Year-End Planning Checklist for Incorporated Business Owners

This list assumes your corporation's year ends on December 31, as many do. If your fiscal year ends at another time, the same questions apply on your own calendar. Your personal tax year always ends on December 31.

1. Your salary and dividend mix

Confirm with your accountant how you're paying yourself this year. The mix affects your personal tax bill, your RRSP room for next year, your CPP benefits and whether an Individual Pension Plan is an option. A bonus declared at year-end generally has to be paid within 180 days to be deductible to the corporation, so plan the timing with your accountant.

2. Retained earnings and passive income

How much has built up in the corporation, and what is it invested in? Passive income above $50,000 can start to shrink the federal small business deduction next year. If you're close, read the $50,000 passive income rule and raise it with your accountant.

3. Pension and retirement plans

If an Individual Pension Plan makes sense, the timing of set-up and contributions matters, so start the conversation before year-end. Personally, check that your RRSP and TFSA contributions are on track. The RRSP deadline for this tax year falls 60 days after December 31, and new TFSA room opens on January 1.

4. Insurance coverage

Has the business grown? Key person coverage, buy-sell funding and your personal coverage should keep up with what the company is worth today. A shareholder agreement with no insurance behind it is one of the most common gaps we see.

5. Group benefits renewal

If your group benefits renewal is coming up, don't just accept the increase. Have it reviewed and compared across carriers before the renewal date.

6. Estate and succession

Is there a plan for your shares if something happens to you? At death, shares are generally treated as sold at fair market value, which can create a large tax bill. Check that your will is current and that the plan includes a way to fund that tax. Many Ontario owners also use a second will for private company shares to reduce estate administration tax, which is a question for your lawyer.