In the Business Corporations Act (of Alberta) there is
no distinction between a holding corporation and an operating corporation.
It is a description of function that is based on fact.
Generally a corporation is considered to be a holding
corporation if it owns the shares in an operating corporation. If an
individual owns shares in the holding corporation, it provides the individual
with the ability to shift excess cash out of the operating corporation
and into the holding corporation. This is referred to as tax free inter-corporate
dividend and it does not trigger a corporate tax consequence. The individual
also does not have a tax consequence in such a circumstance as long
as the individual does not subsequently transfer funds to themselves
personally from the holding corporation.
The transfer of funds to a holding corporation decreases
the risk of loss that can occur as funds held by the holding corporation
are no longer at risk of liability due to activities of the operating
corporation.
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The general opinions expressed herein are for information
purposes only and are not to be relied on. Individuals are encouraged
to seek legal advice as it relates to their specific fact scenario to
ensure they are fully aware of their legal rights and obligations.
