• Last Updated:
  • May 11th, 2019 4:24 pm
[OP]
Newbie
Nov 6, 2011
39 posts

Income from business

My wife and I are starting a new small business in publishing. I'll be doing the majority of the work, but we're hoping to give her the majority of the income from it. Is this doable?
4 replies
Deal Guru
User avatar
Mar 23, 2008
11850 posts
8119 upvotes
Edmonton
HespelerRick wrote: My wife and I are starting a new small business in publishing. I'll be doing the majority of the work, but we're hoping to give her the majority of the income from it. Is this doable?
Sure, until you get audited...

If things get out of whack to the point that the CRA thinks you’re income splitting, they can chose to “rebalance” things and penalize you for it. Up to you to decide if you’re at risk and whether it’s worth it.

For example, as an IT contractor, I can’t pay a spouse half my income if she’s not doing any relevant work for me. I can pay her to do my books, up to what would be reasonable to pay an actual accountant.

C
Sr. Member
Nov 12, 2014
917 posts
589 upvotes
Kingston, ON
HespelerRick wrote: My wife and I are starting a new small business in publishing. I'll be doing the majority of the work, but we're hoping to give her the majority of the income from it. Is this doable?
Can only pay her for the work she does - must be equal to what you'd pay a 3rd party to do the same work.
Deal Addict
Nov 17, 2012
3159 posts
2131 upvotes
Toronto
Dividends - unless you need the RRSP contribution room, CPP etc. You can pay whoever you want as much or as little as you want by issuing the right ratio of shares.
Deal Expert
User avatar
Aug 2, 2010
15193 posts
4924 upvotes
Here 'n There
torontotim wrote: Dividends - unless you need the RRSP contribution room, CPP etc. You can pay whoever you want as much or as little as you want by issuing the right ratio of shares.
True, but the OP has not stated that they are or will be incorporating and if they do then any dividends paid out of income taxed at the small business rate is are ineligible dividends and do not enjoy the favoured tax treatment. By the OP's first post it looks like they are trying to take advantage of the wife's lower tax bracket. Even at the higher tax rate on ineligible dividends it would still make sense paying her the majority of the dividends by having her own the majority of the share class that pays them.

So the next question is: How stable is your marriage?

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