Entrepreneurship & Small Business

How do I put my personal money in my new corporation?

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Aug 16, 2010
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How do I put my personal money in my new corporation?

So I recently created a corporation (my wife and I are the only directors) to start a new business. These are questions for those who have incorporated.
  • What is the typical way to put cash infusions into the company? ie, do I have to issue myself stock every time I deposit cash from my personal accounts in the company's accounts?
  • How do I figure out how much stock to give myself? My articles of incorporation has unlimited stock and no stated value.
Thanks
15 replies
Member
Aug 17, 2011
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CALGARY
1. You just transfer cash from your personal bank accountnat to your corporate account. The "shareholder loan" account tracks these, and basically works as an I-O-U account from the corp to your person. Additionally, you need to do what's called a "share subscription", which is the actual purchase of stock from the corp by your person. It's no more complicated than you writing out a cheque (for example) for $100, and you getting shares in return.

2. Give yourself enough shares that if you have to do a sell/split/swap the numbers don't get ugly. Typically 100 shares is a good number, but err on the side of higher rather than lower if that number won't work for you.
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Nov 9, 2013
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Vancouver, BC
Hansol wrote: 1. You just transfer cash from your personal bank accountnat to your corporate account. The "shareholder loan" account tracks these, and basically works as an I-O-U account from the corp to your person. Additionally, you need to do what's called a "share subscription", which is the actual purchase of stock from the corp by your person. It's no more complicated than you writing out a cheque (for example) for $100, and you getting shares in return.

2. Give yourself enough shares that if you have to do a sell/split/swap the numbers don't get ugly. Typically 100 shares is a good number, but err on the side of higher rather than lower if that number won't work for you.
+1. "Due to/from shareholder" accounts are quite common for small businesses that I work with. At year-end when filing taxes, just make sure that the account is not in a debit position (shareholder owes corporation) to avoid shareholder loan tax implications.
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Jul 5, 2011
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OTTAWA
You can make an equity account called "Partner Contribution". Use it to add your own cash.

The opening balance sheet for my T2 was pretty simple. Just 2 line items. I added $500 to purchase office supplies.

Assets:
Cash and Deposits (GIFI 1000) - $500

Equity:
Contributed and other surplus (GIFI 3540) - $500
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MaceWindu wrote: +1. "Due to/from shareholder" accounts are quite common for small businesses that I work with. At year-end when filing taxes, just make sure that the account is not in a debit position (shareholder owes corporation) to avoid shareholder loan tax implications.
Thanks. Just curious, how would this shareholder loan account be in a debit position? Outflows to the owners would be recorded as salary expense or dividends, right?
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jg2011 wrote: You can make an equity account called "Partner Contribution". Use it to add your own cash.

The opening balance sheet for my T2 was pretty simple. Just 2 line items. I added $500 to purchase office supplies.

Assets:
Cash and Deposits (GIFI 1000) - $500

Equity:
Contributed and other surplus (GIFI 3540) - $500
Thank you. So, is partner contribution the same as the shareholder loan accounts? If not, do cash contributions have a stock element to them?
Member
Aug 17, 2011
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CALGARY
Typically draws are recorded as:

Dr SH loan $500
Cr bank $500

Then at year end a dividend for the amount outstanding in the SH loan account is drafted, and the SH loan account is cleared that way.

As a side note, yes, I suppose a person could use a "contributed surplus" account as a way to do things, but from a technical Gaap standpoint a real contributed surplus is very different from a shareholder transaction.
DiceMan wrote: Thanks. Just curious, how would this shareholder loan account be in a debit position? Outflows to the owners would be recorded as salary expense or dividends, right?
Jr. Member
Feb 18, 2010
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MISSISSAUGA
Yes I agree with the shareholder loan. That is the simplest method of accounting for your contribution to the corporation.

- Allan
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Nov 9, 2013
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There are basically three ways to take cash from your business:

1. Dividend
2. Salary
3. Due to/from shareholder

The third way is basically just an owing balance between you and the corporation with no impact to bottom line, unlike dividends (affects net income) and salary (affects operating income).

What's common to do is just use due to/from shareholder and at the end of the year you see it is in a debit balance (you owe corp) pay out that balance as a dividend to bring it to credit position (Corp owes you) to avoid shareholder loan tax implications.
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Aug 17, 2008
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Dividends dont affect net income
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sr79 wrote: Dividends dont affect net income
Technically no but depends on how you look at it haha :eek:
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OTTAWA
DiceMan wrote: Thank you. So, is partner contribution the same as the shareholder loan accounts? If not, do cash contributions have a stock element to them?
I don't really know if it's considered a loan. It may depend on circumstances. If you do a search for capital contributions you might get an answer. I just just needed some money in the business so that's what I did.

http://www.wisegeek.com/what-is-a-capit ... bution.htm
Sr. Member
Aug 17, 2008
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Quebec
DiceMan wrote: Thank you. So, is partner contribution the same as the shareholder loan accounts? If not, do cash contributions have a stock element to them?
There is no partner in a corporation. Partners contribution are used in partnerships. No there is no stock element in cash contributions.
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Jul 5, 2011
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OTTAWA
sr79 wrote: There is no partner in a corporation. Partners contribution are used in partnerships. No there is no stock element in cash contributions.
That's right. No partners. I changed my QuickBooks so now the account's name is "Director Contribution". Still an equity account.
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Feb 1, 2006
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MaceWindu wrote: There are basically three ways to take cash from your business:

1. Dividend
2. Salary
3. Due to/from shareholder

The third way is basically just an owing balance between you and the corporation with no impact to bottom line, unlike dividends (affects net income) and salary (affects operating income).

What's common to do is just use due to/from shareholder and at the end of the year you see it is in a debit balance (you owe corp) pay out that balance as a dividend to bring it to credit position (Corp owes you) to avoid shareholder loan tax implications.
And make sure that any debit balance is cleared before last day of fiscal year! CRA will let it slide for one year if you have a debit balance, but two years and you're into some bigger problems.
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Thanks to all for replying. Very good information and I at least know which areas of the P&L and the balance sheet I need to follow up on.

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