Entrepreneurship & Small Business

Post your CORPORATE TAX questions here

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Deal Addict
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Dec 26, 2010
1603 posts
643 upvotes
The question has been brought up what is the best way to get money out tax wise from a corporation (not PSB) and it's a mix of salary and dividend, but needs to be analyzed. I just want to know whether I'm on the right track for figuring this out.

Is it a matter of checking the following:

Dividend -- Small corp tax + personal tax
Salary -- Personal tax + ei + cpp + corp's side of ei and cpp

And just figuring out what combination seems to produce the best result?
Indexer, non-yield chasing, low cost, broad based, as simple as possible investor.
Member
User avatar
Jan 22, 2008
271 posts
15 upvotes
Burlington
Generally, and I say the a little loosely, there is no difference because corporate and personal taxes are integrated. This means that as long there is little difference between salary and dividends when drawing from a corporation.
The only real net savings with dividends and CPP premiums since dividends do not attract CPP.
Depending on the amounts involved, the province of residence, and other personal income, the calculation can produce some savings.
Best for the DIY is to use tax software and calculate the differences. Be sure to factor in the CPP if payng a salary.
Member
Sep 29, 2007
394 posts
42 upvotes
Wife started business this year. Initially did not think she would be over $30,000 in sales as i understand GST is to be charged at $30k annually in sales or in the last four quarters.

So, should we register for GST and start charging, or wait until end of year and start charging Jan 1, 2016? What if her sales were say $35K this year....do we then owe 5% on the entire amount or just $5K?
Newbie
May 23, 2011
97 posts
1 upvote
BURNABY
Dear all, if I own 50% shares and my wife owns 50% shares of the corporation, and my wife sells all of her shares to
3rd party, does that mean that there is a change of control upon the sale?
Penalty Box
Aug 2, 2010
10797 posts
2078 upvotes
For 2015 in Ontario do you know the exact % deferral advantage for a shareholder of a CCPC where the CCPC enjoys the small business deduction (ie SBD which provides a 15.5% tax rate up to $500K in active business income in 2015 I believe) retaining the income subject to the SBD in the corporation and later paying it out as a dividend later assuming the dividend taxation rates when later paid out as in 2015?
Deal Addict
User avatar
Dec 26, 2010
1603 posts
643 upvotes
TopTaxGuy wrote:
Jul 19th, 2015 4:09 pm
Generally, and I say the a little loosely, there is no difference because corporate and personal taxes are integrated. This means that as long there is little difference between salary and dividends when drawing from a corporation.
The only real net savings with dividends and CPP premiums since dividends do not attract CPP.
Depending on the amounts involved, the province of residence, and other personal income, the calculation can produce some savings.
Best for the DIY is to use tax software and calculate the differences. Be sure to factor in the CPP if payng a salary.
Yeah. Typically small business tax + dividend = personal income tax. But there is the CPP and EI matching. Other things like RRSPs personally (to a limited extent). I'll run through some runs with software and excel to see what it comes up as.

EDIT: I did a quick run through for Alberta on $100,000 and some combinations.

0 dividend, 100,000 personal
25000 dividend, 75,000 personal
50000 dividend, 50,000 personal
75000 dividend, 25,000 personal
100,000 dividend, 0 personal

I'm not exactly confident on my numbers as EI and CPP matching takes away from corporate, which I can't send out as a dividend (ie: If i pay 75k in salary, I won't have 25k left in the business).

But having done the numbers, $25k dividend, $75k salary worked the best.
Indexer, non-yield chasing, low cost, broad based, as simple as possible investor.
Penalty Box
Aug 2, 2010
10797 posts
2078 upvotes
eonibm wrote:
Jul 20th, 2015 9:32 am
For 2015 in Ontario do you know the exact % deferral advantage for a shareholder of a CCPC where the CCPC enjoys the small business deduction (ie SBD which provides a 15.5% tax rate up to $500K in active business income in 2015 I believe) retaining the income subject to the SBD in the corporation and later paying it out as a dividend later assuming the dividend taxation rates when later paid out as in 2015?
Calculated it myself. The deferral advantage is a miniscule 0.12% for 2014 & 2015 if you pay the 15.5% SBD and keep the funds in the co and pay it out as a ineligible dividend the next year, which is the only type of dividend you can pay on earnings that enjoyed the SBD rate. However, if you invest it at, say, 6% within the company in equity that is not sold until about a dozen years later and then pay the corporate tax and then pay it out as an eligible dividend (since it is part of the GRIP pool, ie that you paid full tax on) then the effective tax saved through the deferral when adjusted for the RDTOH the firm gets back is in the order of about 40% more after 15 years. If the money just sits there an collects no interest or does not grow then the deferral is worth 0.12% no matter how long it sits in the co. This is all assuming you are in the $150K-$220K marginal tax bracket.
Sr. Member
User avatar
May 18, 2005
661 posts
28 upvotes
Toronto
GST/HST question related to the sale of a business

OLDCO vs NEWCO

So OLDCO
- charges annual membership fees for services to be delivered over the course of a year (think prepayment of a gym membership)
- therefore OLDCO collects a bunch of money upfront
- this bunch of money attracts GST/HST
- CRA will want their GST/HST cut from OLDCO when the money is received (net of GST inputs)


NEWCO
- at the end of Q1 NEWCO is buying the assets, name etc of OLDCO
- OLDCP has just made it's GST/HST payment to CRA

My question, is there any GST/HST implication for either CO when the bank account (assets) transfers over to NEWCO?

I think that there shouldn't be any issues as the Gov has received there full cut?
- From the OLDCO point of view - they've received money and then paid the gov there share.
- From the NEWCO point of view???

Thanks in advance.
Newbie
Mar 7, 2012
21 posts
2 upvotes
Toronto
Hey guys,

I have a corporation and then dividend out to my wife and myself for our personal needs which are relatively fixed for the year. Can anyone share a software I can use to figure out the optimum tax situation for myself, my wife and the corporation? I have an accountant for my corporation but he already charges my corporation 3 grand for just the corporate taxes and adding this would likely add 500/hour to the charges. If he wasn't so through with my corporate taxes I would switch but I like him. Last year I did just the dividend but I have a feeling this year it may make more sense to give atleast a small amount in salary.

TIA
Newbie
Nov 5, 2013
32 posts
2 upvotes
Hi,

I have a corporation and all of my income comes from there. I recently ran the math on how to maximize my after tax income. I got stuck on the situation of if i take out all my income as a dividend can I make a voluntary cpp contribution? if so is it tax deductible? Finally, if it is tax deductible what portion of the contribution would be tax deductible and how would it be deducted? (ie would it decrease my taxable income, or be applied as a direct tax credit?)

Thanks
Newbie
Dec 22, 2013
4 posts
75 upvotes
Calgary
May I know any free and user friendly software to file corporate taxes online. Please let me know if there are any without netfile and with netfile filing.
Newbie
Jan 16, 2013
23 posts
6 upvotes
Hello,

Trying to understand if I or we should incorporate or stay as partners.

Have started a side business with two partners where we split the profits equally we have not incorporated so far we have done about 30K in revenue in 2015. We have collected HST but we are holding all of it in a separate account. The next step is too set up our HST number. Is it better to do that as a corporation or partners. We all have 9-5 jobs and we want to minimize our tax would it be wiser to incorporate and then pay ourselves dividends?

Any and all advice is appreciated.
Penalty Box
Aug 2, 2010
10797 posts
2078 upvotes
thebest1 wrote:
Sep 24th, 2015 11:51 am
Hello,

Trying to understand if I or we should incorporate or stay as partners.

Have a regular T4 income in a rural community and I got married in March 2015 my partner is also a regular T4 income.

Have started a side business with two partners where we split the profits equally we have not incorporated so far we have done about 45K in revenue in 2015. We have collected HST but we are holding all of it in a separate account. The next step is too set up our HST number. Is it better to do that as a corporation or partners. We all have 9-5 jobs and we want to minimize our tax would it be wiser to incorporate and then pay ourselves dividends?


I also have a third income where I sell online advertising for a website and have earned 13.5k in USD this is just for me. Is it worth me considering my own corporation who owns shares in my business partnership that way I could let all the profit sit in the company including my third income.

Any and all advice is appreciated.


I am completely lost as to how I should structure this income to minimize taxes and minimize red flags to avoid an audit.

Any and all advice is greatly appreciated!
See my post #337. You will not minimize taxes by incorporating unless you 1) leave the income in the corporation for a very long time AND 2) invest it either back into the company as working capital or invest it to produce returns in something like an investment portfolio, real estate etc. If you pay the money out in the short term, either as income in the year you earn it and then as dividends in the years after there is no advantage to incorporating (except about 0-3% in some years but that has to be balanced by the fact that you have to pay $1-$2K or more for accounting fees and corporate tax preparation to an accountant). However, you may want to incorporate for the limited liability it provides and/or the ability to sell your shares in the corporation.
Newbie
Aug 26, 2012
84 posts
10 upvotes
Montreal
hi ,
i need an advice, i have my own business so it is in my corporation, in which i am also un employee .
i have already bought a condo and it is under construction in Montreal, and i want to buy a home near Montreal.
is it better to buy it as personal,
or buy it by the corporation. ( maybe i could pay more deposit , and less interest / tax)
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