Edmonton Bookkeeper | How Entrepreneurs Can Pay Dividends
Business owners who are not aware of how they can pay personal dividends to themselves and their corporations can risk significant penalties such as being assessed for having to pay back taxes says Edmonton bookkeeper. It’s very important that business owners know how they can take out their salary or personal dividends in order to maximize their tax savings and avoid penalties.
The first thing that is important for entrepreneurs to know about keeping themselves, is that they need to not to be themselves with the paycheck, but take money out of their business as a salary or personal dividends. The way they would do that is through a shareholders loan. Shareholder loans is Edmonton bookkeeper is what is called when a business owner takes money out of there corporation. They are the shareholder and the business is loaning them the money. They are expected to pay that money back however. So business owners need to take care to ensure that they are keeping track of which money they pay themselves and when they are paying it to them. Even though a business owner is expected to pay that money back to the corporation, they are not intending on doing so says Edmonton bookkeeper because they are taking that money out as a salary in order to live off it. So a business owner needs to clear that shareholder loan balance in order to no longer over the corporation.
How a business owner is going to clear their shareholder loan balances Edmonton bookkeeper, is by declaring their personal dividends were salary on their personal taxes. Once they have declared how much money they’ve taken out of their business on their taxes, that resets the shareholders loan balance back to zero and they are no longer required to pay that money back to their corporation. It is extremely important during this time, that business owners keep good record of the money that they take out of their business. Edmonton bookkeeper says best practice is creating a separate bank account that will be where the business owner draws all of their salaries or personal dividends from. Since this is going to be the only thing that is being taken out of that bank account, it will be very easy for business owners to see how much money they are taking out of their business every year. This will also allow accountants to with you the amount of money that business owners taken out of their business, and reviewing it to see if there are any errors. This is also extremely important if CRA has any questions or even potentially an audit. This will make it much more easy for CRA, accountants as well as business owners to review historical shareholder loan balances. if clean records are not kept, there is a potential that reviewing the historical data will be impossible, and the potential to be for business owners who would end up paying higher taxes because of it.
Business owners must be very aware of how they take money out of their business as a salary or personal dividends says Edmonton bookkeeper. The reason for this is because if business owners don’t take care, they could end up either paying higher taxes or get triggered with significant tax payment. Business owners need to understand what the shareholder loan is, and take the money of their business accordingly, as well as account that money properly.
Every time a business owner takes money out of their business, this is called a shareholder loan, and that’s money that is expected to be paid back to their corporation. Since business owners are taking money out of their bank in order to live on that money, they have no actual intention of paying that money back to their corporation. Edmonton bookkeeper says in order to clear that shareholder balance ensure that no longer over the corporation, they must declare the money that they have taken out of their business on their personal taxes. It’s extremely important that business owners keep good records of all of the money that they have taken out of their business, in order to be able to claim how much money they’ve taken out when they go to pay their taxes. Once they have declared the amount of money in taxes, there shareholder loan balance is back to zero, and they can continue taking money out of their business.
It’s extremely important that a business owner clears there shareholder balance will often enough in order to avoid penalties. A business owner cannot over their company longer than two consecutive years shareholder balance. They must clear the balance before the end of the second or potentially risk triggering a significant tax payment to the CRA. The CRA will be able to assess a business owner who has not. There shareholder loan at any time and without warning.
One of the best ways that business owners can keep track of all of the shareholder loans that they are taking out of their businesses Edmonton bookkeeper, is by creating a separate bank account. This bank account will be where business owners take all of their dividends from, and she was limited to one or two draws every single month. One drawer being a business owners dividends, and another job being what they’re taking to pay their personal taxes. If anything else shows up in this account, the accountant should be able to see easily if there’s any errors or any additional money that is being paid out. This can also make it very easy for CRA to get answers, and extremely easy if any business owner accountant or Canada revenue agency need to review historical shareholder data.
Helping business owners understand how to pay their dividends in their business, can help them significantly plan their taxes around that. By spreading out how much money they will take and when they will take it, can drastically affect their tax planning allowing them to even it out. see you soon.