FOR INCORPORATED PROFESSIONALS | ALBERTA AND BC

You built the corporation. Now give it a plan.

Many corporations are set up for tax deferral and then left alone. The surplus grows, the registered accounts are full, and there is no plan for how the money comes out or what happens to it at death. There are established structures for this situation, each with real costs and trade offs. This page explains four of them plainly.

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PATTERNS WE OFTEN SEE

If any of this sounds familiar

Surplus sits in the company earning interest

Investment income earned inside a corporation is taxed at about 46.7% in Alberta in 2026 (about 50.7% in BC). Around 30 percentage points of that is refunded when the corporation pays taxable dividends, but until then it is out of your hands. Passive income above $50,000 a year can also reduce the federal small business deduction on your active business income.

Money comes out without a plan

Integration means income earned in the corporation and paid to you ends up taxed at roughly the same combined rate as if you had earned it personally. The advantage of incorporating is mostly deferral. That deferral pays off only if there is a plan for how and when the money comes out, and what happens to it at death.

The corporation is filed, but not planned

Your accountant keeps the corporation compliant and the returns filed. Connecting it to your retirement income, your insurance and your estate plan is a different job, and often nobody has been asked to do it.

Registered accounts are full

Your RRSP and TFSA are maxed, or you take dividends and have little RRSP room. What stays in the corporation needs its own plan for retirement and for your estate.

FOUR STRUCTURES

Worth a conversation with your accountant

All four are built on rules in the Income Tax Act and have been used by Canadian business owners for years. None is right for everyone, and each has costs and risks. Here is how each one works, what it costs, and who is involved.

IPP

Individual Pension Plan

A defined benefit pension plan your corporation sets up for you as its employee. The corporation makes the contributions and deducts them. An actuary sets how much can go in, based on your age and your T4 salary history, and from about age 40 that amount is generally larger than the RRSP room it replaces. Past years of salary back to 1991 can sometimes be funded as well, usually after part of your RRSP is transferred into the plan.

COSTS AND RISKS

Needs a steady T4 salary from your corporation. Dividends do not count.
Setup, an actuarial valuation at least every three years and annual filings all cost money.
If investments fall short of the plan's assumptions, the corporation has to contribute more.
The money is locked in for retirement, and minimum withdrawals start by the end of the year you turn 72.
While you are in the plan, your new RRSP room shrinks to almost nothing.

Usually considered when: You are over about 40 and have paid yourself a substantial T4 salary for several years.

Who does what: A pension actuary designs and certifies the plan, and it is registered with CRA and, where required, the provincial pension regulator. Five Ridge coordinates the work and can provide segregated fund contracts for the plan's investments.

Read the full breakdown

IRP

Insured Retirement Plan

Your corporation buys a permanent life insurance policy and pays the premiums from surplus it does not expect to need for many years. Growth inside the policy is not taxed each year while the policy stays within the rules for exempt policies. Later, a bank may lend against the cash value to provide retirement money. At death, the death benefit is paid to the corporation and repays the loan. The amount above the policy's adjusted cost basis is credited to the capital dividend account, which lets the corporation pay that portion to its shareholders, often your estate, as a tax free capital dividend.

COSTS AND RISKS

Premiums are not tax deductible. It only makes sense with a lasting need for life insurance, and you have to qualify medically.
Borrowed money is not income, but if the corporation borrows, moving that money to you is still taxed as salary or dividends. Borrowing personally against a corporate policy needs a corporate guarantee and a fee your accountant should review.
Retirement loans are not guaranteed. Rates can rise, the bank can ask for more collateral or stop lending, and interest builds up until death.
Policy dividends and many cash values are not guaranteed, and surrendering the policy early can create a taxable gain.

Usually considered when: Your corporation has surplus it will not need for 15 years or more and you need permanent life insurance anyway, for example for estate tax or to pass on the business.

Who does what: Five Ridge places the policy. A lender sets any loan terms. Your accountant confirms the tax treatment.

Read the full breakdown

RCA

Retirement Compensation Arrangement

A trust your corporation funds for retirement benefits above what an IPP or RRSP can provide. Contributions are deductible to the corporation when they are reasonable for the work you do. Half of every contribution, and half of the investment income earned in the trust, goes to CRA as refundable tax. CRA returns $1 of that tax for every $2 the trust pays out in benefits, and the benefits are taxed as income to you when you receive them.

COSTS AND RISKS

The refundable tax held by CRA earns no interest, so half the money sits idle for years.
Payments are fully taxable. The benefit comes mainly from receiving them when your tax rate is lower, which is not certain.
Contributions must be reasonable for your services, and CRA can deny deductions that are not.
A trustee, annual trust filings and administration add cost every year.

Usually considered when: Your salary is well above the level where an IPP or RRSP stops adding room, and surplus remains after both.

Who does what: A trustee holds the assets, an actuary or plan administrator sets the arrangement up, and your accountant handles the filings. Five Ridge coordinates and can provide insurance or segregated fund contracts where they fit.

Read the full breakdown

IFA

Immediate Financing Arrangement

Your corporation buys a permanent life insurance policy, usually participating whole life, and pays the premium. A bank then lends the corporation money using the policy as collateral, and the corporation uses the loan in its business or in income earning investments. The aim is to keep both the insurance and the use of the capital, at the cost of interest. At death, the death benefit goes to the corporation, the loan is repaid, and the capital dividend account works as described for the IRP.

COSTS AND RISKS

This is borrowing. Interest is a real cost every year, and rates can rise.
Interest is deductible only while the borrowed money is used to earn business or investment income. Part of the premium may be deductible when the bank requires the policy as collateral, within limits.
The bank can change terms, ask for more collateral or call the loan, and policy dividends are not guaranteed.
CRA reviews leveraged insurance closely and shut down some versions in 2013. The general anti avoidance rule was broadened in 2024, so the purpose and paperwork matter.

Usually considered when: Your corporation needs permanent life insurance, has steady cash flow to carry premiums and interest, and has a real business or investment use for the borrowed money.

Who does what: Five Ridge places the policy, a lender provides the loan, and your accountant confirms the deductions.

Read the full breakdown

WHO DOES WHAT

What we do, and what we bring others in for

Five Ridge Financial Ltd. is licensed to sell life insurance and segregated fund contracts in Alberta and British Columbia. We are not a securities dealer, an actuary, an accounting firm or a law firm. For these structures we coordinate the people who are: a pension actuary for an IPP, a trustee for an RCA, a lender for an IRP or IFA, and your accountant and lawyer for tax and legal advice. The numbers we show you are illustrations to review with them, not tax advice.

HOW WE ARE PAID

Plainly

When you buy a life insurance policy or a segregated fund contract through us, the insurance company pays us a commission. Actuaries, trustees and lenders charge their own fees, and we show you those before you decide. The first conversation costs nothing and does not commit you to anything.

HOW THIS WORKS IN PRACTICE

A short call

We learn how your corporation is set up, how you pay yourself and what you want the surplus to do. If none of these structures fits, we will tell you.

Illustrations from the right people

An actuary's IPP illustration, insurer illustrations that separate guaranteed and non guaranteed values, and the costs of each option side by side.

Review with your accountant

Nothing goes ahead until your accountant, and your lawyer where needed, have reviewed it and you have decided.

Prefer to start on your own? The Financial Snapshot covers your personal picture: income, coverage, savings and retirement goals. It does not model corporate strategies; we do that together on a call.

READ THIS BEFORE WE TALK

Guides to the structures we look at

Individual Pension Plans

How an IPP works, who it suits, and why the numbers depend on your age, salary history and how you pay yourself.

Corporate Strategies Guide

What happens to corporate surplus under different approaches: investing inside the corporation, an IPP, an IRP, or a mix.

WHO THIS IS FOR

Built for a specific kind of business owner

Worth a conversation if

You own a corporation, often a professional corporation or holding company, with surplus the business does not need
Your RRSP and TFSA are full, or you take dividends and have little RRSP room
You pay yourself a T4 salary and are over about 40 (relevant to an IPP or RCA)
You have a lasting need for life insurance, such as estate tax or passing on the business (relevant to an IRP or IFA)
You want your accountant involved

Probably not a fit if

You are not incorporated. These structures need a corporation.
You will need the money within the next ten years or so.
You are not comfortable with borrowing or with values that are not guaranteed (IRP and IFA).
You do not want your accountant or lawyer involved.

WHAT THIS LOOKS LIKE IN PRACTICE

Three composite scenarios

These are composites of common situations, not real clients. They show what we would look at, not results anyone achieved.

Incorporated physician, age 48

SITUATION

Professional corporation paying a T4 salary above $200,000 for many years. RRSP and TFSA full. Surplus building in a holding company, invested in GICs and a balanced fund. The accountant keeps the corporation filed and compliant, but nothing connects the surplus to a retirement or estate plan.

THE GAP

Investment income in the holding company is taxed at about 46.7% when it is earned in Alberta, and part of that comes back only when dividends are paid. There is no registered room left, no plan for how the surplus comes out in retirement, and no view of what happens to it at death.

WHAT WE WOULD LOOK AT

In a case like this we would ask a pension actuary for an IPP illustration that compares the contributions with the RRSP contributions they replace, including setup, valuation and possible top up costs. We would also illustrate a corporate owned permanent policy (the base of an Insured Retirement Plan) for the part of the surplus not expected to be needed during the owner's lifetime, with the values the insurer commits to shown separately from projected values. Both would be reviewed with the accountant before any decision.

Incorporated consultant, age 55, planning to step away in 8 years

SITUATION

Corporation with no employees. T4 salary plus dividends above $300,000 a year, with salary paid since the early 2000s. RRSP and TFSA full. No pension plan and no corporate owned insurance. Plans to sell or wind down the business at 63.

THE GAP

Most of the retirement income will have to come out of the corporation after the business stops. Taking large amounts out over a few years could push income into the top brackets and into the OAS recovery range. No one has mapped the order and timing of withdrawals.

WHAT WE WOULD LOOK AT

In a case like this we would have an actuary illustrate an IPP that recognizes past years of T4 salary, which usually requires transferring part of the RRSP into the plan first. We would look at whether an RCA adds anything for salary above the IPP maximum, weighing the 50% refundable tax that earns no interest. With the accountant, we would illustrate a withdrawal order across IPP pension, dividends and RRSP or RRIF income. Corporate owned life insurance would be considered only for the estate: its capital dividend account credit arises at death, so it supports the estate rather than retirement income.

Two partner professional corporation, both age 42

SITUATION

Shared professional corporation. One partner draws a T4 salary above $150,000 and has an RRSP. The other has taken dividends only and has no registered savings. No buy sell agreement and no key person coverage. Surplus held in a high interest savings account.

THE GAP

If a partner dies or becomes disabled, there is no money set aside to buy their shares from their estate. The dividend only partner has no RRSP room and cannot join an IPP without first being paid a salary.

WHAT WE WOULD LOOK AT

In a case like this we would illustrate corporate owned life insurance to fund a buy sell agreement drafted by the partners' lawyer, and disability buyout coverage where it is available. We would ask the accountant to compare the dividend only partner starting a salary (which builds RRSP room and CPP, and could later support an IPP) with staying on dividends. Permanent coverage on part of the surplus would be considered only if the partners have a lasting need for insurance.

See whether any of this fits your corporation.

A short call is usually enough to tell whether an IPP, IRP, RCA or IFA is worth a closer look for you. If it is not, you will hear that too.

Book a call Send this to your accountant

General information only, not tax, legal, accounting or investment advice. Descriptions reflect our understanding of the Income Tax Act and 2026 tax rates; tax rules, interest rates, lending terms and policy values change, and non guaranteed values are not guaranteed. Insurance is subject to underwriting and the terms of the policy. The scenarios on this page are composites, not real clients. Confirm any strategy with your accountant and lawyer before acting. See our Disclaimer.

You built the corporation. Now give it a plan.

Surplus sits in the company earning interest

Money comes out without a plan

The corporation is filed, but not planned

Registered accounts are full

Individual Pension Plan

Insured Retirement Plan

Retirement Compensation Arrangement

Immediate Financing Arrangement

What we do, and what we bring others in for

Plainly

How this works in practice

A short call

Illustrations from the right people

Review with your accountant

Guides to the structures we look at

Individual Pension Plans

Corporate Strategies Guide

Built for a specific kind of business owner

Worth a conversation if

Probably not a fit if

Three composite scenarios

Incorporated physician, age 48

Incorporated consultant, age 55, planning to step away in 8 years

Two partner professional corporation, both age 42

See whether any of this fits your corporation.