What are the legitimate business reasons for retaining earnings in a corporation?
Nova Scotia, Canada
The following excerpt is from Bembridge v. Bembridge., 2009 NSSC 158 (CanLII):
“In the case law, legitimate business reasons for retaining earnings in a corporation have included: (1) the need to acquire or replace inventory; (2) debt-financing requirements; (3) carrying accounts receivable for a significant period of time; (4) cyclical peaks or valleys in cash flow; (5) allowances for bad debts; (6) allowances for anticipated business losses or extraordinary expenditures and (7) capital acquisitions.” ( Beeching v. Beeching 2006 SKQB 542 para. 27.)
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