A Holding Company (Holdco) is typically established to facilitate family planning, estate planning and or to structure an investment.
A holding company structure contains limited liability so debts of the corporation do not attach to the corporation owner.
A corporate structure legally separates the owner and the corporation, which can significantly reduce the total tax burden. The small business credit currently supports a federal tax rate of 11% on eligible income earned in the holding company up to $500,000.
In contrast, income earned by investments owned by the owner (not the holding company) are taxed at the marginal tax rate.
Other notable tax benefits of a holding company include a zero tax rate on dividends passed between two Canadian controlled private companies.