In the last episodes, we unpacked how to use a Canadian Controlled Private Corporation to invest. However, the main reason why corporations exist is to run a business. A small business owner must learn how to pay themselves through their business. That applies to incorporated companies, or as a sole proprietor. It sounds simple, but there are all sorts of nuances to make it fair compared to regular employees.
Compensating yourself can take multiple forms. For example: salary, dividends, taxable benefits, pensions, gifts, and health benefits. How you choose to pay yourself has different advantages, potential pitfalls, and nuances to be aware of. Use this knowledge to reward yourself optimally for your work while staying out of trouble. It is like a table saw. You don’t want to leave money on the table. However, you don’t want to stick out like a sore thumb either.
“When you’re consulting a tax professional, knowing about these topics is really important. That’s going to help you get the most out of the interaction with them.”
@LoonieDoctor
“The other thing on EI that’s interesting to think about is that you always have the option to switch to paying yourself dividends.”
@benjaminwfelix
“There’s less of a penalty for flowing active income through a corporation as you move down to lower tax brackets.”
@LoonieDoctor
“Accountants will tend to look at, ‘How do I optimize things for this tax year? Maybe the next two tax years.’ A financial planner is looking over your lifetime, over the next 30, or more years – [remember] your time horizon doesn’t end at retirement.”
@benjaminwfelix
