Limiting liability and saving taxes are two principal reasons for incorporating a family business but in order to maximize tax savings and improve on return on equity, planning is particularly important, says Vern Krishna, Tax Counsel with Borden Ladner Gervais LLP’s Ottawa office with expertise in tax litigation, international tax, wealth management and personal tax planning.

The system, explains Krishna, double-taxes corporate income at the corporate level first and then at the personal level. 'With combined federal and provincial corporate rates at 34 percent and individual rates at 46 percent, tax planning is all about keeping more of one’s income.'

Giving consideration to bonuses, salary and dividends; salaries to family members; split income with family and filing tax returns will go a long way in preventing double taxation of corporate income — and avoiding confrontation with the CRA.