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Corporate Structuring
HoldCo vs. OpCo Architect
Excess cash sitting inside an operating company is exposed to that company's own creditors and lawsuits, and can quietly disqualify its shares from the Lifetime Capital Gains Exemption.
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How To Use This Calculator
Enter your OpCo's retained earnings, how risky the operating business actually is, and your exit timeline.
A dividend from OpCo up to a connected HoldCo generally moves tax-free between the two corporations, provided OpCo itself has no refundable dividend tax on hand to trigger Part IV tax on the way up. This models the sweep, the protected balance over time, and flags the one timing trap that catches people who set this up too close to a sale.
Your Inputs
Structure Viability
-Total Protected In HoldCo By Exit Year
$0
Remaining In OpCo, Exposed To Business Risk
$0
Part IV Tax Triggered On The Sweep
$0
01
OpCo Earns & Retains
Active business income taxed at the small business rate, retained as cash.
02
Inter-Corporate Dividend
Paid to a connected HoldCo under section 112, generally tax-free.
03
HoldCo Holds & Invests
Cash sits outside OpCo's creditors, invested for modest passive return.
04
Available At Exit
Distributed to shareholders, or reinvested into the next venture.
Protected In HoldCo vs. Remaining In OpCo
This models the mechanics of an inter-corporate dividend sweep, not a full corporate reorganization. Actual implementation involves share structure, voting control, and potentially a Section 85 rollover to establish the HoldCo relationship in the first place, all of which need a lawyer and accountant working together.