Below you can get answers to a variety of frequently asked questions about accounting for businesses. If your question is not listed here, please contact us!
How will I pay myself or withdraw money from the corporation for personal use?
As a shareholder of a corporation, you have two basic choices. These are discussed below.
Your first option would be to put yourself on a regular payroll schedule, in which case the company pays you a regular salary and will deduct/remit source deductions to the Canada Revenue Agency (CRA). In this situation, any net or surplus profits at year-end can either be reinvested in the company (this shows up on the balance sheet increased asset value) or paid out as a bonus (which can defer the tax for up to six months) or paid out by way of a dividend.
Alternatively, you can opt to not pay yourself a regular salary and instead draw money out in lump sums from the company as a shareholder’s loan. In this situation, there are special taxation laws that you must follow. If the company regularly gives you money outside of a standard payroll, that is considered a shareholder loan. Tax laws require that you repay your shareholder loans no later than one year from the balance sheet date. The details can get complicated, but essentially if you owe the company money over two consecutive year-ends, you will be required to include the principle portion of the loan as part of your income with no corporate deduction allowed. This creates a double taxation situation and can only be remedied by repayment of the loan.
The decision of how to pay yourself can have significant cost implications. Seeking advice from a professional will ensure you’re using the best method for your specific situation and will likely save you money and headaches in the future.
How do I make my payroll remittances?
Remitting by mail
Make your payment payable to the Receiver General, print your payroll (RP) account number on the cheques, and mail it to the Ottawa Technology Centre with your remittance voucher. You may post-date your payment to your remittance due date. Remittance date requirements vary depending on the size of your payroll. Send your remittance to:
Ottawa Technology Centre
875 Heron Road
Ottawa ON K1A 1A2
If you do not have a remittance voucher, include the following information:
• Your payroll (RP) account number
• If applicable, state that you are a new remitter
• Your business’ complete legal name, address, and telephone number
• The remitting period covered (if your remittance covers more than one period, provide a detailed breakdown)
• If applicable, state that you did not receive a remittance voucher
What should I do when incorporating a new corporation?
Articles of incorporation and shareholders’ agreements should be set up correctly the first time; this saves unnecessary costs. The share structure should be set up with multiple classes of shares to allow for dividend sprinkling, estate freezes and corporate reorganizations. Consult your accountant to instruct the lawyer on the share structure that allows for the most flexible tax planning currently and in the future.