Cummins’ four pockets have a direct Ontario analogue: operating company, holding company, RRSP, TFSA — four different tax treatments of the same dollar. A holdco above the opco lets retained earnings move upward by tax-free intercorporate dividend and keeps the operating company’s balance sheet clean.

The trap is specific and catches founders constantly. The lifetime capital gains exemption is available only on qualified small business corporation shares, and the QSBC tests look at the composition of the company’s assets — broadly, a 90% active-business test at the moment of sale and a 50% test throughout the preceding 24 months, plus a 24-month holding requirement. Cash and investments piling up inside the operating company can quietly disqualify the shares, and the fix (“purification”) takes time, which is why it has to be checked before a sale is in sight rather than during one.