A disadvantage of using a holding company structure could include:

Question: A disadvantage of using a holding company structure could include:

Answer options:

• Decreased administrative burden due to simpler corporate structure. ✅ Potential loss of access to the small business deduction for operating companies if specified corporate income rules are triggered.
• Inability to shield passive investments from active business creditors.
• Automatic qualification for the Lifetime Capital Gains Exemption on the shares of the holding company.

Correct answer: Potential loss of access to the small business deduction for operating companies if specified corporate income rules are triggered.

Explanation: A major disadvantage is the potential for complex associated corporation rules to reduce or eliminate the small business deduction if the holding company earns significant passive income, impacting the overall tax efficiency of the corporate group.