Many entrepreneurs start their businesses Edmonton bookkeeping. Without having any understanding of how much money they are going to get paid. Therefore, it’s very important that entrepreneurs keep in mind how much money they will need to live. So that they can plan with their accountant how much money to take out of their business every month.
Not all entrepreneurs are going to start their business needing to take any sort of shareholder draw at all. This is because they might have their own savings, we could also have another paying job says Edmonton bookkeeping. Or they might be supported through a spouse or other family member.
In order for entrepreneurs to figure out how much money they should be taking as a shareholder of their corporation. They need to disclose their personal circumstances. To their accountant, so that they can help the business owner. Figure out what their shareholder draw should be
The first thing that business owners needs to do, in order to share their personal circumstances with their accounting. Is to do a personal balance sheet and a personal income statement says Edmonton bookkeeping. The balance sheets should be based only on an entrepreneurs personal information including all of the assets that they have, liabilities and expenses.
The income statement says Edmonton bookkeeping. Should be all of the fixed and variable expenses that a business owner has to pay in their personal life. By taking their own personal circumstances into consideration. They will be able to figure out how much money they need to take out of their business to live.
What’s so wonderful about doing the personal balance sheet and personal income statement according to Edmonton but keeping. Is that a business owner will be able to truly gain an understanding. On how much money they need to live. They can figure out what expenses are not necessary. In order to minimize their living expenses. As they grow their business.
Well some shareholders are going to need to take a significant amount of money out of their business. Other shareholders are not going to have to take anything at all. There is no one right answer says Edmonton bookkeeping. And the more money that a business owner needs to take out of their business. Simply means the faster they need to start generating Revenue in their business.
Business owners should take this into consideration when they start a business. The more money they have in savings, either a savings account. Or rather they have rrsps or even tax free savings account. Can help increase the amount of time a business owner can go. Without getting paid from their own business. To give their business as much a chance as possible. To gain momentum and start generating Revenue.
The sooner an entrepreneur can figure this out with their accountant says Edmonton bookkeeping. The sooner they’re going to be able to understand how quickly they need to get the revenue increased in their business. So that they know how many months they have to live on their savings. Before they need to start taking drawers out of their business as a shareholder.
Edmonton Bookkeeping | How to Pay Your Shareholders
When an entrepreneur has increase the revenue of their business so much says Edmonton bookkeeping. And that they are ready to start taking a shareholder draw out of the business. They may have a question for their accountant. Should they take a salary or should they take dividends.
The answer to the question is not so straightforward says Edmonton bookkeeping. Because it is dependant on several factors. By getting an extremely good accountants. Business owners will be able to allow their accountant to figure out the best mix of the two.
Typically, the amount of salary and dividends that an entrepreneur will take as a shareholder draw. Will be some salary and some dividends. Dependent on the entrepreneurs personal circumstances including their debts and assets. As well as their tax risks. As well as the circumstances of their business.
Edmonton bookkeeping says that if an entrepreneur takes 100% salary, or 100% dividends. It’s more likely that they are not getting the mix that is the most tax advantage for them. Therefore, business owners needs to understand that their accountant will make the best recommendation. So that they can gets the most money and pay the least taxes both personally and in their business.
However, a business owner must take a shareholder draw out of their business every month says Edmonton bookkeeping. Without claiming salary or dividends. So that their accountant can figure it out at the end of the year.
Therefore, no matter how a business owner takes money out of their corporation. Whether they write a check, do an e-transfer, or takes cash. A business owner should keep extremely good track of it. And if they are reading a check. Edmonton bookkeeping cautions them not to write salary on the memo line. Because this will then Force an accountant 2 consider all of the checks with that designation. Can only be designated as a salary and not dividends.
That may not be in an entrepreneur best interest. And can lead to an entrepreneur ending up paying more taxes than they need to.
The goal that’s a business-owners accountant is going to have when they classify salary or dividends. Is to help the entrepreneur take as much money out of their business as they can. While paying the least amount of taxes both personally and in their business.
One thing that business owners should avoid doing regardless of anything, is not use payroll tables to pay shareholders. Because this will force an entrepreneur to have to take all of their shareholder draws as salary.
Therefore, as soon as an entrepreneur starts their business. They should find a great accountant, who will be able to help them figure out the salary or dividend mix that’s right for them. When they start taking money out of their corporation. The sooner in their business that they have a great accountant says Edmonton bookkeeping.
The sooner they can start saving on their taxes. Which will allow them to start saving money for their future, increasing their well, and using the tax savings in their business to continue to fund their business operation.