Management company (Gesco)

A holding company (often called a Gesco) is a company whose primary purpose is to hold assets, such as shares in another company, investments, or real estate, rather than to sell products or services itself. It is used to shelter accumulated profits and defer taxes.

At a glance

Its purpose: to hold assets (stocks, investments, real estate), not to run a business on a day-to-day basis
It often serves as the parent company of your operating company (the company that actually generates sales)
Profits can be transferred from one company to another, generally without immediate taxation
It safeguards your surplus funds (savings) and helps you plan for retirement and estate planning
Tax deferral: Money retained within the business is taxed at around 12.2% (the small business tax rate in Quebec, 2026) rather than at your personal tax rate, which can go as high as 53.31%

Why it matters

Imagine two drawers: your company that generates daily revenue (the operating company) earns more money than you need to cover your living expenses. That money sitting there remains at risk if a customer sues you or if an invoice goes unpaid. A Gesco acts as a separate safe: surpluses are transferred there as dividends between affiliated companies, generally without immediate taxation, and then you can invest them or plan for retirement at your own pace. The real advantage is tax deferral: the money left within the structure is taxed at Small business tax rates, approximately 12.2% on the first $500,000 of active business income in Quebec in 2026, instead of being taxed immediately at your personal tax rate, which can go as high as 53.31%. It’s not magic: a second company means a second set of financial statements (the company’s annual financial report), a second set of tax returns, and specific rules, such as the gradual phase-out of this favourable rate when Gesco’s investments generate more than $50,000 in passive income per year. This structure goes hand in hand with your share capital and often a shareholder agreement. Bankeo will connect you, for free, with a vetted accountant who specializes in corporate tax to help you determine if this is the right choice for you, and we’ll be there for you every step of the way.

Frequently asked questions

What exactly is a management company?

It’s a company that doesn’t sell anything itself: it acts as a safe haven for holding assets, such as shares in your main business, investments, or real estate. Many entrepreneurs set it up above their operating company, which handles sales, to protect the money they’ve accumulated.

Does a Gesco really help you save on taxes?

Its main purpose is to defer personal taxes, not to eliminate them: surpluses are generally rolled over without immediate taxation and grow within the Gesco until you need them. Caution: A poorly structured arrangement could cause you to lose a significant tax benefit when you sell the business (an exemption that reduces the capital gains tax on the sale of shares). This exemption, the lifetime capital gains exemption, will shield approximately $1.25 million in gains from taxation in 2026 on eligible small-business shares. This requires advance planning.

How do I know if a Gesco is worth the cost for me?

You need to compare the benefits it provides (tax deferral, protection of your surplus) with its annual costs: secondary financial statements, secondary tax returns, and fees. The calculation varies for each person. Bankeo connects you for free with a vetted accountant who will provide a clear decision based on real numbers, at no cost to you, and we’ll be there for you every step of the way.