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Edmonton Bookkeeper | Paying Salary In Corporations
Business owners learning how to pay themselves salary or taking personal dividends in their business is extremely important to learn how to do effectively says Edmonton bookkeeper. If they do not do this properly, they can end up paying much higher taxes, and even potentially getting assessed with additional taxes from the CRA. Helping business owners understanding shareholder loans, can make a big difference in their business.
Business owners should understand that when they take money out of their corporation, they need to account for that, because every dollar they take out they actually need to pay bac in the form of a shareholder loan. Since they will their business for every dollar they take out, it’s very important that they need to account for that. Since a business owner is not going to pay back the corporation the amount that they have taken because that’s how they pay themselves – with salary or personal dividends, they need to tell CRA in any year that they owe their corporation, that they have taken that money out as salary. Edmonton bookkeeper says the reason for that, is because every business owner who takes dividends of their business, pays personal taxes on the amount they take out. They cannot owe their company for two consecutive years, they must clear that balance before the end of the second year. If they don’t, CRA will be able to assess them at any given time and without warning. In order to avoid being hit with a huge tax bill, business owners should understand how shareholders loans work.
Every time a business owner puts money into the business, that also is kept track of on a running total basis dating back to the start of the corporation. Any time they are owed more money by the corporation then they over the corporation that, this can even out the balance. This way, it’s very important for a business owner to keep track of not only all the money that they take out of the business, but all of the money that they put in, or bills that they pay personally says Edmonton bookkeeper.
One way that business owners can keep track of all of the money that they have taken out of their corporation is by creating their own bank account that is specifically for taking money out of their business and shareholder loans. This can help the bank account have limited number of transactions that are coming out of the account says Edmonton bookkeeper. This can make it easier to monitor as well as minimize errors. Ideally, a business owner will only have one or two things coming out of that account every single month, one is there salary or dividend, and one for their personal tax. If a business owner or their accountant sees anything else coming out of the account, that should be easy to take note of. It’s also extremely important that it is easy to be able to look back historically to the life of the business.
Understanding shareholder loans is extremely important for businesses says Edmonton bookkeeper. The reason is because, if business owners don’t understand how to take money out of their account, pay it back, or clearance, they can be assessed with huge tax bills that could harm them potentially.
One of the first loss that an entrepreneur should understand when it comes to take out of their business, is that every single dollar that a business owner takes out of their account, they actually over back to the corporation. Also, every single dollar that they used to pay a bill for the corporation is mentally that the corporation owes them. Both of these totals need to be kept track of on an ongoing basis dating back to the beginning of the corporation. A business owner is not able to of their corporation for more than two consecutive years. The reason for that, is because if they don’t pay that amount back, or tell CRA that they have taken that money out, CRA will see that as not paying their taxes on income that they’ve taken out of their business, and are able to process a business owner at any given time and without warning. In order to avoid this tax bill, business owners should be very diligent in being aware of how much money they over the corporation, in order to clear that amount.
In order to help business owners keep track of all the money that they of the corporation, Edmonton bookkeeper recommends that entrepreneurs also create a bank account specifically for payment dividends to themselves out of says Edmonton bookkeeper. This will enable the business owner to see the limited number of transactions in their account, in order to monitor the account. If a business owner or their accountant sees any additional transactions that are not expected, they will be able to figure out very easily what’s going on, or proved to CRA that the money that was taken out was not used for personal dividends.
By understanding these things, this can help businesses plan their dividend draw in order to spread out the amount of money that they are taking to minimize tax payments. Edmonton bookkeeper says by knowing that they have to clear any amounts that they will their corporation in two years, can help business owners figure out when and how to take money out of their account to pay the least amount of taxes within that second year.
By understanding how businesses can be there salary in their corporations through shareholder loans, as owners can avoid paying higher taxes than absolutely necessary, and also avoid getting hit with assessment from the CRA. It’s extremely important that business owners keep extremely good track of all of the money that they owe their corporation, so that they can to CRA exactly how much they did pay themselves, and get there is a question. By keeping great track, business owners can go back historically since the beginning of the corporation.