Private corporations (CCPCs) have various financial needs and opportunities.

1. buying out a shareholder
2. corporate insured annuity
3. freeing "trapped" surplus
4. providing retirement income for a key person
5. providing collateral for loans
6. replacing a key person
7. shared ownership
8. shareholder estate planning

Tax is a threat.

Buying Out A Shareholder

Funding a buy/sell agreement upon

• death of a shareholder or
• a living buyout at disability or retirement

so surviving shareholders maintain ownership & control

Corporate Insured Annuity

• increases returns on fixed income
• increases shareholder after-tax estate value
• reduces capital gains tax on deemed disposition of shares at death of shareholder

Freeing "Trapped" Surplus (most common)

• using surplus funds (not needed to run the business) to
  • earn tax-free investment growth
  • provide a tax-free death benefit

Providing Retirement Income For A Key Person

• Individual Pension Plan (IPP): supplements RRSPs
• Retirement Compensation Arrangement (RCA): can also finance corporate growth

Providing Collateral For Commercial Loans

• repays loan upon death of shareholder or key employee

Replacing A Key Person

• reimburses the company for financial loss of a key person upon
  • death
  • disability, or
  • critical illness

(profits lost, cost of replacement)

Shared Ownership

• corporation owns & pays for death benefit
• life insured owns & pays for tax-deferred investments

Shareholder Estate Planning

• uses cheaper corporate dollars to cover shareholder’s capital gains tax, etc