can I do to make future John, future Kyle, future me have an easier downstream world? I wanna, no matter what, you’re never gonna get rid of problems. It’s about what problems do you wanna solve now versus later? Do you want these problems later or do you just wanna, be proactive and do the upstream thinking now.

Well, and I love the fact like, you know, the part that makes it hard is when we get someone who reaches out to us and they’re like, I have a home closing in 30 days. How should I get the down payment money in order to do it? You’re like, well, it’s going to be really tough for us to try to apply one of these particular strategies, which is exactly what you’re saying. It’s like, but had we done some thinking ahead of time? Now, here’s something I want people to also note in their mind is that what we do, you and I, actually utilize our wealth reservoir as the fixed income portion of our investment portfolios until we need it for something. So it’s like right now we know our portfolio is growing. The portion that we put into our wealth reservoir inside our corporate structure, we know that it’s growing like a fixed income product. It’s growing like a GIC. We’re not comparing it to equities or anything like that. So a great way to prepare yourself is like you don’t take every dollar that’s inside your corporation and have it in a policy necessarily. You certainly could, but you take the portion that you want to be safe, stable and non volatile and those dollars go in and instead any other investments you have, you can now be more risk on with those particular investments and then you’re kind of hitting two birds with one stone. Maybe you never buy the beach home in two, three, five, 10 years. But you are now prepared for that and you’re also solving another problem, which is that my investments probably should have a fixed income portion to them. And now instead of using bonds, GICs or other such quote unquote safe assets, even though they are volatile, you can now use this tool in the interim. And we also get to solve the estate and legacy problem down the road because remember, Your corporation is a tax deferral tool. It’s a fantastic one. But if we don’t set something up like this down the road, those dollars will get taxed they will get taxed at a fairly high rate. Therefore, we can actually use this wealth reservoir idea to not only plan for a big purchase or plan for when I need to leverage, but I also get to have it act as the fixed income portion of my portfolio and of course, what this tool is so fantastic for and what it was created for in the first place, which is estate and legacy preservation. So if I can do three things by planning one, I’m gonna take it. And so many others of you out there, those people with assets, with tax deferral challenges, specifically with retained earnings problems, should be highly considering a move like this one because it’s going to solves so many of your problems all at once.

And if you want to go down this pathway, if you want to know the details of what this looks like, very specific details of what the creation of the Wealth Reservoir looks like, what problems we’re actually solving, we’ve created a masterclass about this. You can join for free. It’s over at CanadianWealthSecrets.com board slash masterclass. It is a course format and you’re going to get in there and you’re going to learn about the pieces of the Wealth Reservoir and how to create them, how to set them up and what it’s useful for and how to do this. Head on over there and register completely for free and learn the tools and the structures that you could be putting into place to build this for yourself. Also as a reminder, if you want us to take a look at your unique situation and dig into your four stages of your, either your personal, your corporate wealth planning strategies, you can book a call with us over at canadawheelsecrets.com for discovery. Just as a reminder as well, The content you heard here today is for informational purposes only. She not construe any of this information as legal or investment or tax advice. CalPierce is a licensed life and accident and sickness insurance agent and the president of corporate wealth management here at Canadian Well Secrets.

Canadian Wealth Secrets is an informative podcast that digs into the intricacies of building a robust portfolio, maximizing dividend returns, the nuances of real estate investment, and the complexities of business finance, while offering expert advice on wealth management, navigating capital gains tax, and understanding the role of financial institutions in personal finance.

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