Oh yes, you can grow your investments in your corporation!

I recently met a friend for coffee and blew her mind.

Naturally, as most mind-blowing experiences go, we started out discussing her corporation and saving taxes. We’ve talked before about how she can use her corporation to save over 30% in taxes by keeping funds in the corporation instead of taking a larger salary. (Personal income that exceeds $220K is taxed over 49%, whereas the first $500K kept in a corporation is taxed at only 15.5% in Ontario.)

She’s been running her business for almost five years and it’ll soon be able to support her whole family’s income needs. So I knew she understood that when she’s in a situation to save at least $40,000 a year, she should use her corporation.

But then she said: “I guess the problem is that the money just sits in your corporation and doesn’t make anything while you wait to use the funds to pay for your kid’s education or your retirement.”

Well, not exactly. I explained that she could invest and grow the money in her corporation like any other investment. She had no idea. Mind = blown.

She thought this was too good to be true, and I couldn’t fathom the fact that she assumed the money would be doomed to just sit there until she needed the funds in the future.

It made me wonder just how many people had the same reasoning as her. So in case you missed it, not only can you save over 30% in taxes by keeping funds in your operating or holding company, you can also invest those funds in everything from stocks, bonds, ETFs, mutual funds or basically anything you can usually invest in your TFSA or RRSPs.