Private Corporations · BC
Your corporation should be working harder for you.
BC owner-managed businesses can access some of the lowest corporate tax rates in the world — but only with the right structure, compensation strategy, and planning. Clearline builds the plan that lets your corporation compound, not leak.
The small business rate is only the starting point
BC's 11% corporate rate on the first $500,000 of active income is exceptional — but most owners leave significant money behind by not managing the passive income grind-down, the right salary/dividend split, and succession timing.
Corporate structure rarely keeps pace with growth
A structure that worked at $1M in revenue often becomes costly at $5M or $10M. Holding companies, family trusts, and management fee arrangements all need to be revisited as the business scales.
Passive income inside the corporation is a hidden tax
Once your corporation earns more than $50,000 in passive investment income annually, the Small Business Deduction begins to erode — a swing of up to $80,000 in additional corporate tax per year that most owners don't see until it's already costing them.
The capital gains exemption requires advance planning
The $1.25M Lifetime Capital Gains Exemption on qualifying shares can shelter your business sale from tax — but the corporation has to qualify at the time of sale. Most don't, because no one built toward it.
Insights for BC Private Corporations
Tax strategy for owner-managed businesses
Corporate Tax Rates
BC's 11% small business rate is one of the lowest in the world — here's how to protect it
The small business deduction applies to the first $500,000 of active business income — but passive investment income inside the corporation quietly erodes it. We explain how the grind-down works and what owners can do before the threshold is crossed.
Read more → Compensation StrategySalary vs. dividends — the right answer changes every year and most owners never recalculate it
The optimal split between salary and dividends depends on your income level, RRSP room, CPP position, and corporate cash requirements. A mix set at incorporation and never revisited costs real money every year.
Read more → Corporate StructureThe structure you set up when you incorporated rarely works as the business scales
Holding companies, family trusts, and management fee arrangements are tools — but they need to be revisited as revenue and retained earnings grow. Most businesses outgrow their structure without realizing it.
Read more → Income SplittingFamily income splitting is still available — but the 2018 TOSI rules changed the conditions
Dividends to family members can be a powerful tax planning tool, but the Tax on Split Income rules mean the conditions have to be met before any dividend is paid. We review the specific facts before every family distribution.
Read more → Succession & Exit PlanningThe after-tax proceeds on your business sale are determined years before the deal — not at the table
LCGE eligibility, passive asset purification, and estate freeze timing all require runway to implement. Owner-managers who start planning in the year of sale typically leave significant money behind.
Read more → The Clearline ApproachWhat working with Clearline on your private corporation actually looks like
Most accounting firms file your T2 and move on. Clearline builds a plan — covering your corporate structure, compensation mix, passive income exposure, and eventual exit — and revisits it every year.
Read more → Get StartedBook a free corporate structure review
No obligation. We'll review your current structure, flag any passive income exposure or TOSI risk, and tell you plainly where your planning gaps are — and what they're costing you.
Book a consultation →The principals who work with private corporations
Every private corporation client at Clearline is served by a principal who understands BC's tax landscape for owner-managed businesses — from the small business deduction to succession planning and everything in between.
Jeff Block
CPA, CA · Principal
Tax and accounting for professionals and private companies
Dave Block
CPA, CA · Principal
Holistic strategies for owner-managed businesses
Jennifer Scott
CPA, CGA · Principal
Private enterprise, professionals, tax services
Gurbir Rai
CPA · Principal
Corporate tax, private enterprise, tax planning
Common Questions
Questions private corporation owners ask us
The most significant is the small business deduction — BC's combined corporate rate on the first $500,000 of active business income is approximately 11%, compared to a top personal marginal rate of 54%. That differential means every dollar left in the corporation for reinvestment is taxed at roughly one-fifth the personal rate. Additional advantages include income splitting with family members (subject to TOSI rules), access to the $1.25M Lifetime Capital Gains Exemption on qualifying share sales, and the ability to accumulate retirement wealth inside the corporation through a holding company at lower after-tax cost than drawing income personally first.
Both, in a proportion that changes every year. Salary generates RRSP contribution room (18% of earned income, 2026 max: $32,490), is deductible at the corporate level, and produces CPP pensionable earnings. Dividends avoid CPP contributions but leave no RRSP room and are taxed at different rates depending on whether they are eligible or non-eligible. The optimal split depends on your income level, existing RRSP room, CPP position, family situation, and corporate cash needs. We model this every fall for each client so the year-end draw is determined before December 31 — not scrambled in February.
Potentially yes. Once your corporation generates more than $50,000 in passive investment income annually, the Small Business Deduction limit begins to erode — reduced by $5 for every $1 of excess passive income, eliminating it entirely at $150,000. At BC's combined rates, that swing is up to $80,000 in additional corporate tax per year. A corporate investment portfolio of $600,000–$900,000 earning 6–8% may already be approaching this threshold. Solutions include a holding company structure, corporate-class investment funds, an Individual Pension Plan, or corporate-owned life insurance — all of which require advance planning before the threshold is crossed.
Yes, in many cases — but the Tax on Split Income (TOSI) rules introduced in 2018 changed the conditions. A spouse or adult child who meets the exclusion tests — including actively working in the business or holding excluded shares — may qualify to receive dividends taxed at their marginal rate rather than the highest rate. Arrangements set up before 2018 often haven't been reviewed and may be exposed to reassessment. We review the specific facts of your family situation before any family dividend is paid — not the general rule, but your actual ownership and involvement structure.
Start now. The Lifetime Capital Gains Exemption — $1.25M per individual in 2026 — can shelter a significant portion of the gain on a qualifying share sale from capital gains tax. But the corporation must meet three tests: shares of a Canadian-Controlled Private Corporation; 90% or more of assets used in active business at the time of sale; and shares held for at least 24 months with more than 50% of assets active throughout. If your corporation has accumulated passive investments, purification planning — moving excess assets to a holding company, paying down debt — typically takes one to two years. An estate freeze can lock in today's value at your level and pass future growth to a family trust, multiplying the exemption across beneficiaries. We recommend starting exit planning three to five years before any intended sale.
The Clearline Approach
What working with Clearline actually looks like
We don't file your T2 and disappear. We build a Clearline Plan — a year-round advisory relationship covering your corporate structure, compensation strategy, passive income exposure, and your eventual exit from the business.
1
Business Diagnostic
We review your corporate structure, T2 filings, compensation history, passive income position, and any existing holding company or family trust — and identify the highest-priority gaps immediately.
2
Tax Modelling
We build a salary/dividend optimization model, project your SBD passive income threshold, and stress-test your structure against your anticipated growth over 3–5 years.
3
Structure & Implement
Holding company setup, family trust review, management fee agreements, TOSI compliance — coordinated with your BC business lawyer and completed in the correct sequence.
4
Ongoing Advisory
Annual T2/T1 filings, RDTOH and GRIP tracking, passive income monitoring, and proactive outreach when ITA changes affect private corporation clients.
5
Exit & Succession
QSBC eligibility review, estate freeze timing, deal structure analysis, and coordination with your M&A advisor to maximize net after-tax proceeds.
Talk to a CPA firm that works with private corporations specifically.
We'll tell you plainly where your planning gaps are and what they're costing you. No obligation — just a direct conversation about your corporate structure and where it stands.
Book a Discovery Call
