Use of a Trust or Holding Company
Structuring Your Incorporation for Maximum Benefits
When incorporating, you can own the common and preferred shares of the company directly or have the shares held indirectly by a family trust.
What is the benefit of owning the shares of the company directly?
Under this scenario, the voting common shares would likely be owned by you while non-voting preferred shares would be owned by your family members. The benefit is that the initial set-up cost is likely $2,000 less than if a family trust was set up. In addition, the corporate structure is simpler and easier to manage.
One downside is that it is costly to add or remove a shareholder.
What is the main motivation behind having a family trust?
A family trust creates flexibility as the beneficiaries do not own the shares of the company directly. As the main trustee of the family trust, you would have control over 100% of the company and would be responsible for determining how much income a beneficiary would be entitled to receive, if any.
Are there other benefits to having a trust or a holding company?
A trust and a holding company can also protect your money from creditors.
Your FWH advisor can help you decide whether you would benefit from setting up a trust or holding company.