One of the most common questions that brand new entrepreneurs often have for their accountant is how much money should I take out of my business says Edmonton bookkeeping. And while that’s not an easy question to answer. Their accountant make counter with another question. Of how much money do they need to make in order to survive.

While it snow surprise for many entrepreneurs, that they might not be able to take money out of their business initially. As they are growing it, and increasing the revenue. However, some entrepreneurs needs to take money out of their corporation sooner than others.

Therefore, when entrepreneurs are able to explain this to their accountant. Their accountants can help them come up with a financial plan. Of understanding how much money they need to take out of their corporation. And when they need to start making shareholder draws of that money.

The benefits of being an entrepreneur says Edmonton but keeping is that they can have the ability to start paying fewer taxes than the average taxpayer. the Fraser Institute reports that the average Canadian pays 43% of their total wages in taxes. Including income tax, CPP and EI. And in fact, Alberta’s highest tax rate is at 48% currently.

Therefore, one of the benefits of becoming a business owner. Is that they will be able to save significant amount of taxes. That entrepreneurs can then use to give themselves a raise when they need it, and accumulate wealth for their future.

However, Edmonton bookkeeping says that entrepreneurs needs to be very upfront about their personal circumstances with their accountants. In order to help them figure out exactly how much money they need to take out of their business, and when they need to start earning it.

By filling out a personal balance sheets and a personal income statement, business owners will be able to help their accountant understand exactly what their net worth is, and what’s their financial responsibilities are. So that’s their accountant can come up with the most realistic plan for them as well as their business.

The personal balance sheet is going to have an entrepreneur list all of their assets first. This includes all of the property that they own, whether it’s real estates, their house, or their vehicles. And including savings such as rrsps and tax free savings accounts.

Followed on the assets is the liabilities section says Edmonton bookkeeping. These are all of the deaths that a business owner has in their personal life. Including their mortgage, and he car payments, credit card debt. This even includes taxes that they might owe the government. As well as money they owe to family members.

the personal income statements is going to have a shareholder list all of the fixed expenses in their life. Which might include things like their mortgage, their car payments, and their household bills. These are static expenses, that are pretty much the same every single month.

The variable expenses are next, and aren’t necessarily things that they can avoid paying. But aren’t typically the same every single month such as groceries. Edmonton bookkeeping says entrepreneurs can put into this area, there additional spending such as clothing allowance, and meal and entertainment budget for example.

When the accountant is able to see exactly what the shareholders personal circumstances are. They will be able to calculate exactly how much money they will need to draw from their corporation. And when they need to start taking it out of their business.

This will help ease shareholders Minds. Knowing that there is going to be a Payday in their future. So tthat they can concentrate on working hard in their business to grow it.

Edmonton Bookkeeping | How Much Money Should Shareholders Make

While most entrepreneurs understands that they might not be able to start taking a regular paycheck from their business immediately says Edmonton bookkeeping. They might be very curious to know when they can start doing that. And how they’re going to be getting paid.

While the question ultimately boils down to whether an entrepreneur is going to be taking dividends out of their corporation. Or if they’re going to be paying themselves a salary. Ultimately, that’s decision is attacks related question.

The reason why, is because dividends and salary have very different hacks implications attached to each one. The reason why many people decide to become entrepreneurs is in order to enjoy the tax savings that corporations get. While the average Canadian will pay 43% of their wages every year in taxes. Entrepreneurs, hey 11% in corporate taxes.

This tax savings can only come if their accountant can figure out. how an entrepreneur is going to get paid on a monthly basis. While the choice is between taking dividends out of the corporation. And taking a salary. What’s ultimately the best tax decision. Is going to be a mix of the two.

What’s the mix is will be based on the financial circumstances of the business says Edmonton bookkeeping. But also, the personal circumstances of each of the shareholders. My understanding the different tax consequences of each decision. Can help entrepreneurs understand. Why it’s such a complex issue.

If entrepreneurs take a salary out of their business, they’re going to get the 43% taxes that’s typical Canadians are going to pay. Meanwhile, if they take out dividends. There’s no taxes on them in the corporation. But once an entrepreneur takes the dividends. There are tax is applied to it.

Therefore, an accountant must figure out how to effectively pay each shareholder. With the minimal amount of taxes being taken out of there shareholder draws. The accountant ultimately will be making this classification at the end of the corporate tax year. Specifying what percentage was dividends. And what percentage was salary.

Therefore, when shareholders are taking a draw out of their corporation. The recommendation is for them to take a round figure only once a month. And if they are taking that money out in the form of a check. To not put salary in the memo line of the check. They can put something such as shareholder draw instead. So that it doesn’t stye the accountant to having to clean that as a salaried income.

When accountants are able to figure out at the end of the year the best mix on what to claim that an entrepreneur took out of their business. They will be able to enjoy the tax benefits that entrepreneurs can enjoy. Because of their hard work building their business.

The sooner an entrepreneur can find a great accountant who is willing to do this for shareholders. The sooner an entrepreneur can breathe a sigh of relief. Understanding that they’re going to have someone on their side. Helping them make money and the save taxes.