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When people start their first business says Edmonton bookkeeping. They often wants their accountants to tell them. How much they’re going to be able to get paid by their business. And how soon they’re going to be able to start taking a paycheck.

Ultimately, the faster a business owner can generate Revenue in their new business. The easier it’s going to be for them to take a regular paycheck. However, Edmonton bookkeeping says the money that a shareholder takes out of the corporation. Is called a shareholder draw. And comes in the form of either salary, or a dividend.

And, when an entrepreneur starts their business. Their accountant will want to find out their personal circumstances. So they know if they should account for the shareholder. Drawing money out of the corporation quickly. Or if they can afford to wait a few months or a year.

Some entrepreneurs need to start taking money out of the business immediately. Because they are the only income of their family. And they need to pay their bills. And some shareholders have another job, or have somebody else’s income. And don’t needs to take money out of the business for quite a while, if ever.

This is why it’s incredibly important that as the due diligence of the accountant. They will ask each of the shareholders of the corporation. To complete a balance sheet and an income statement, but for their personal finances instead of their business.

This is so that the accountants will be able to understand each shareholders net worth, as well as their debt servicing requirements. They will be able to figure out, what resources they have at their disposal. And if they are able to take anything out of their personal finances to put into their business if this ever becomes necessary.

What’s the personal balance sheet looks like since Edmonton bookkeeping. Is that it will have the assets listed first. Everything that is in the shareholders name, that they own including a house, vehicles that they may own. Even rental property, or recreational vehicles. Even savings account such as tax free savings accounts and rrsps.

The second part of the personal balance sheet will list all of the shareholders liabilities. This is all of the deaths that they have, whether it’s consumer, or dots on their assets. Such as a mortgage, car payments. Or if they are credit card debts, or texts.

Edmonton bookkeeping says that a personal income statement will simply list all of the expenses that a shareholder will have. With the fixed expenses listed first. These fixed expenses are typically static from month to month. and are typically expenses that are extremely important that they pay. Such as their mortgage or rent, car payments, utility bills or phone and internet for example.

The second half of the personal income statement will have the variable expenses. Which are either expenses that aren’t necessarily A bill that they have to pay. Such as groceries, or Pharmacy, four examples.

By understanding the personal finances of each of the shareholders. And what they need to take over the business in order to live. Can help an accountant ensure they get what they need to be paid from their business. So that they can focus on growing their new endeavour.

Edmonton Bookkeeping | How Much to Pay Shareholders

When people start their first business says Edmonton bookkeeping. They often have several reasons why it’s important to them. Including wanting to minimize the taxes that they pay. And accumulating their wealth for the future.

In order to accomplish both of these goals, an entrepreneur will need to find a great accountant. To help them minimize the taxes that They will pay. So that they can use the savings to pay themselves more money, put it into a savings account for example.

However, how an entrepreneur ends up taking money out of their corporation is extremely important. To maximize the tax savings that they can get. While there are two ways for a shareholder to take a shareholder draw out of their business. And either needs to come out as salary. Or it needs to come out of their corporation as dividends.

In order for a shareholder to take dividends, the business has to be generating a prophet. Because the Dividends are a disbursement of the profits of a business. Therefore, if the business has not yet generated any profit. The shareholders will not be able to take dividends out of the corporation.

Edmonton bookkeeping says that salary is the other way. Which is taxable, by income tax, as well as CPP and EI. Therefore, salary is not the most advantageous. For entrepreneurs who are looking to save on the tax bills that they have to pay.

Ultimately, Edmonton bookkeeping says that the best Tax Solution for most entrepreneurs will include taking a mix of dividends and salary. Depending on their business, as well as all of the personal circumstances of each shareholder.

Only a good accountants will be able to look at all of the business finances. And the personal balance sheets and income statements of the shareholders. In order to make this determination.

However, Edmonton bookkeeping says shareholders they have to take a draw, before the accountant will know if they needs to take salary or dividends, or what’s the mix of the two would be. Therefore, when they take money out of the business. It’s very important that they were remember several rules.

If they are writing themselves a check. What they write in the memo line is extremely important. They cannot say salary, or else be counted will have their hands tied. And be forced to designate every single check that had the word salary written on it as salary.

This might be not very beneficial tax-wise to the entrepreneur. So Edmonton bookkeeping recommends that if they are writing themselves a check for a shareholder draw. They simply right shareholder draw and the date in the memo line of the check.

This will ensure that their accountant will be able to specify exactly what they are taking out of their corporation. So that they can get the best tax advantage that they possibly can.

The sooner an entrepreneur can do this in their business. The sooner they’re going to be able to enjoy the significant tax benefits that entrepreneurship can bring.