How do you pay yourself from the corporation?
Did you know it could be a mix of both and it should be based on your business and goals.
Often business owners ask. Should I be paying myself a salary or a dividend. The answer is... IT DEPENDS. Each business owner has different priorities, and both items have advantages and disadvantages. I have outlined some of the advantages and disadvantages of both.
Salary Considerations
• RRSP contribution room generated
• Less surprises at tax time, taxes paid in advance
• Eligible for CPP upon retirement
• Reduction to corporate taxable income
• Payroll processing and monthly remittances required
• Additional expense for CPP (2022 max $3,499.80)
Dividend Considerations
• Simplicity, take the funds and file a T5 return every February
• No CPP remittance which may result in a lower overall cost
• Payment of profits of the company, must be profitable to distribute
• May have personal tax implications such as inability to claim childcare expenses
• May not be eligible for CPP upon retirement
• Dividends are based on class of shares, may cause complexities with multiple partners.
Contact me to schedule a 30-minute complementary phone call to find out more.
