Corporate-owned insurance for Canadian owner-operators.

The problem retained earnings create

Successful Canadian corporations accumulate cash that has already been taxed at the small business rate. Left inside the company as passive investments, it is taxed again — heavily — every year. Distributed as dividends, it triggers personal tax immediately.

Corporate-owned permanent insurance offers a third path: capital that grows tax-sheltered inside the policy and eventually exits the corporation through the Capital Dividend Account (CDA) largely tax-free.

The mechanics, in plain English

• The corporation owns the policy, pays the premiums, and is the beneficiary.
• Cash value grows inside the policy on a tax-advantaged basis.
• On death, the corporation receives the death benefit tax-free.
• The portion above the policy's adjusted cost basis creates a CDA credit — allowing the corporation to distribute those funds to shareholders as a tax-free capital dividend.

Where it fits best

Not every corporation is a candidate. Corporate-owned insurance tends to make sense when there are meaningful retained earnings, a long time horizon, and a clear estate or succession purpose — replacing lost income, funding a shareholder buyout, or transferring wealth efficiently to the next generation.

What we watch for

• Alignment with your shareholder agreement and succession plan.
• Whether Holdco or Opco should own the policy — and why.
• The interaction with your salary/dividend mix and passive investment income rules.
• Cash value access strategies during your lifetime that respect corporate attribution rules.

These are the conversations we have with our owner-operator clients — usually alongside their accountant — before recommending any structure.