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When business owners first open the doors to their business Says Edmonton bookkeeping. That they might not take into consideration when they need to start earning an income from the business. Or how much money they will be able to start to pay themselves.

While many entrepreneurs have another job that earns them income. And others might have money saved up in a savings account. and still, some might live with a family member who is paying most of the bills. And this will not require a shareholder to take money out of their corporation for quite a while.

However, Edmonton bookkeeping says that other shareholders are the only person earning an income in their family. And not only needs to take money, but need to take it consistently. And a large amount to pay all of their bills.

No one shareholder is correct. Because everyone must learn an income somehow. Therefore, when they start taking a draw out of the corporation. And how much is actually a question that they should be asking their accountant.

This is something that the accountant will need to understand not just how well the business is doing. But also the personal circumstances of each of the shareholders.

The accountant will do this by asking the entrepreneur to fill out a personal balance sheet as well as a personal income statement. So that they will understand but the personal net worth of the shareholder is. And how much money they are going to require from the corporation each month in order to live.

The personal balance sheet will have the shareholder lists all of their assets first says Edmonton bookkeeping. And this might include things such as house or the kishin property, Vehicles, tax free savings accounts or even rrsps.

The second section of the personal balance sheet will be all of the liabilities as shareholder has, including mortgage payments, car payments, credit card debt. Even taxes owing, or money owing to family members as well. This will show An accountant what resources they have at hand. And how much money they can take out of their personal life in order to put into their business if necessary

the personal income statement is next says Edmonton bookkeeping. And what this is going to include are all of the fixed expenses that a shareholder has every month, no matter what. Including mortgage, car payments, utilities and phone and internet. These are expenses that are typically the same every month, and require payment.

The second section of the personal income statement says Edmonton bookkeeping. Include the variable expenses. which should be considered expenses that business owners might need to make. But they’re not exactly the same every month. Or they could be given up all together. There might be groceries listed as a variable expense, but also an entertainment or meal budget, or things such as gym membership, clothing allowance, or money to get hair done for example.

This exercise is extremely important for shareholders to go through. Because it can show them how much money they actually need to live. And What expenses can actually be cut from their budget. The last money that they need to live on says Edmonton bookkeeping. Is the last money they have to take out of their corporation initially.

Edmonton Bookkeeping | How Much Money Should Shareholders Make

Not all shareholders are going to need to take money out of their corporation right away it says Edmonton bookkeeping. Or even have to take out of there Corporation at all. It will depend not only on the circumstances of the business. And how much revenue it is generating.

But how much have a draw a shareholder needs take out of their corporation. will depend upon their own personal circumstances as well. Some shareholders can wait several months or years before they need to start taking a shareholders draw. And some needs to take money out of their corporation immediately. There’s no correct answer here.

However, once a shareholder starts taking a draw out of their corporation. They might have the question As if they should take their shareholder draws of the corporation. As a salary, or if they should take it as dividends.

The one thing that business owners need to understand about dividends says Edmonton bookkeeping. Is that in order to take dividends. The business must earning Revenue. Because dividends come from the profits of the business.

Therefore, if an entrepreneur needs to start taking money out of their corporation before they start earning profits. They might have no option but to take it as salary says Edmonton bookkeeping.

the differences between salary and dividends is that salary is going to be taken out at the typical taxes that the average Canadian has taken off their wages. Including income tax, CPP and EI.

And while dividends do not have Source deductions taken from them. They remain tax-free, until an entrepreneur takes them out of their business. Therefore, it’s very important for a business owner to be very strategic about how they take money out of their business.

The answer to the question of how should they take money out of their corporation. Is actually best answered by an accountant says Edmonton bookkeeping. Who clearly and thoroughly understands both the business. As well as the shareholders personal circumstances.

It is typically going to be a mixture of the two. Based on how much in taxes the accountant can save the shareholder. if an accountant is able to easily answer that question, it’s probably because they don’t truly understand the situation enough says Edmonton bookkeeping.

Therefore, entrepreneurs should find a great accountant early on in their business ownership. So that they can get to know the entrepreneurs circumstances. As well as get to know their business a very well.

Ultimately, one of the benefits of being an entrepreneur. Is being able to enjoy the freedom of lower taxes. To allow them to spend that additional money in their business so they can grow it. And that so they can start accumulating wealth for their future.

By letting their accountant do their job and figure out the best tax situation for the business. The better off they will be. Chances are taking a mixture of dividends and salary is typically going to change year-to-year. As the business grows, earns Revenue. and as the shareholders own circumstances gradually change.