If you own a Canadian controlled private corporation (CCPC), make sure you pay the most effective compensation to yourself, any relatives you employ, and shareholders.
You can take a straight salary, pay bonuses or come up with an effective combination. As well, you can pay dividends that may be subject to a lower tax rate. Consult with your accountant about these forms of compensation, each of which presents its own tax advantages:
- Salaries provide contribution room for your RRSP. You can also split income and lower taxes by paying a reasonable salary to your spouse or common-law partner and to your children who work for the business. The money is taxed at the rates of the lower-earning individuals.
- Bonuses can be paid next year to yourself and relatives working for the business. This defers taxes, if your company reports taxes on an accrual basis.
- Bonuses can also be used to reduce your enterprise's income so that it qualifies for the small business deduction.
- Dividends paid to shareholders may qualify as "eligible dividends" that are subject to a lower tax rate. The payouts must come from the corporation's general rate income pool at the end of the year in which the money is paid.
Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
 Mrs Wendy Willis, President
Integrated Business Management Group Inc.
We are Certified Consultants who do accounting software sales, setup, installation, conversions, onsite technical support, and training classes. Our products are QuickBooks, MYOB, Simply Accounting, Paymate and PayDirt payroll. We also do inhouse and remote bookkeeping and payrolls with job costing that we send by encrypted email for you to import into your system. Ask us about our free seminars with tips in Victoria, BC. http://www.ibmgi.com |
