Edmonton Bookkeeper | How Entrepreneurs Can Pay Their Salary
The reasons why business owners want to own their own business, is in to avoid paying the 43% of income taxes that average Canadians pay says Edmonton bookkeeper. However business owners need to be very mindful when they are paying themselves, to know how to do it properly in order to take money out of their business that they need in order to live, and minimizing the effects during that money has on their taxes. There are several things that business owners need to know when it comes to shareholder loans, that can help them do this effectively. By understanding these following questions, business owners can learn how to pay themselves in their business properly.
The first question that business owners can understand is what happens when a business owner takes money out of their company? Edmonton bookkeeper says that taking money out of the business simply adds to their shareholder loan account. Every time a business owner takes money out of their business, that’s money they owe back to the company and is kept track of as a running total.
The next question that business owners should understand says Edmonton bookkeeper is what if a business owner contributes their own personal funds or pay corporate expenses out of their own pocket? Business owner should understand that every time they the money back into their corporation, that’s money that they are then over back by their corporation. This is also kept track of as a running total. And the money that they owe the corporation, and the money that the corporation owes them can cancel each other out.
The next question that business owners should understand when it comes to shareholder loans, is how our shareholder loans owing to the corporation usually cleared? Edmonton bookkeeper says all of the money that a business owner takes out of their corporation is money they owe back. However, money that a business owner takes out of their corporation as salary, they are not planning on paying back, Because that is there salary. Therefore, they need to declare to CRA that they have taken that money out of their business as salary or as personal dividends. That way, business owners can pay the personal taxes that are needed to pay on money they’ve taken out of their business.
The next question that business owners should understand says Edmonton bookkeeper is what happens to their personal taxes when they declare salary or dividends? What happens to their personal taxes as the Edmonton bookkeeper is this amount that they’ve taken out of their business is included in their personal tax refunds. They declare their dividends, create a personal tax amount, that salary will be on their personal tax return, and it clears the shareholders loan balance.
The next question is why is it difficult to review historical shareholder loan balances? Edmonton bookkeeper says this is because the running total is kept throughout the entire life of the business since its incorporation. business owners and accountants must take meticulous care in keeping track of every single dollar that they have taken out.
Business owners take money out of their corporation in order to pay their salary rather than giving themselves a paycheck says Edmonton bookkeeper. But business owners who don’t understand exactly how to use their shareholder loans effectively and properly, can end up paying higher taxes, or even get assessed with owing back taxes. Business owners understand the answer to these following questions, it can help them understand shareholder loans and take money out of their business easily without incurring additional tax or assessments.
The first question is does monitoring their shareholder loan prevent unnecessary personal tax? Edmonton bookkeeper says yes this is absolutely true because if business owners don’t know how to take money out of their account, and do so effectively can end up paying more taxes than they might otherwise. What business owners should do, is create a shareholders loan account, and be able to account for the money that they’ve taken out more easily. It is much easier to monitor, they take one amount of that account and them live off of it. They’ll be able to look back at the end of the year, to see how much money they took out of their account throughout the year.
The next question says Edmonton bookkeeper is does limiting transactions and that shareholder loan account prevent errors? This is again resounding yes, by limiting the number of transactions that a business owner has coming out of their shareholders loan account, they can easily see how much money is coming out and when and if there is any additional money coming out, a business owner as well as their accountant can see what’s going on, and be able to figure out if something has come up that it shouldn’t have, in order to account for it. Recommendation is of one or two amounts being taken out of that account every single month, one for personal dividends or salary, and one for personal tax.
The next question is how long does a business owner have clear the balances owing to their corporation? Edmonton bookkeeper says a entrepreneur cannot go there company for two consecutive years. By the end of the second year, they need to have cleared the balance. Either paying that money back to their corporation, or the clear those dividends on their personal tax return.
The next question is does this to your window to clear shareholder loan provide planning opportunities? Edmonton bookkeeper says that it absolutely significantly allows a business owner to plan. It will allow them to spread out how often and when they can take the money out in order to maximize tax planning.
The last question that can help businesses understand shareholder loans is can personal tax be automatically assessed if they don’t clear that loan? Absolutely if a business owner does not clear the balance that they owe their company, or the clearance as dividends in their personal tax refund, command the revenue agency can add that amount to a business owners tax assessment at any given time without any warning.