Should I invest my money as an individual or as a corporation?

Managing your finance as a freelancer is not easy but it isn’t hard. You just have to remember that your income is not regular, but your expenses are.

This is what I am currently doing but am open to changing:

KEEP A $30,000 – $40,000 AMOUNT OF MONEY IN CASH

I can’t really call this an emergency fund because it isn’t an emergency.

I’m using it to pay for my daily bills and so on, so it’s more of just savings, or operating capital.

Now you might groan, moan, clasp your head in your hands and think: ALL THAT MONEY COULD MAKE SO MUCH MORE ON THE STOCK MARKET!

Perhaps… but I keep that amount in cash to tide me over until my next contract for these reasons:

1. I don’t want to sell my stocks if the market happens to dip & I need cash to buy food
2. I’d rather have cash in a savings account so I don’t have to scrounge for money
3. I keep enough in cash for the next year and a half or so (unless I travel)
4. I can’t withdraw savings from my contract/earnings until they’re in “retained earnings”*

*My earnings are under a company, so I can’t withdraw its working capital to pay myself, its shareholder, until the books have been closed for the year and I can as a shareholder, withdraw however much I want as dividends to pay myself a salary.

…then when I get a contract, I invest it in the stock market.

I INVEST MY OPERATING CAPITAL OR SAVINGS FOR DAILY EXPENSES AFTERWARDS

After I get a contract, I know money will be coming in monthly, so I do the following:

• Max out my retirement funds if I haven’t already done so (unlikely but possible)
• Calculate how much I need to live/spend before fiscal year end
• Invest the excess and keep what I need until fiscal year end
• File my taxes for fiscal year end, and get my retained earnings number (e.g. savings)
• Withdraw an amount I need to live paying as little tax as possible (or not at all…?)

NOW I AM THINKING OF JUST KEEPING A CAPITAL

Now that I am permanently going to settle in Canada, I am not going to plow my money into the stock market after I get a contract.

I’ll just keep that money I’ve already paid taxes on and use it to live, and put the company’s retained earnings (also known as savings) to work.

Maybe I’ll buy some real estate to rent out, land, invest it in stocks for dividends, for interest earnings or just to grow over time in some index funds.

Basically what I’d do if it was MY money in my pocket, and not under my company.

I have to figure out what the best tax plan for this is — either to take the dividends as a shareholder, pay taxes and then invest it, or invest it under the company and pay taxes under the company.

I’m not quite sure where to start other than to figure out how investing is taxed under a corporation versus an individual.

I’ve done some reading on forums but it’s just too confusing for me, as people have specific situations, and I just want some general guidelines.

Any Canadian accountants or other freelancers around to shed some light on where I should invest my money?

Under myself as an individual or under a corporation?