Salary or dividends from a corporation

Salary or dividends from a corporation

If you thought navigating the maze of investing was challenging enough, from a personal perspective, consider how some business owners may feel.

How to invest inside a corporate account, whether you should pay yourself a salary or a dividend, can be a complex decision for many business owners.

Corporation

I have some ideas on what might be best, but I never pretend to have all the answers. Options abound!

As so often said: “it depends”!

So, to support this topic today, I’ve enlisted some help. Welcome back a not-so-grumpy accountant Neal Winokur to the site.

Neal Winokur, CPA, started his practice in 2013 and his grumpiness has grown steadily over time – when it comes to our Canadian tax system. An active blogger, several of his articles have been published in the National Post. Neal continues to feel a moral obligation to speak out against any Canadian tax system flaws while educating others as best he can.

You may recall I profiled Neal’s book The Grumpy Accountant here.

Neal, welcome back to the site!

Great to be back Mark and happy to contribute in terms of general financial tax knowledge.

Neal, as someone who is new to incorporating and investing inside a corporation myself, it seems there is a lot for me to learn. Can we back up for readers and explain what the key benefits of incorporating are, from a tax perspective?

Sure thing Mark.

The main benefit of incorporation, from a tax perspective, is what we call a “tax deferral”.

Let me illustrate by using a simple example. Imagine you are self-employed and earn $100,000 of profit from your business. If you report this income on your personal tax return as self-employment income, you will pay $24,000 of income tax (approximate, based on combined Federal + Ontario rates).

Let’s now imagine, instead, you incorporate a corporation and earn this income within the corporation. You will only pay $12,200 of income tax on the $100,000 of profit in the corporation (based on combined Federal + Ontario rates).

This is because “active business income” within a Canadian Controlled Private Corporation (CCPC) is eligible for the “small business deduction” which allows the first $500,000 of profit to be taxed at the low 12.2% rate. Profit above $500,000 is taxed at 26.5%.

So, instead of paying $24,000 of income tax personally, you are only paying $12,200 of income tax in the corporation, resulting in savings of $11,800. This $11,800 can then be invested within the corporation. You will not have to pay personal income tax on these funds until the money is withdrawn from the corporation for personal use. So the idea is to take out as little money as possible from the corporation each year. Take out only what you need for personal use (and some extra to max out your TFSA and possibly RRSP, RESP etc.) but then, leave the rest in the corporation.

Keep in mind, of course, the investment income earned within the corporation is taxed each year. But you are starting off with a higher amount of funds to invest due to paying a lower amount of income tax.

That tax deferral concept is very important.

When it comes to taxation – I’m trying to minimize it. Like other Canadians! Since I’m still working full time – I’m not intending to pay myself a salary (nor dividends) from the corporation for a few years from now.

What are your thoughts on that approach? I mean, it just seems to make sense to keep any money earned inside the corporation (and not spend it?) as much as possible for future investing.

You’re right Mark – don’t pay any more in taxes that you have to!

Again, I think you’re wise to incorporate if your blog or other business ventures are making some money and increasing your personal taxable income.

Like we have discussed, since your corporation is really a transfer from your small home-based business to a corporate structure for tax purposes; and since you’ve stated you don’t need the money from the corporation for any day-to-day living expenses now, then I would leave as much profit as humanly possible within your small business corporation for the coming years.

Assuming you’re going to essentially bank all income earned less a few operating expenses within your corporation, then leave that money there, pay the low corporate tax, and invest the after-tax profit.

I should mention there is a great debate out there regarding whether someone such as yourself should actually pay out the corporate profit as a salary to yourself and then max out your RRSP each year and invest within the RRSP. Jamie Golembek, one of the top tax experts in the country at CIBC, released a whole report showing very detailed calculations. His conclusion was that for most business owners, it makes sense to pay yourself a salary to the point where you can create the maximum RRSP contribution room, you pay into CPP, and contribute to your RRSP. Over the long run, his calculations show you are better off by doing this due to the lower tax bill as a result of contributing to your RRSP as well as having tax-free investment income within your RRSP.

In your case, this would mean paying yourself a salary of $154,611 to create the maximum RRSP contribution room (2020 numbers) – if you ever earned that much of course. If you already have a salary from other sources of income, as you do, then you could just top off your salary from the corporation to bring you up to the maximum RRSP amount and leave the rest of your profit within the corporation.

Great stuff Neal. So as a newbie to investing as part of my corporation, based on my situation, I’m wondering how best to invest. (Since I’m not paying myself a salary nor a dividend). I’m leaning on opening a taxable investing account within the corporation structure and investing inside that taxable account – is that tax-wise?

Well, this would be the only way to do it. You can open a self-directed trading investment account within your corporation and invest the funds there. Of course, you should speak to a corporate lawyer to discuss any potential legal liability issues. The major one I see for corporation owners – if they were ever to be sued, these investments could be at risk. Some people open up holding corporations which own the shares of the operating corporations. Then, the operating corporation can pay a tax-free dividend to the holding corporation and the funds can be invested there.

From a tax perspective, investment income within the holding corporation is actually taxed at high rates. For example, interest income is taxed between 47 and 54% depending on the province. Capital gains would be taxed at half that rate because half the capital gain is tax-free, of course. Dividends are taxed more favourably due to the dividend tax credit and refundable dividend tax.

I am aware that as soon as I start withdrawing the funds, for personal income use, I will have to report that as a salary and/or dividend to myself and pay the rates of taxation then.

I had a great interview with my go-to-guy at Horizons ETFs on this, Mark Noble, and it seems any corporate class fund structure could be a great fit. 

Tax Efficient Investing – Horizons ETFs

Thoughts on that? There are also other great all-in-one funds to invest in for growth.

VEQT vs. XEQT vs. HGRO Equity ETFs

 I can’t speak to your personal investing goals nor other parts of your financial plan Mark, and I can’t give specific investment advice, but based on the structure of the Horizons ETFs you cited, this is exactly why these funds are ideal for corporations.

Dividend income is taxed favourable in corporations but these types of ETFs are great if you can minimize the tax by way of not having the dividends be distributed out in the first place.

What about other folks that have incorporated Neal. Some of them cannot just park the money like I might consider. The question I see posted quite a bit is the debate about paying yourself a salary or paying yourself dividends to deliver income. Thoughts? Is one better over the other?

There are pros and cons of each choice. Keep in mind one can also do a combination of both. 

Let’s walk through a few different examples of strategies that can be used.

Let’s say someone has $40,000 they want to withdraw from their corporation and they have zero other personal income. In such a case, if they paid themselves a dividend of $40,000, they would pay virtually zero income tax personally. Canadians can earn up to $35,000 or even $40,000 of dividend income with almost zero income tax payable on the personal end. Of course, that dividend is not a deductible expense in the corporation so the corporation would pay corporate income tax at a rate of 12.2% on that income but overall, one is still better off than salary in that particular example.

At amounts higher than that, generally speaking, one will pay very similar amounts of income tax, overall, whether pay salary or dividends, when adding together both corporate income tax and personal income tax. The real difference is CPP contributions and the ability to create RRSP contribution room for yourself.

When you pay yourself salary, you must pay into CPP (Canada Pension Plan). And you must pay double CPP! Meaning, you are the employer and the employee so you must pay both the employer and the employee portion of CPP.  Also, when you pay yourself salary, you create RRSP contribution room for yourself. So for example, if you pay yourself a salary of $100,000, you create $18,000 of RRSP contribution room. For 2021, the maximum RRSP room is $27,830 which means if you pay yourself a salary of $154,611 you will create the maximum RRSP room for yourself.

In the long run, both CPP and RRSPs can be potentially more beneficial when compared to paying dividends. I’ve done this analysis many times for clients and although the salary option is slightly more expensive, sometimes, due to the CPP contributions, they are actually still better off because I would rather people pay into CPP than pay income tax. Remember, CPP comes back to you whereas income tax does not. The CPP funds are managed separately from general government revenue (income tax) and cannot be touched by politicians, at least according to the law right now! Hopefully, it stays that way!

I usually recommend people bite the bullet and pay themselves a salary, pay into CPP, which provides some long-term security and create the RRSP contribution room. But again, this might not be the best solution for everyone. It depends on one’s income, on one’s short-term and long-term goals, on one’s cash flow needs, on one’s comfort level and ability to invest and manage their own money and many other factors.

Keep in mind, when paying a salary, the corporation must withhold CPP and income tax from your salary, pay those deductions along with the employer portion of CPP to the CRA, and file a T4 slip for you. However, when paying a dividend, there are no deductions, no remittances to CRA, but a T5 slip must be filed.

It’s important to note that many small business owners used to pay their spouses dividends. If one’s spouse was in a lower income tax bracket personally, then one could pay them a dividend and they would pay a lower overall amount of family income tax. However, in 2017, the federal government implemented a new set of legislation called “TOSI” Tax On Split Income to try to prevent this type of income splitting.

To stay onside of the TOSI rules can be very complicated and an explanation of the TOSI rules is well beyond the scope of these comments. In fact, TOSI has been described by some tax experts as one of the most complicated and punitive pieces of tax legislation they have ever seen! For this reason, it’s usually not recommended to pay spouses dividends unless they are really actively involved in the business in a real way and it’s definitely highly recommended to speak to a tax expert who is very familiar with these TOSI rules.

Overall Mark, I like your summary below for readers!

If paying yourself a salary

  • Payments are a deductible expense.
  • The corporation must prepare and file a T4 slip and summary  
  • The salary expense reduces the corporation’s taxable income which reduces corporate taxes owing.
  • You will need to register a payroll account with CRA, the corporation will need to withhold source deductions like CPP and income tax.

Benefits of paying a salary?

  • Predictable income – good for large corporations who have staff.
  • You can generate RRSP contribution room via salary from a corporation – but that room cannot exceed any overall, existing personal RRSP contribution room.
  • Generates Canada Pension Plan (CPP) contributions – a salary allows you to contribute to CPP but it also means CPP contributions are a corporation cost – less cash now, more cash later.
  • Less tax surprises – given income tax is withheld, you have already paid some income tax come tax filing time.

If you are paying yourself a dividend

  • Dividends (payments to shareholders of a corporation that are paid from the after tax earnings), are not a corporate expense and do not reduce the corporate taxes paid.
  • Dividends are declared and cash is transferred from the corporate account to a shareholder’s personal account. The corporation must prepare a T5 for any shareholders who the dividends. Dividends are issued based on share ownership (e.g., 100%, 50%, other).

Benefits of paying a dividend?

  • Very simple you can just declare a dividend and transfer cash from the company to your personal account.  No need to register for payroll and remit source deductions but you must register a “RZ” account to file the T5.
  • Lower costs – paying dividends to shareholders removes the need to contribute to CPP, which reduces corporate and personal costs. (However, you cannot contribute to the Canada Pension Plan either). More cash now, less cash later.
  • Less payroll issues – paying dividends eliminates the chance of late or missed payroll remittances.  

Final question Neal. Based on some of the horror stories you’ve helped clients work through over the years, when it comes to corporate structures, what tidbits of advice or words of wisdom do you have for newbie folks like myself? Anything I need to be very mindful of?

Also, other than tax experts like yourself, where can small businesses find accurate and relevant information on successfully managing their corporation in Canada?

I think it’s very important that people who are thinking of incorporating speak to both a tax accountant as well as a corporate lawyer. Some people think they must incorporate when they start a new business when, in fact, they can simply run their business as a sole proprietor with proper business insurance.

Others think there will be no benefit from incorporating or it’s too much hassle but then start to earn unexpected very high amounts of income. The bottom line is the Canadian tax system is WAY too complicated to figure this out on one’s own. I truly wish it wasn’t this complicated. I wish there would be no reason for the job of a ‘tax accountant’ or ‘tax advisor’ to even exist.

I also recommend people do NOT incorporate their own corporations online. I would rather people use a corporate lawyer that they develop a relationship with so the incorporation is done properly. Many people don’t realize they might need to file a Section 85 rollover when they incorporate and they need to physically deposit share capital into their corporate bank account to purchase the shares of the corporation. There are a lot of little things like that people forget or ignore, which I do not recommend.

Great insights and thanks very much for this overview Neal.

Folks, certainly lots to think about and I would like to hear from you if you have incorporated.

How do you manage your salary or dividends for your income stream? Do you do a combination of both?

Do you find our Canadian tax system as messed-up as Neal and I think it is? Do share!

About this post:

Neal Winokur, CPA, started his practice in 2013 and his grumpiness has grown ever since. An active blogger, several of his articles have been published in the National Post. Neal feels a moral obligation to speak out against the inherent flaws, unfairness and needless complexities that define Canadian tax. His dream is for the Canadian tax system to be massively simplified to the point where his job as a tax accountant would no longer exist. His wife won’t be too happy about this, but it’s for the good of the nation!

This post is about general tax perspectives and is not considered personal tax advice to My Own Advisor or any reader. You are encouraged to seek professional tax expertise whenever you are in doubt or should you need any support for your personal or corporate investing needs.

My name is Mark Seed and I'm the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I've surpassed my goal and I'm now investing beyond the 7-figure portfolio to start semi-retirement with. Find out how, what I did, and what you can learn to tailor your own financial independence path. Subscribe and join the newsletter! Follow me on Twitter @myownadvisor.

44 Responses to "Salary or dividends from a corporation"

  1. Mark, eventually, much later in retirement, the investment assets of a corporation need to be transferred back to shareholders through dividends payable to shareholders. The alternative is to go on for years paying expensive accounting fees for annual company reports as well as legal fess to cover the necessary annual legal filings. With my accountant’s advice, I opted to wind down my professional corporation over a 3 year period, This was taken in the form of taxable dividends from the corporation. It was quite a large tax hit, but in the end mosgt likely cheaper than continuing the corporation for many years. The accountant ran the numbers for various scenarios to decide what was going to work out best. In the end, there must be sufficient tax advantage over many years when considering incorporation versus taking the income personally.

    Reply
    1. Very smart advice Maureen. For now, I don’t need the income whatsoever from the corporation so I’m banking all of it. Basically, a small but growing emergency fund. I can see years down the road when I need the income to cover some living expenses (?), that I will potentially pay ourselves a dividend for the flexibility that offers (to shareholders).

      I have no idea yet how I’m going to wind down the corporation, likely in another 10 years I can think about that 🙂

      Reply
  2. Wow this couldn’t have shown up in my inbox at a better time. I’m just working out some tax numbers (income spliting etc) for my nephew. He earns an excellent wage as an IT consultant and we’ve been duscussing how best to reduce his tax bill. His tax bill alone is more than most people make. More importantly they missed out on buying a house (moved back to Canada just as the housing market took off) I used to think 500 grand was a lot for a house, HA!

    Anyways I’ll incorporate this in to the information I’m giving him. And as always I really encourage him to ask questions of his accountant. the better you understand taxation the better you can avoid and defer it.

    Reply
    1. Thanks Rob. Please do share and let me know what other questions your nephew has. Reply to this thread. Neal and I can likely combine forces again and offer some details on corporations/incorporation tax management.

      Cheers.

      Reply
      1. I actually do have another one, regarding income splitting with your spouse (I know that the CRA has cracked down on this, if you hire your spouse or children it needs to be for legit business reasons, not just income splitting.

        Here’s the advice I have him

        An employment contract laying out conditions of work salary expectation etc
        A separate bank account
        Depositing money into that account (vs payment in lue of)
        Seperate email address
        Perhaps even a separate workstation.

        In general the goal is to make this look as legit as possible

        Now what I’m interested in is how does the CRA view whether a spouse is legitimately employed. Say for example he claims that he hires here to do 50% of the work. Now in his job it can be a grey area who does what. Say for example he creates a time sheet saying she did half the work. As his work is all online programming etc it would be really hard to determine who did what.

        Just how anal is CRA about this kind?

        Reply
        1. My understanding is anyone getting paid dividends or salary should have a legitimate role with the corporation. That should be backed up by various corporation records – is my guess. I would be curious about Neal’s take and this is something we can explore going forward.

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          1. I did a lot of reading and what I discovered is there are a ton of tax trip wires. My impression is it matters less that a person has a proper role than all the correct boxes are ticked. One example of this was a couple who got tripped up by having a joint account. If your going to go this way, you need to be very careful how you structure things. Ask your accountant liads of questions

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            1. This is a VERY complicated area. In 2017, the federal government passed “TOSI”. Tax On Split Income. This is one of the most complicated nightmarish punitive tax laws ever written. Check out this flow chart to try to understand it but please be warned: I will not be held responsible if you experience a heart attack or any other grumpiness while or after looking at this:
              https://www.moodystax.com/flowcharts/tosi/
              If you can understand that chart, then you deserve the Order of Canada!
              Long story short – I would consult with an actual tax expert who is knowledgable in TOSI before paying a family member a dividend.
              If you pay a salary (as opposed to a dividend) then the rules are the same as they always have been. The salary being must be reasonable in light of the work performed. So if you claim your spouse is doing office admin work and you pay her a salary of $150,000 during the year, that would probably be considered unreasonable! But if you pay $25,000 for the year or $30,000 etc, that would probably be reasonable and justifable. There are no hard and fast rules.
              Whose bright idea was it to design a tax system with so much complexity and vagueness that no one knows really what’s acceptable and what isn’t?
              Rule of thumb: what would you pay an external arm’s length random person for the work that you are paying your spouse for? That should be the salary.. In practice, the CRA doesn’t really question these types of things if the salaries are nice low amounts. But still it’s a good practice to have time sheets, ensure source deductions are paid on time each month to CRA, have the separate e-mail etc.
              In my humble opinion, Canadians should be taxed as FAMILY UNITS/HOUSEHOLDS as opposed to individuals! This would eliminate the need for all this income splitting tax planning…
              In fact, the Carter Commission, which was the last time Canada had comprehensive tax reform in the late 1960s, actually recommended that families be taxed as opposed to individuals… But of course, the government didn’t listen!

              Reply
              1. Hi Neal

                Holy crap batman, looked at that chart and uhhhhh maybe I like being an employee LOL

                But seriously from what I’ve read and researched a lot of self employed people, especially those who went employee to freelance tend to get tripped up around taxes. Doug Hoyes, as you know, mentions this alot.

                My advice to him was that death taxes and paperwork are part of being self employed and the better you are at getting the paper work right the less the risk of problems with the CRA.

                My general advice to him was to have a good accountant and to ask lots of questions, understand how your taxed and what to do to reduce it. Unfortunately death taxes and paperwork are part of being self employed and the better you are at getting the paperwork right the less the risk of problems with the CRA.

                I think for him the simplest way is to max out his RRSP contributions and to leave the balance in the corporation. Invest the remaining in an ETF that doesn’t pay distributions so it can grow tax free till withdrawal.

                It’s a lot of work to manage but if he can max out his savings (he figures they can save in the 50,000 a year range) give him a decade he’ll be sitting pretty. The investment side matters more because they missed the big run up in house prices, due to living abroad. And even at their income owning doesn’t really make much sense.
                rob

                Reply
                1. Your comment about being taxed as a family unit is interesting as I live in Germany and you are taxed as a family unit. It has both positives and negatives.

                  The biggest negative is singles pay a lot more in tax as they can only came the tax free portion for one person, a couple gets it for 2 people (8,130€ vs 16,230€).

                  Secondly since you are taxed as a family you have the utterly confusing tax classes (1-6) which is used to determine how much tax to deduct at source. The higher the tax class the more taxes that are deducted. This prevents you from getting a huge tax bill at the end of year, say your spouse works part time but has not had any taxes deducted.

                  Lastly the big advantage/disadvantage is profit/losses are taxed/deducted at your marginal tax rate.

                  Finally the German love of making the simple complicated they have about 8 different businesses classifications depending on what you do. All of which all get taxed differently.

                  I’m probably the only person in Germany who loves the tax system here! I spent a lot of time energy understanding it and figuring out the best tax loopholes and was actually able to create a negative tax rate. For every Euro of income I got back 5 cents. This was done mostly via real estate investing and max out the German equivalent of a RSP.

                  Reply
                  1. Wow! thank you for sharing that regarding family taxation in Germany. I did not know those details. Yes, it seems VERY complicated.. I’m starting to think government should abolish ALL taxation and conduct gofundme campaigns to raise money from voluntary contributions from citizens!!! That would certainly simplify things!

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  3. Solid write up. Like some others been there, done that.

    Given your current situation and future plans it sounds like your planned corporation (tax/income) direction is a good one Mark.

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    1. Thanks RBull. I hope to pick Neal’s brain as time goes on related to corporations.

      Given I am working full-time for the coming 3-4 years at least, I expect never to draw an income/salary nor dividends from the corporation. I will essentially treat it like an emergency fund, pay my annual taxes at the corporate rate, and move along.

      Once we decide to start part-time / semi-retirement work, I expect more and more this site and my new venture(s) will be my work and I will consider drawing dividends for income. Not sure yet but it’s good to have some tentative plans.

      This way, I can keep most of my portfolio intact in the early years of retirement to avoid any negative sequence of returns risk.

      Based on where our economy is headed, I’ll need that buffer.

      Reply
      1. You’re welcome Mark.

        Perfect. Having some form of ” corporation employment” assets/income going into semi retirement is just excellent. And yes, a buffer anytime is a good thing, and I think especially now in the decade ahead.

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  4. Great article. Done this got the t-shirt. Yes talk to your accountant to see the pros and cons for deciding pay or dividend. Each situation is different and you need to weight the impact and risk.

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  5. I had a consulting company for 19 years that my wife & I both consulted through. We took enough salary to live comfortably & invested the rest inside the company using a savings account & self-directed brokerage account. We withdrew the company investments as salary for 5 years after we stopped consulting, reducing taxes by smoothing our consulting income over non-consulting years.

    When you incorporate a company you register online with CRA to get a Business Number. This is required to pay corporate tax. A payroll account & GST account can be created at the same time (same base number with different suffixes). T4 filing is easy, it’s an online form that takes a few minutes per employee.
    I found the greatest costs were for an accountant and lawyer. A T2 (corporate) income tax return is beyond the average person and there is an annual return filed by your lawyer each year. Accounting was about $1,500 and legal was about $500.

    Reply
    1. Good stuff Trevor.

      I probably won’t register for payroll right away given this blog doesn’t make too much (yet!?) and I’m working full-time. I see the big advantage of my incorporation of late as one of tax deferral.

      I will use a tax accountant this year for my T2 for sure. Given I’m on the only employee at this time, shouldn’t be too difficult since I’ve been managing my income and expenses as a small business for about a decade. I think however when the time comes, I might lean on dividends as a payment – just seems more flexible. Again, we’ll see.

      Thanks for your insights.

      Reply
    2. It’s pretty ridiculous that Canada does not have a form of incorporation whereby for legal purposes, the corporation is a separate legal entity but for tax purposes, the tax filing can be combined as part of the personal tax filing. In the U.S., they have an S-corp which is separate for legal purposes but it’s combined with the personal tax filing (as a simple income statement) just like if you were sole proprietor. That makes the tax compliance burden much easier and would save on everyone’s accounting fees. Canada is WAY behind on simplifying the tax system!

      Reply
  6. Very timely as I just went through this discussion with my accountant again 2 weeks ago. He reaffirmed what I felt was the best course of action for 2021.
    Pay myself a salary so that I continue to build CPP income. I build RRSP space each year, who knows if I may get a windfall of cash in the future and need to invest. Generates an expense for the business to keep profit down and mitigate corporate taxes.

    I just need to say as a small business owner of 18 plus years I wish I had the problem of $100,000 in income and tough choices lol

    Reply
    1. I certainly see the advantages of building CPP income, especially if you’ve been self-employed or running your own business for many years. I continue the max to CPP right now but that might change in the coming 3-5 years.

      Ha, yes, that would be a nice problem for many small business owners.

      Check your email – blog questions on the way!
      Mark

      Reply
  7. This was very useful and timely for me Mark. As a consultant, I was told I had to incorporate to work on a government contract. I also am a sole proprietor of an agricultural business. I saw the consulting revenue as a way to defer tax, not pay myself and continue to build my retirement nest egg. Hopefully drawing dividends to pay myself in the years to come.

    Reply
    1. Nice to hear from you Mark!

      Yes, I recall you have a agricultural business – hopefully that will continue to thrive for you over time.

      I think drawing dividends seems to be both simple and flexible in your role as a consultant.

      Stay well during the pandemic and best wishes,
      Mark

      Reply
  8. Very insightful! Thanks Mark and Neal! I have plans to incorporate too so this guide is handy.

    For the next topic, maybe Neal can touch on the RDTOH and how that works with investments inside the corporation?

    Reply
    1. Thanks Brian!

      I’ve got to connect with you again soon, want to post my update with life insurance – I think that would be informative. 🙂

      When it comes to you, I think that’s smart to incorporate. Certainly gives you some options.
      Mark

      Reply
        1. Sounds good 🙂 I look forward to sharing that outline with you in the coming weeks. Been busy!

          Stay well Brian and thanks for your guidance on that.

          Mark

          Reply
  9. Excellent article. Another advantage of paying a salary, is that if your spouse is a director or assigned as an employee they also can contribute to CPP. This may be especially good for stay at home spouses. Of course I believe one can contribute to CPP if they only take dividends out of the corporation.

    Reply
    1. To clarify, if you want to pay your spouse a salary, they actually have to do work and the salary has to be reasonable in relation to the work perforced. CPP would be payable on the salary. But if you pay out dividends, there is no CPP on the dividends. So just wanted to clarify to ensure accuracy here – dividends = no CPP.. salary = CPP.

      Reply
    2. Thanks cannew. Tried to expand my body of knowledge and clarify a few things – and figured Neal’s outreach to me about his book was perfect timing since the fall.

      Reply

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