So, um, we recommend to have personal and corporate taxes separate from each other for that reason. And again, your business should have, um, should be your only of saving money and you should have your always put back your cash into your corporation to make it grow I think is um, uh, the most effective way of keeping your business alive. Yeah. Yeah. We see lots of people too that yeah, use their, their business credit card for personal transactions if at all possible, we recommend having two credit cards, one personal and one, um, one business with Edmonton Bookkeeping.
So same with your bank accounts, right? So that you have them separate. So it’s so much easier to just know B’s were personal transactions and these were business transactions. Cause sometimes it’s questionable what, um, what expense really was a business expense. And, um, you know, if you ever get audited by CRA you have to prove that it was a business expense. Yeah. So, yeah. Yeah. Yeah. So yeah, we, how can I pay myself as a, as a business owner, um, you, you can pay yourself through salary or dividends. So, uh, there is, um, there’s advantage in both, um, mechanism. Most of the time you want your accountant to look at your actual, um, S household situation, especially if you’re the sole owner of the corporation. And if you’re depending on that corporation to support your family, um, you would want your accountant to look at what is the best, um, mechanism for you to pay yourself with Edmonton Bookkeeping.
Um, salary is, um, usually or the most common way that, uh, an accounts are an account that would, um, declare for, uh, for them to get rid of that shareholder loan account or for them to pay you from the corporation. But the thing we salary is that it, first of all, it decreases your profit, which is important if, um, if you have a debt looking at your profit and loss and second of all, you will have to pay your employer and employee portion of your CPP and EEI. So that’s one thing with this however you, so although it reduces your tax for having a, a lesser profit and loss, um, you will have to think of who’s the users of your financial statements that use Edmonton Bookkeeping. Is it, um, you’re law that’s looking at how profitable you are? Is it, uh, uh, is it your cashflow that’s important that you, uh, will actually need those couple of thousands for a to avoid those CPP and EEI?
So, um, that’s one thing to, um, to think about when you’re, uh, choosing between salary and dividends, right? Yeah. So can you, um, kind of tell us what a dividend is? A dividend is, um, something that your company declared to, um, distribute their profits. So, um, uh, dividends would show on your balance sheet instead of the income statement cause it wasn’t necessarily included in your operation. It is mostly, um, your corporation does to distributing either the current earnings or the previous earnings of the company. Um, and this decreases your repaint, what we call our retained earnings. So this is, uh, mostly what has been being left in a company after profits and what’s, uh, after dividends, which is what you’ve distributed out at that earnings. Right? Yeah. Great. Um, and so then what’s the salary? Um, Oh, Hey, I talked about it a little bit with Edmonton Bookkeeping.
So, um, salary is what you pay yourself as an employee. So this is employment income on your personal side. Um, again, if you choose for yourself what salary you will have to be the employer portion of it and the employee portion of your CPP. And EEI, and I’m part of, I’m declaring salary is also having to remit, um, installments for your PM or account cause salary if you’re declaring salary you should have about it. And then there’s separate Peter account for CRA and there’s a different requirements with Edmonton Bookkeeping. Did that depending on, um, your level of activity. Yeah. So how does it affect my financial statements if I pay myself in a salary and salary? So again, salaries and expenses. So it decreases your profit, it decreases your bottom line. And also, uh, again, thinking about the users of your financial statement, if you have somebody that’s looking, uh, if you’re selling shares and they’re looking at profitability or huge salary, would definitely only decrease all your profit and loss.
And this might not be, um, very good looking for an investor to, uh, to go on. So, uh, yeah, so salary mostly affects your profit and loss by decreasing it. Yeah. Okay. Um, and so just one last question, what happens if I’m operating as a proprietors? So proprietorships don’t have, um, shareholder won’t account. This is what we call, um, a single entry accounting. If you’re doing it for tax purposes cause the only need the totals of each expenses, they don’t necessarily have to look how it’s affecting your financial position, which is your balance sheet. So, uh, but if you do have both, um, if you’re operating as a proprietorship, anything that you draw or contribute to your company, um, gets affected by, uh, or affects your owner’s equity, which is your shared capital. I know, sorry, I’m not sure. Your capital, your owner’s capital that use Edmonton Bookkeeping. So instead of having that shareholder alone count, uh, separate from your equity account, anything that you contribute or take out of your corporation becomes, um, a deduction or an addition to your, um, owner’s equity. Yeah. Good. So I think that’s all the questions that I have. Yeah. So thanks for joining us today. I hope you find this helpful, informative. Um, let us know if you have any questions or comment and a section below and please click like and subscribe and we’ll see you guys next time.