You have 2 free articles remaining. Subscribe
Mar 2, 2017

Small Business Owners And Professionals Have You Got Your Money Working For You?

by Allan Small

Allan SmallIf you’re a small business owner or a professional that has incorporated, do you have surplus cash sitting in your corporate account earning next to nothing? Why not put that money to work by investing it, to produce an additional revenue stream?

It’s surprising how many small business owners and professionals don’t realize that their corporation can invest their surplus cash. They often assume that they need to pull money out of their small business in order to invest it, which is then taxed, and then they invest the money personally. Many obviously don’t want to pay the extra tax and, consequently, just leave the money sitting in a corporate account, which offers little in the way of return.

Liquidity Is Important For Small Businesses When It Comes To Investing

Investing is a viable option to bring in additional revenue. Perhaps the biggest difference in the approach to investing by a business compared to an individual investor is the need for liquidity. Unlike most personal investors who tend to be investing for the long term (10, 20 or 30 years out in the future), small businesses need to be able to access their money on a regular basis.

Businesses often have a need for the money much sooner, perhaps to cover expenses if some receivables are late coming in, or there may be a desire to reinvest into the business to purchase equipment or even leverage the funds to make an acquisition.

Surplus cash sitting in a corporate account will make next to nothing, but, if invested, the hard-earned money could earn a rate of return that is much better than money just sitting in cash or in a savings account. It is possible to invest and keep the money liquid. There may be a settlement delay of two to three days to access the funds, but for most corporate investors that is acceptable.

The corporation will have to pay tax on the additional earnings, but corporate tax often is less than personal tax, which makes for a winning proposition.

Here Are Some Tips To Consider Related To Corporate Investing:

Have A Goal In Mind

Like any one or organization that is investing, it’s important to understand what you want to achieve as this can often impact the type of investments that will be considered.

Determine How Much You Want To Invest

Businesses need to think carefully about how much they want to invest. It’s important to take into consideration cash flow and debt obligations. Like personal investing, your investment advisor also will ask about your risk tolerance and your time horizon. Understanding the time horizon is important because businesses tend to be more cautious and have liquidity considerations.

Types Of investments

Pay attention to the type of investments selected because of liquidity concerns (e.g., don’t invest in five-year non-redeemable GICs). Companies might want to look at investments that can be liquidated quickly, such as low-risk corporate bonds or dividend paying stocks.

Understand the tax implications

Talk to your tax advisor before moving forward to ensure that you understand the implications for your situation. They can provide counsel on the best way to access the additional funds from the investments in the most tax-efficient way possible.

Allan Small is the Senior Investment Advisor with Allan Small Financial Group with HollisWealth, a Division of Scotia Capital Inc. ( as well as the author of How To Profit When Investors Are Scared. He can be reached at (416) 332-3863 or via email at


This article was prepared solely by Allan Small, registered representative of HollisWealth ® (a division of Scotia Capital Inc., a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada). The views, including recommendations expressed in this article are those of Allan Small and not those of HollisWealth. ® Registered Trademark of The Bank of Nova Scotia, used under license. Allan Small Financial Group is a personal trade name of Allan Small.