Determining the best way to pay yourself through your corporation can be daunting, but it doesn’t have to be. There are many options to choose from and before making the decision, you’ll want to consider both your personal financial circumstances and the corporations.
Many times, salary and bonuses are paid out to individuals to help ensure the corporation doesn’t earn over the Small Business Limit of $500,000 because a privately controlled Canadian Corporation (CCPC) pays lower income taxes if the income amount remains below $500,000. After salary and/or bonuses are paid, dividends can be used if more income is necessary.
Before determining the correct approach for paying yourself through your corporation, you’ll want to consider a few personal financial circumstances including:
- What is your income level?
- What are your cash flow needs?
- What is the corporation’s predicted income for the year?
- Is having RRSP room or other personal income tax deductions important?
- How old are you?
Because there are so many issues and points to consider in order to ensure the best possible outcome, we highly recommend consulting with a financial professional like an accountant, tax lawyer, or financial advisor.
Bottom Line
Having a corporation can lend many benefits including freedom to choose the best way to get paid. With many options and combinations to choose from, it is important to take a good look at your personal finances and goals as well as the corporation’s to ensure the best approach is implemented. If you find yourself unsure or would like to discuss anything further, I encourage you to get in touch with me to set up a time to meet.