Associated corporations are corporations connected by common control or common ownership under the rules in section 256 of the Income Tax Act. The concept is broad and captures more than corporations with identical shareholders; it reaches certain related-party and cross-holding structures.
The principal consequence is that associated corporations must share a single small business deduction limit and certain other tax preferences between them, rather than each claiming the full amount. Inadvertent association — for example through family relationships or option arrangements — can quietly reduce the group's access to the small business rate. Mapping the ownership and control of related companies is therefore a routine step in corporate tax planning.