If your business sells for more than you ever imagined, are you ready for the tax side of that success?

For business owners, years of work and risk can suddenly turn into a large capital gain, all landing within a single tax year. It’s often the first time that owners see just how much tax a successful exit can trigger, and it can feel pretty devastating.

In Port Perry, I see this pattern often. Business owners typically keep their cash and retirement money in their companies. Growth comes first. Personal savings can wait. RRSPs don’t feel urgent when building the business is the plan.

The challenge shows up later, in the season of transition.

Until it’s time for change, Registered Retirement Savings Plans (RRSPs) tend to sit on the sidelines.

An RRSP, or Registered Retirement Savings Plan, is a government-registered account designed to help Canadians save for retirement. Contributions are made with pre-tax dollars, which can reduce your taxable income in the year you contribute. Each year, you can contribute up to 18% of your earned income from the previous year, up to a government-set maximum. Any unused contribution room carries forward indefinitely, so business owners who have focused on building their company may have significant RRSP room built up over time, which can be used to offset tax, up until they turn 71.

When a business is sold, gains that have quietly accumulated over many years will surface all at once. This creates a lot of income, typically in the form of capital gains, which can push taxes higher than expected, and leave owners scrambling for options they wish they’d understood sooner.

This is where an often-overlooked tool comes back into focus: the RRSP.

Since many business owners may have built up significant unused RRSP contribution room over the years, that room can create flexibility in high-income years, including the year a business is sold.

Most people think of RRSPs as something you grow slowly, year by year, on the way to retirement. But for business owners, they can also play a strategic role at pivotal moments. For example, an RRSP contribution can offset the taxable portion of the sale of a business, over and above the personal exemptions.

Knowing how RRSPs work, how much room you have, and when they may matter most, can make a meaningful difference when major financial decisions are on the table.

In my role as a Strategic Planner specializing in advising business owners on financial and estate planning. I often witness the amazement on people's faces when I reveal the financial advantages and opportunities that come with owning your own business.

In addition to utilizing RRSP’s, there are tax-free methods to extract money from your company and tax-favoured ways to grow the unused portion of your corporate bank account.

Let the BGIP team show you how to offset capital gains tax on your business or investment real estate, as well as proven strategies to keep more of what you've worked so hard to build.

Book a no-pressure, no obligation chat today:

BGIP.ca

If you want to learn about keeping more of your money safe and sound, read our 100% free financial advice blog here:

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See you soon,

Brian and the BGIP Team