Featured Series: Business Valuation & Estate Strategy
How Much Is My Business Worth? The Importance of Long-Term Vision
The Scenario
Kevin, a business owner who started with a few thousand dollars 7 years ago, was ready to sell his business for $3M. His own valuation was $2.5M. But proper valuation methods revealed the business is worth $6M today and could be worth $62M+ in 15 years at conservative 20% growth.
The Discovery
Using a Discounted Cash Flow (DCF) model with terminal value based on EBITDA multiples, we calculated:
- Current value: $6M (15x EBITDA on $400k)
- Proper asking price: $7.2M - $8.0M (18x-20x for subscription businesses)
- 15-year value (20% growth): $62M (conservative)
- 15-year value (30% growth): $358M (what's possible with increasing margins)
Key Learning: Our minds are not built to visualize compounding over 10-15 years. Numbers compounding is the simplest to calculate, but it only touches the surface of what actually materializes when combined with the compounding of intangibles: conviction, habits, knowledge, connections, client trust, skills.
The Compounding Tax Bomb: Estate Freeze & Purification
The Scenario
Kevin, now 52, has a $400k EBITDA business growing at 15% for 10 years, then 3% for 23 years. He also has $1.2M in investments growing at 10% annually (50% realized, 50% unrealized). By age 85, his estate will be worth $76.6M, but without proper structure, he faces a $53-61M tax bill at death.
The Problem
Without purification and estate freeze:
- Total estate value: $76.6M (OpCo $28.7M + Investments $47.9M)
- Capital gain: ~$65.2M (after adjusted cost basis)
- LCGE denied: ~62.5% passive assets fail the purity test
- Tax bill: $53-61M (including double tax on extraction)
The Solution
With purification and estate freeze:
- OpCo purification: Separates investments into InvestCo, allowing OpCo to qualify for LCGE
- Estate freeze: Locks OpCo value at $3.6M, shifts $25.1M future growth to Family Trust
- LCGE multiplication: Kevin, spouse, and 2 children each use $1.25M LCGE = $5M total tax-free
- Estimated savings: ~$7.0M in immediate OpCo tax savings ($1.33M saved + $5.7M deferred)
Key Learning: When investments grow faster than the business, the corporation becomes a "massive investment fund that happens to own a business." This creates a permanent purity problem and an exponential death tax. Purification and estate freeze must be implemented early, before the problem compounds further.
Maximizing Estate Value for Business Owners
Coming soon: Advanced strategies to maximize estate value for successful business owners.
Recent Case Studies
From Active Trading to Tax-Free Estate Transfer (Mark)
The Scenario
Mark, 49, built a $5M corporate portfolio through position trading. He averaged 16% before tax. But CRA reclassification risk, LCGE denial, and the tax drag on compounding meant his estate could lose millions.
The Discovery
By redirecting $3M from the corporate portfolio into corporate-owned universal life insurance over 10 years, Mark's family could receive $35.3M at age 85 vs. $25.1M with the traditional approach. +$10.2M more to the estate because the proceeds pass tax-free through the CDA.
Key Learning: Tax-sheltered growth inside life insurance, combined with tax-free extraction via the Capital Dividend Account, can deliver more wealth to the family than a higher-return taxable portfolio. Structure matters more than returns over decades.
The $150,000 Question: Private Lending vs Corporate Investing (Samuel)
The Scenario
Samuel runs a tech company in Montreal with $500k annual profit. He had $1M in retained earnings and started a private lending business without consulting his advisors. Year 1 generated $100,000 in interest income.
The Discovery
Because LendCo had no employees, CRA classified it as a Specified Investment Business. Passive income triggered the SBD grind-down. His tech company lost half its small business tax break. The lending business cost him $73,720 more per year in taxes than if he had invested in corporate class funds instead.
Key Learning: Capital-based businesses (lending, real estate) trigger passive income rules with fewer than 6 employees. Corporate class funds in a HoldCo offer tax-efficient deployment with liquidity and simplicity.
Paying Pennies on the Dollar for Your Estate Tax
The Scenario
Gregory, 74, healthy non‑smoker. His two sons run the business after a successful estate freeze. The freeze created a $300,000 personal tax liability for the estate. The cash to pay it sits in the HoldCo.
The Discovery
To net $300,000 for the estate, a one‑time dividend from retained earnings costs the HoldCo $642,536 (53.31% tax on non‑eligible dividends, Quebec 2026). Corporate life insurance can fund the same liability for 40–60% less in typical age ranges, using the CDA for tax‑free extraction.
Case Study: Don't Ignore Tax on Your Corporate Portfolio (Mike, Active Trader)
The Scenario
Mike, a business owner and active trader, thought he was achieving 15.48% pre-tax IRR on his corporate investment account. After 7 years of trading TSLA, META, and ETFs (SPY, QQQ), his portfolio grew from $510,000 to $1,540,000. But when we calculated the true after-tax IRR using actual taxes paid, the reality was very different.
The Discovery
By reviewing Mike's T2 returns and using the IRR calculator, we discovered:
- Pre-tax IRR: 15.48% (what Mike thought he was achieving)
- After-tax IRR: 13.99% (after accounting for $128,700 in taxes paid)
- Net After-Tax IRR: 11.63% (if liquidated today, including capital gains tax)
- Tax Drag: 1.49% per year, compounding over time
The Hidden Cost
Over 20 years, the tax drag compounds dramatically:
- Pre-tax 20-year ending balance: $27.4M
- After-tax 20-year ending balance: $13.9M
- Total tax cost: $13.5M
Key Learning: Business owners consistently ignore taxes on investment income because they're buried in the total corporate tax bill. Active trading results in almost immediate capital gains realization with almost zero tax deferral. Tax-efficient funds can deliver 15%+ returns with less than 1% annual taxable gains, requiring zero time and eliminating CRA business income risk.
Case Study: From Personal Insurance to Corporate Asset (Key Person, 69)
The Scenario
Two brothers co-own a corporation with their father (69) as a Key Person. They wanted personal life insurance ($1,000/month for $300,000 coverage). Looking at the bigger picture revealed a far more efficient approach.
The Comparison
Three levels of value were discovered:
- Chapter 1: Same gross cost (~$24k/year) bought $600,000 corporate coverage vs. $300,000 personal. 2x the coverage immediately.
- Chapter 2: Super-funding to $42,673/year created a tax-efficient estate transfer vehicle. Net to family at age 85: ~$882,400.
- Chapter 3: vs. regular corporate investments ($42,673/year at 6%), net to heirs would be ~$441,100. The difference: +$441,300 (+100%).
Key Learning: Shifting perspective from "personal insurance" to "corporate asset" doubled the estate value. We did not just buy insurance. We rescued over $440,000 that would have been lost to taxes.
Case Study: Estate Extraction with Universal Life Insurance (Samuel, 45)
The Scenario
A 45-year-old healthy non-smoker with $500,000 in surplus corporate cash (contributed $50,000/year for 10 years) comparing two options: a regular HoldCo investment account (9% return) vs. investments sheltered under a corporate-owned universal life insurance policy (8% return).
The Comparison
Even with a 1% lower assumed return (8% vs. 9%), the universal life insurance strategy wins:
- At Age 65: Universal Life (8%): $2.7M vs. Regular Investment (9%): $1.3M (+114% more to beneficiaries)
- At Age 80: Universal Life (8%): $6.2M vs. Regular Investment (9%): $4.1M (+50% more)
- At Age 100: Universal Life (8%): $22.3M vs. Regular Investment (9%): $18.7M (+19% more)
Key Learning: Tax-deferred growth inside the policy, combined with the death benefit and tax-free CDA distribution, creates substantial additional value for beneficiaries at every milestone, even when the assumed return is 1% lower.
Additional Case Studies
Case Study: Business Loan Insurance (Marcus, 60s)
The Scenario
A business owner in his 60s needed $5 million in life insurance to secure a $5 million corporate line of credit during COVID-19. The lender's in-house insurance arm quoted rates approximately 150% above standard due to a medical condition.
The Result
An independent broker conducted preliminary underwriting research across 15-16 insurance companies anonymously, securing approximately 30% lower premiums than the bank's initial quote.
Key Learning: Shop beyond the lender's insurance arm. An independent, brand-agnostic approach allows comparison across multiple insurance providers to find the best fit for your specific medical situation and needs.
Case Study: Partner Buy-Sell Agreement Funding (Kevin & Michael)
The Scenario
Two cybersecurity company partners with $700K annual profit and no buy-sell agreement. Company value resided in the partners' knowledge and expertise, not physical assets, making valuation complex.
The Result
Established a buy-sell agreement with valuation based on 10-year cash flow projections (company valuation of over $10 million), then funded it with life insurance. Each partner insured for 50% of company value, with options for future increases as business grows.
Key Learning: Buy-sell agreements need funding, and life insurance provides guaranteed liquidity exactly when it's needed. For knowledge-based companies, future cash flow projections provide a more appropriate valuation than asset-based approaches.
Case Study: Corporate Estate Strategies with Whole Life Insurance (Kevin)
The Scenario
Retirement planning revealed significant holding company assets that won't be needed during the owner's lifetime. The question: How to structure assets for the next 30-50 years with tax efficiency, growth potential, and protection against inflation and market risks?
The Result
Selected participating whole life insurance as part of the long-term portfolio for estate transfer. Provides comparable growth to moderate-aggressive portfolios (7.5-8% annually) with much lower volatility and tax-efficient wealth transfer through the CDA.
Key Learning: For assets designated for the next generation, whole life can provide stable, predictable growth with tax benefits that complement traditional investment portfolios. Values only move upward, providing predictability for long-term planning.
Case Study: Universal Life for Active Investors (Samuel)
The Scenario
An IT contractor with significant accumulated profit in his holding company recognized that active trading triggered capital gains and was tax-inefficient. He wanted to tax-shelter investments while maintaining active control over investment selection.
The Result
Selected universal life insurance with yearly term cost structure, allowing large investment amounts with low initial costs and active investment management. Tax-sheltered growth within the policy, with nearly 100% of death benefits credited to the Capital Dividend Account for tax-free distribution.
Key Learning: For investors who want active control, universal life offers a way to combine tax efficiency with investment management flexibility. Unlike whole life, universal life allows you to choose specific investment options and make active investment decisions within the policy.
Case Study: Wealth Preservation Through Key Person Life Insurance
The Scenario
A case study comparing wealth creation vs. wealth preservation strategies using corporate life insurance. Comparing Term-15 (wealth creation) vs. Universal Life (wealth preservation) strategies for key person coverage.
The Comparison
Universal Life preserves $1.16M vs. Term-15's $500K, demonstrating why extraction costs exceed 55% tax and which strategy preserves more wealth for your family.
Key Learning: Wealth preservation strategies focus on protecting and growing assets over the long term, while considering the full cost of extraction. Universal Life provides both protection and tax-efficient wealth accumulation.
These are illustrative examples, not guarantees. All scenarios are anonymized. Results depend on specific circumstances. Always consult with your CPA, lawyer, and investment advisor.
Request a structure review to discuss your specific situation.