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CCCP shareholder rules

By Gord Ahier |

Jan asked:

Can a Canadian Controlled Private Corporation (CCPC) have more than 50 shareholders?

Gord Ahier answered:

A Canadian Controlled Private Corporation (CCPC) is the primary vehicle through which Canadians operate their businesses and it is a fundamental building block in the Canadian Taxation system. In broad brush strokes, the Canadian Income Tax System is designed to reflect the principal of integration between corporate and personal taxation.

In other words, an individual should pay the same amount of tax on income earned directlyversus having that same income earned and taxed in the hands of the CCPC and then paid to the shareholder as a dividend which is then taxed in the shareholder's hands. In Ontario, the corporate tax rate is 15.5 per cent on income eligible for the small business deduction by a company with a year ended December 31, 2011.

There is no restriction under the Income Tax Act on the number of shareholders that a CCPC can have. The restriction flows from the incorporating legislation and Security Law issues. Generally from a security law perspective the Corporation is limited to 50 persons not includingemployees and former employees. If this is an concern, then you need to address this issue with your lawyer who would be familiar with the specifics of your situation.

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