“With ‘good’ integration, whole tax (company and private) on earnings earned via an organization ought to theoretically equal whole tax on earnings earned instantly by a person,” Richie and Feindel say of their ebook.

Like most educational math issues, the situation doesn’t bear out in the true world. In response to Richie, dividends are topic to decrease private earnings tax charges. Which means with a purpose to meet a sure cash-flow want, somebody wouldn’t must take out as a lot in dividends from their company in comparison with if they’d gotten paid via a wage.

“The driving force must be how a lot you spend. Based mostly on that, you truly do not want the total $150,000 in dividends,” Richie says. “So the query is ‘how do you give you a web after-tax money move?’ And you may work out how a lot the shopper truly wants from there.”

The decrease earnings tax fee on dividends additionally has implications on whether or not to carry cash in an organization or an RRSP. Whereas one million {dollars} held in an organization may look the identical as one million held in an RRSP via a net-worth lens, Richie says there’s extra to it.

“The tax charges on dividends are decrease than the tax charges on wage and RRSP earnings,” he says. “Whether or not you’re taking cash out in a single yr, 10 years, or 50 years, you’re at all times going to be in a decrease tax bracket with cash within the company than with the RRSP.”