Best company structure in Canada

by a searcher

3 years ago

It's generally accepted that the best corporate structure for a searchfund operated company in the US is an S-Corp, where profits are passed through to the owner and reported on their personal income tax returns. 

However, this type of a structure is not available in Canada. Corporations in Canada have to pay corporate tax on their profits. What then is the best structure to adopt in Canada? Is it a corporation or a sole proprietorship? or something else?

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3 comments

searcher from Carleton University

The answer to your question depends on a lot of factors. If you plan to buy a Canadian business, you will probably have to buy shares (unless it is a very large deal, ~$10M+) since the tax benefits to the seller are very significant (no tax on first ~$0.9M of capital gains for each owner). For a search vehicle where you have outside investors, I would suggest a limited partnership. If you plan to create a holding company structure, then a corporation may be better. This is not tax advice, please consult your tax advisors.

3 years ago | like reply | 0 likes

professional from New York University

The best structure for a business is rarely an S Corp, unless it's a single-owner service business that doesn't intend to ever be sold. I agree with ^Searchfunder member‌

3 years ago | like reply | 0 likes

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