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E-Myth – “Why most small businesses don’t work & what to do about it”

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Edmonton Bookkeeper | Helping Business Owners Understand Shareholder Loans

By not understanding shareholder loans, Edmonton bookkeeper says business owners risk paying higher taxes through not taking money out of their company efficiently, as well they can also be at risk for being assessed additional taxes by CRA at any time without warning. Extremely important for entrepreneurs to understand how their shareholder loans works so that they can avoid triggering significant tax payments and be able to take the money out of their business that they need in order to live.

The most important things that a business owner can duces Edmonton bookkeeper is creating a separate bank account specifically for shareholder loans payments. This can help a business owner limit the number of transactions that are happening in the account in order to help monitor what’s going on in the account as well as avoiding errors. If a business owner takes money out of their business once a month, it can make it very simple for their accountant to see how much they’re taking out and for what reason. If there is any additional jaws out of the account, the business owner and the accountant can easily see that.

The next thing that business owners should understand when it comes to shareholder loans, is that every time they take money out, it’s a running balance against the corporation that they owe back to that corporation. Business owners may not understand that they are owed money back to the corporation unless they clear it. Edmonton bookkeeper says clearing that loan simply means declaring to CRA that they have taken out that money from their company in salary or personal dividends. Since business owners have no intention of paying back the money that they have taken out of their business in order to live off of it, they need to tell CRA if they have taken that money personally. A business owner has up to two years to tell CRA that they have taken money out for personal use, and that they don’t over that back to their corporation. The reason it’s important that they tell CRA that they have taken his money personally, is because every business owner who takes salary or dividends of their company owes personal tax on that amount. By not telling CRA, this looks as though they’re trying to take money without paying taxes on it which doesn’t make CRA very happy. They can assess a business who hasn’t cleared their shareholder loans at any time and without any warning.

For these reasons, it is extremely important for business owners to know how to take money out of their corporation in a way that will not have them paying more in taxes, and so that they know to tell CRA that they are taking money out of their corporation. Simply by understanding these simple things, business owners can avoid paying higher taxes or paying penalties, while being able to pay themselves the money they need in order to live.

All too often, entrepreneurs don’t think it’s important to understand how their shareholder loan accounts work says Edmonton bookkeeper, and end up getting assessed significant taxes because they haven’t properly cleared their account. Dividends can be complex, but by understanding a few things about shareholder loans, business owners can understand what they need in order to pay themselves and avoid paying more in taxes.

Business owners need to understand that they should be monitoring their shareholders accounts very carefully. Edmonton bookkeeper says one of the first things that they can do is create a separate bank account in order for all their shareholder draws to come out of one bank account. This can help not only business owners but there accountants monitor their account see how much money is being taken out. There should be only one or two draws every single month, one for the business owners dividends, and another one perhaps for their personal tax. This will help everyone understand how much money is being taken out, and that can also help them keep running balance of what they or the corporation.

Every time a business owner does take money out of their corporation, that is a running total of of money that they owe back to their corporation. However, business owners who are taking money out of the corporation in order to live off of it, aren’t intending on paying that money back. Therefore they need to declare all of the money that they’ve taken out of their company to CRA. Everyone pays personal taxes on their salary or dividends that they take out of there company.

Edmonton bookkeeper says that business owners have until the end of the second year in order to clear out there shareholders loan balance. They cannot owe the corporation for more than two consecutive years without paying it back. Business owners who do not clear the amount that they go back to the corporation and that to your time. Run a risk of being assessed by the CRA. The CRA can assess any business that owes their corporation longer than two years at any time and without warning says Edmonton bookkeeper. Therefore it’s extremely important of business owners want to avoid getting hit with a tax bill, that they clear their shareholder loans, and pay their taxes. The good thing about knowing this, is that they will be able to plan out how to take the money out of their corporation in a way that can help them effectively tax plan. Through proper tax planning, and taking money out of the corporation in a planned way, business owners can take the money that they need in order to live, and avoid paying the CRA more in taxes than they need.

These are some of the ways that business owners can use understanding shareholder loans as a way of taking money out of the business that they need in order to live. So if you are in need of help to keep your business alive, call 780-665-4949 right now for assistance.