Pull Money Out Of The Corporation
Posted On: 25/11/21 - 0

Many Shareholders Feel That They Can Just Simply Pull Money Out Of The Corporation Indefinitely.

Entrepreneurs often think that they can borrow money for any length of time from their corporations. They don’t realize that that money needs to be paid back within a year. We see this often, especially with new business owners.

There Are Tax Implications to Pulling Money Out Of The Corporation

There are tax implications to withdrawing from your company funds. You need to pay those funds back to the company within that year. Otherwise, those funds will need to be disclosed on your personal income tax return. That could potentially put you in a serious position of being hit with a huge tax liability. This is why it is so important to know up front what the tax implications are. Be sure you have the cash flow set aside for your personal income tax as well as your corporate taxes. You do not want to get stuck owing money to the CRA. We know, we see this all too often in our office and nobody likes this kind of tax surprise.

Should You Pay Yourself With A Dividend Or A Wage From Your Corporation?

Many of the owners of these companies often pay themselves before they have actually mapped out what the tax liabilities will be. Rarely planning for a rainy day. In other words, they have not planned ahead. These companies don’t decide in time whether they are going to be declaring this money as a wage, or should they  pay themselves as a dividend? If they don’t think about how those cash withdrawals should be handled then they could be stuck with a huge tax bill. Also, depending on how it was set up, or improperly set up, there could be penalties as well.

Plan Ahead, Minimize Your Tax Liability In Your Corporation

Often, owner’s are so busy running the business that they don’t make time to sit down with an accountant to plan out strategically how best to avoid making honest mistakes. Mistakes cost money, and sometimes added penalties. Too often, business owners may not see an accountant for a few years. People think that they will save accounting fees by allowing the paperwork to pile up. When they finally decide to do something about the administration, they are well into what could potentially be a mess on the their hands. They simply did not have all of the information in order to make some sound business decisions that will keep them out of trouble.

Spend Up Front For Professional Advise To Protect Your Corporation

Business owners often initially think they are saving themselves money by not hiring an accountant up front. Only to find out that the decision to wait to seek out professional guidance has only costed them more. The longer the wait, the bigger the problem could be. It is easier and more cost effective for you, if we work to keep you out of trouble versus work at getting you out of trouble.

12203-107 Avenue.
Edmonton, Alberta.
T5M 1Y9

Call us:
780.482.7297