The benefits of tax free rollover

The benefits of tax free rollover.

Is your company growing too fast?  Many times we see that our clients outgrow their basic corporate structure.   In the initial stages, most start up companies incorporate their business to protect themselves personally from legal liability and own shares directly of their business. 

However, as the company grows and you have multiple shareholders, it may be ideal to rethink about the corporate structure.  Perhaps, having a holding company that holds the shares of the operating company can provide the flexibility needed for starting other ventures.  We have come across many clients that want to transfer their operating company shares to a separate holding company owned by the shareholder.

To avoid triggering any capital gains and tax liability, using a section 85 tax free rollover can help you reorganize and transfer your shares or other assets to another corporation on a tax free basis.  The section 85 rollover is beneficial for situations where you have accrued gains that you do not want to trigger.  There are also many tax planning opportunities available using this special rollover.  For this election you will also require the assistance of a lawyer to draft up the appropriate agreements in conjunction with working with your accountant.

If you are considering transferring assets, you may want to see whether this rollover is applicable for your situation.  For more information please feel free to contact an MP Group expert.

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