Entrepreneurship & Small Business

How to get personal money back that was put in to help start corporation?

  • Last Updated:
  • Jun 9th, 2018 1:06 am
[OP]
Newbie
May 6, 2010
39 posts
5 upvotes

How to get personal money back that was put in to help start corporation?

I started my own corporation (a one-man Corp) a year ago and let’s say I have put in $1000 of personal money in the beginning to get it started. What would be the best way for me to get my personal money back from the corporation? Is it considered a liability or a shareholder loan? And how do I report it on my T2 short form if profit is nil or a loss after I pay myself back? Thanks ahead of time for any help.
5 replies
Deal Addict
Feb 5, 2009
2518 posts
650 upvotes
Newmarket
It's a shareholder loan, when you loan it to the corporation you debit bank and credit shareholder loan, when you pay it back you credit cash debit shareholder loan, you simply return the funds you have loaned to your corp.
Obviously depending on the circumstances you may choose dividends over loan repayment. None of it is reported on your profit and loss statement, just balance sheet items.
[OP]
Newbie
May 6, 2010
39 posts
5 upvotes
Thanks for the help Homerhomer! For corporate expenses that I paid directly out of my own personal savings (without transferring it to my business account first), am I right to assume that I just need to record those expenses in my balance sheet, pay myself back as shareholder loan, and, of course, to keep the receipts as proof?

And, also curious, under what circumstances would it be better to pay back as dividends instead of shareholder loans?

Thanks again for any help.
Deal Addict
Feb 5, 2009
2518 posts
650 upvotes
Newmarket
If you pay company expenses with personal funds you credit shareholder loan account and debit appropriate expense/sales tax account. The transaction affect both balance sheet and income statement.
As to how you draw the funds it really depends on many factors, one example would be if you don't have personal income from other sources you would want to draw at least enough dividends to cover the personal credits, you may also pay yourself wages if you want to create CPP, RRSP room or simply need to claim child care expenses.
The list of variables is pretty long ;-)
Sr. Member
User avatar
Jan 1, 2009
914 posts
225 upvotes
Vancouver
Wazaloob wrote:
Jun 8th, 2018 11:20 am
Thanks for the help Homerhomer! For corporate expenses that I paid directly out of my own personal savings (without transferring it to my business account first), am I right to assume that I just need to record those expenses in my balance sheet, pay myself back as shareholder loan, and, of course, to keep the receipts as proof?

And, also curious, under what circumstances would it be better to pay back as dividends instead of shareholder loans?

Thanks again for any help.
Homerhomer knows his stuff. Indeed you must maintain your shareholder loan account. Credits to the shareholder loan account represent your shareholder contributions into the company (including using your personal credit card to pay for corporate expenses) which you can recover tax free later on when the business has sufficient cash to repay you. Debits to the shareholder loan account always represent personal expenses or shareholder drawings - meaning you took corporate cash and transferred it into your personal bank account, or had the corporation pay for your personal credit card. You can choose those methods to have the corporation pay you back. If you are indebted to the corporation represented by a debit balance in your shareholder loan, there are taxable implications under 15(2) of the Income Tax Act and 80.4(2) of the ITA as well. Keep a maintained shareholder loan account and the CRA will love you. They hate accountants (generally CA's ;) that "plug in" a shareholder loan account to balance the corporate balance sheet of their client.
Deal Addict
User avatar
Aug 15, 2015
1030 posts
124 upvotes
Markham, ON
That's why with CA everything is on TAP. They keep taps on their friends as jokes. Its not funny.

Top

Thread Information

There is currently 1 user viewing this thread. (0 members and 1 guest)