Day to Day Operations of a Business: Reporting Money You Take from your Corporation
We must take note that paying yourself is different from reporting. Paying yourself is acquiring funds from the corporation while reporting is where we identify the type of funds you are receiving.
There are 3 main ways to report the money you take from your corporation:
1. Wages / Salaries / Bonuses: Wages, salaries or bonuses are deducted as expenses to the corporation. Note that you may need to discuss this with your accountant first as it is not always beneficial in all types of situations. The effect of deducting these as expenses to your corporation may depend on your marginal tax rate.
2. Dividends: Dividends are not deducted as an expense but come off the Retained Earnings. Dividends provide tax advantages personally but an Alberta Corporation will still pay the corporate tax.
3. Shareholder loans: Shareholder loans do not affect net income or retained earnings. These loans can be powerful tools for shareholders as you loan the company funds or other assets and receive that loan repaid back to you at almost any time with no tax consequence.
Do you have any questions regarding these ways to report money you take from your corporation? Call KD today!