Incorporated business owners often accumulate retained earnings in their corporate accounts.
This money either sits in cash earning very little interest or is invested in something unrelated to the business, such as in stocks, real estate, etc.
Income earned on these investments are considered passive income by Canada Revenue.
If the money/investment in your corporation earns passive income it affects your small business deduction (SBD).
Once passive income exceeds $50k, the SBD is reduced by $5 for every $1 over the $50k threshold. It is completely eliminated once passive income exceeds $150k.
This reduces the tax advantage of your corporation and you should take steps to minimize the passive income earned or move the funds out of the corporation.
If the ultimate purpose of this money is for retirement I can help you transfer the funds out of your corporation tax-free.
Or if you prefer to keep the funds in the corporation I can help you minimize the amount of passive income earned to reduce the impact on your SBD limit.