ADVISORY: Investing Surplus Corporate Cash

March 7, 2023


NANAIMO – The purpose of running a business is to generate income. Once your hard work results in surplus cash, you’ll want to think about how to invest this money. First, you need to understand how money moves through your business and what is considered excess cash.

Operational cashflow is the cash needed to run the day-to-day business. The working capital is the movement between current assets and liabilities that keeps your business running.  Neither of these are sources of investable money. So what is?

Look to retained earnings to determine what’s appropriate for investing in a portfolio. This type of cash is the business’s after-tax money, and it’s not needed for business operations or capital reserves. Once you have enough retained earnings, your options to invest are to:

  • Keep the funds within the company and open an investment account;
  • Create a holding company to receive tax- free inter-corporate dividends on shares it holds in the operating company—the advantage is this can put the withdrawn funds beyond the reach of the operating company’s creditors; or
  • Pay out excess cash as dividends — these funds may be placed in a personal non-registered investment account.

Before choosing any of these options, we recommend you work with a tax professional to determine what’s best for you and your company. The next step is to reach out to an Advisor to make an investment plan.

Please feel free to call me at 250.268.6144 if you would like to learn more about what Coastal Community Private Wealth Group can offer. Credential Securities is also here to help with your investment needs, so your hard-earned money can grow.

Aislinn Bissenden, CFP® is a Private Wealth Advisor with Coastal Community Private Wealth Group and an Investment Advisor for Credential Securities.

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