Debt Vs Equity Financing

Every business needs capital—but how you raise it defines your risk and control. Debt financing increases obligations but preserves ownership. Equity brings partners but shares profit. Mackisen CPA Auditors Montreal analyzes both sides to design the best structure for your growth and tax strategy.

Legal and Regulatory Framework
Income Tax Act (Canada) Section 20(1)(c): Governs interest deduction rules for debt.
Income Tax Act (Canada) Section 15: Regulates shareholder loans and equity transactions.
Taxation Act (Quebec) Section 34: Defines reporting standards for financing activities.
CPA Canada Handbook Section 3856: Sets standards for equity and debt classification.
Bank Act (Canada) Section 462: Requires accurate disclosure for business loans.

Key Court Decisions
Beaudoin v. The Queen (2020): Highlighted penalties for misclassified shareholder loans.
Simard Beaudry Construction v. Canada (2019): Validated CPA-led debt-to-equity reclassification.
Lincora Group v. Quebec (2019): Penalized incorrect financing disclosure.
Royal Bank v. Canada (2019): Confirmed lenders’ preference for CPA-audited structures.
Tremblay Holdings v. The Queen (2021): Reinforced consistent reporting for both debt and equity.

Why CRA and Investors Examine Structures
CRA and lenders evaluate whether your financing aligns with operational reality. Misclassifying loans or capital investments can create tax risk. Mackisen CPA Auditors Montreal builds clear, compliant capital structures to protect financial integrity.

Mackisen Strategy
Capital Analysis — Evaluate current debt and ownership structure.
Scenario Modeling — Compare effects of debt vs equity financing.
Tax Optimization — Maximize deductibility while preserving ownership.
CPA Certification — Ensure transparent documentation for lenders and investors.
Strategic Planning — Develop funding strategies for sustainable growth.

Powering Client Needs and Capital Strength
A Montreal tech company raised $1.2 million in equity with Mackisen’s CPA-advised structure. A Quebec manufacturer refinanced debt to improve balance sheet ratios. A Calgary start-up balanced investor ownership and tax efficiency through hybrid financing.
How Mackisen Clients Benefit

• Tax-optimized funding mix

• Greater investor and lender confidence

• CPA-verified documentation

• Compliance with CRA and financing rules

• Sustainable financial planning

Common Questions
Which is cheaper—debt or equity? It depends on interest costs and control goals.
Can I deduct dividends? No—only interest on debt.
Does CRA audit financing structures? Yes, for compliance accuracy.
Can Mackisen help restructure existing capital? Yes, for tax and growth benefits.
Is hybrid financing possible? Yes—Mackisen builds customized models.

Why Mackisen
Mackisen CPA Auditors Montreal ensures your capital decisions are smart, compliant, and growth-driven. We create financing structures that balance tax efficiency and business independence.