A holdco is just an ordinary corporation that owns shares of another one. It is not a tax shelter and it is not private. It is useful for three specific things: getting retained profit out of the risky company, keeping the operating shares sale-ready, and letting co-owners take money out on different schedules.
Our charges include applicable taxes. Disbursements are extra and billed at cost — itemized upfront, in writing, never hidden.
From $1,128.87 taxes included
You own Holdco. Holdco owns the shares of Opco. Opco runs the business — it signs the lease, hires the staff, takes the risk. Both are ordinary corporations, usually both incorporated under the OBCA, and each has its own minute book, its own annual return, its own tax return and its own accounting bill.
Dividends generally move from Opco up to Holdco without immediate tax between connected Canadian corporations. That is the plumbing everything else depends on. It is not a loophole — the tax is deferred, not erased, and it becomes payable when the money reaches you personally.
Nothing about a holdco is hidden. Both corporations appear in the Ontario Business Registry, and since 1 January 2023 both must keep a transparency register of individuals with significant control. If someone has sold you a holdco as a privacy measure, that is not what it does.
Protecting surplus. Profit left inside Opco sits behind Opco's creditors. Sweep surplus cash up to Holdco periodically and it is out of reach of an Opco lawsuit, a failed lease or a bad customer. This only works if you do it before trouble appears — moving assets once a claim is on the horizon invites an attack on the transfer itself.
Sale readiness. The capital gains exemption on qualified small business corporation shares depends on asset tests that idle cash and passive investments can break, and the tests look back over a period before the sale. Regularly moving surplus out of Opco helps keep the shares eligible. Have your accountant confirm the tests against your balance sheet — they are strict and they are unforgiving about timing.
Two or more owners with different needs. If one partner wants to draw dividends now and the other wants to leave money invested, each holding their Opco shares through their own holdco lets them take money out on their own schedule without arguing about it. It also makes an eventual buyout cleaner, because there is a structure to buy at.
Two corporations means two of everything: two Ontario annual returns, two T2 returns, two minute books, two transparency registers, two sets of accounting fees, every year, forever. For a business with modest retained earnings, that recurring cost outweighs a benefit that is largely theoretical.
Passive investment income inside a corporation is taxed at a high rate, and earning too much passive income across the associated group can grind down the small business deduction available to Opco. A holdco stuffed with investments is not a free ride, and the interaction needs to be modelled, not assumed.
The most common failure is a holdco that exists on paper and nowhere else — no share certificates issued, no dividend resolutions, no record of the transfers that were supposedly made. If a structure is meant to survive a CRA review or a buyer's due diligence, the paperwork is the structure. There is nothing else to point at.
You cannot simply hand your Opco shares to a new Holdco and carry on. A transfer of shares is a disposition at fair market value unless you elect otherwise, and in a profitable company that can mean tax on a gain with no cash to pay it.
The usual route is a section 85 rollover: transfer the Opco shares to Holdco in exchange for Holdco shares, elect at an amount that defers the gain, and file the election on time. Depending on the facts, an internal reorganization or share exchange may fit better. Which one is an accountant-and-lawyer decision, made together, before anything moves.
Whatever the route, expect a valuation position you can defend, articles creating the right share classes in Holdco, directors' and shareholders' resolutions in both companies, share certificates issued and registers updated, and any lender or shareholders' agreement consents that the share transfer triggers. This is not a form-filling exercise, and the tidying-up is most of the work.
Most owner-operated Ontario businesses do not, at least not yet. A holdco is worth its double running costs when there is real surplus cash accumulating inside a business that carries genuine liability risk, when you are preparing the operating shares for a sale, or when co-owners want different dividend timing. If profits are being fully withdrawn each year and the risk profile is low, you are paying for two corporations to get the benefit of one.
It protects surplus that has already been moved out of the operating company. It does nothing for cash still sitting in Opco when a claim lands, and moving assets after a claim is foreseeable can be unwound as a transfer at undervalue. The protection is a function of doing the sweeps routinely, in good times, and documenting each one with a proper dividend resolution.
Not automatically — a share transfer is a disposition at fair market value by default. A section 85 rollover lets you transfer the Opco shares to Holdco in exchange for Holdco shares at an elected amount and defer the gain, but it is a joint election with the CRA with its own filing deadline and it depends on getting the valuation and share terms right. Plan it with your accountant before any shares change hands.
Two T2 corporate tax returns, two Ontario annual returns (no Ministry fee, but someone has to file them), two minute books to maintain and two transparency registers to keep current. The Ministry fees are small; the accounting and legal maintenance is the real number, and it recurs every year. Get an annual figure from your accountant before you build the structure, not after.
Our corporate work starts at $1,128.87, taxes included, published on our pricing page. Government filing fees are extra and billed at cost — incorporating the holding company itself is currently a $300 Ministry fee in Ontario.
Open your file tonight — a licensed Ontario lawyer will confirm everything with you by tomorrow.