A business owner asked me a question recently that more incorporated owners should ask: "Are my corporations actually structured properly?" On paper their setup looked impressive, a separate holding company for each of three operating companies, a family trust, and an investment company on top. Someone had clearly put thought into it. The honest answer, once we looked at how the businesses actually run, was: not for where this owner is right now.
I want to use that question to show how we think about corporate structure, because the right answer genuinely cuts both ways, and the only way to know which way is to look at the facts. So: one example where a big structure is overkill, one where it absolutely earns its keep, and what we landed on in this particular case.
First, what this article is not
It isn't tax advice for your situation, and it's no knock on accountants and lawyers, the good ones build these structures for solid reasons. Corporate structuring lives at the intersection of tax, law, and your long-term plan, and the right setup depends entirely on your details. What follows is a way of thinking it through, not a recommendation for your business. The real work always happens alongside your accountant and lawyer.
Example one: when the structure is more than you need (for now)
Here's roughly what this owner had, and where we landed:
Two facts drove it. The companies weren't retaining meaningful earnings, and there were no plans to sell for the foreseeable future, they reinvest everything back into the business. That matters, because most of the reasons to layer a structure only pay off under the opposite conditions.
And here's the part worth sitting with. The number that made the structure look like it was accumulating wealth, "retained earnings", wasn't a war chest at all. A big chunk of it was simply cash that had come in for a job they'd just finished, sitting in the account waiting for a bill that hadn't come due yet. Money in transit, not money being stockpiled. A holdco built to shelter and protect accumulated profit isn't doing much when the "profit" is really this quarter's cash flow on its way back out the door into the next project.
Example two: when that same structure is exactly right
Now picture a different owner. They're genuinely banking surplus profit inside the company year after year, they run businesses with very different risk profiles they want walled off from each other, and they expect to sell within a few years. For them, the holdco protecting accumulated cash, the separate entities containing risk, and a trust positioned ahead of a sale can each be doing real, measurable work, potentially saving far more than they cost. Same diagram, opposite verdict. The structure isn't good or bad in the abstract; it's only right or wrong for a specific situation.
The cost nobody puts on the diagram
Every company in a structure is its own legal entity: its own corporate tax return each year, its own bookkeeping, its own filings, its own share of accounting and legal fees. Several extra entities mean that cost is paid every year, whether or not the structure earned anything that year. That's the side of the ledger that quietly adds up while the benefits sit idle waiting for conditions that haven't arrived.
What we showed this owner
In this case, we were able to map out a simpler path: collapse to a single holding company that owns the shares of all three operating companies, with the owner and his wife owning the shares of that one holdco. That keeps the genuinely useful benefit, one clean layer between the family and the operating risk, and lets the two extra holdcos, the trust, and the investment company come off the books for now.
Maintaining four extra entities, two holding companies, a trust, and an investment company, typically runs somewhere in the range of $4,000 to $9,000 a year once you tally the corporate and trust tax returns, filings, and basic bookkeeping (an approximate range based on typical published Canadian fees, not a quote). Set against the years they expect to keep reinvesting rather than selling, that's roughly $60,000 to $135,000 over a fifteen-year horizon, real money to keep a structure on standby for an event that isn't on the calendar. And critically, this isn't "tear it all down forever." It's "don't pay for a decade to be ready for an event that isn't on the calendar." When a sale does come into view down the road, that's exactly when we'd recommend building the proper selling structure, a trust and the planning around the lifetime capital gains exemption, and doing it well in advance, because those strategies have to be in place ahead of time to comply with the rules and qualify. Early enough to count, not so early you bleed fees for years first.
How we look at it at FS²
We don't replace your accountant or lawyer, we work with them. Our job is connecting the structure to the rest of the picture: how it interacts with your insurance, your investments, your retirement income, and how you'll eventually take money out of these companies. A setup built purely for tax can quietly work against a clean retirement or insurance plan when nobody's looking at the whole board. That's the gap we're built to close.
The bottom line
"Are my corporations structured properly?" is the right question, and "properly" depends entirely on what you're trying to do. Retaining serious earnings or heading toward a sale? A layered structure may be doing important work. Reinvesting everything with no sale in sight? Some of those layers may be costing more than they save, for now. Either way, you should be able to point at each company in your structure and say what it does for you this year. If you can't, that's not a problem, it's just a good reason to sit down with us and your accountant and take a fresh look. Different advice, by design.