It may not be the first important consideration that an entrepreneur makes when they start their first business bookkeeping. But sooner or later, the shareholders of a corporation will wants to know when they can start getting paid. And how much they’re going to be able to bring home on a consistent basis.
when entrepreneurs are creating their business plan in order to starts their first business. They may want to include in the business plan when they would like to start drawing a salary. If they don’t outline when they need to start drawing a salary. They may not hit important Revenue Targets in their business.
Many entrepreneurs start their business with savings that they can live off of while their business grows. However other entrepreneurs, needs to start earning a salary right away. Neither circumstance is wrong. It’s just important that they understand this. So that they know how much time they have before they need to draw a salary. and how much revenue they need to be making in their business in order to achieve it.
Each entrepreneurs personal circumstances are going to be vastly different from the others. This personal circumstance is going to be very important in calculating how much of a shareholder draw they’re going to require in order to live comfortably. As well as when they need to start taking a salary out of their business.
Edmonton bookkeeping says that they shouldn’t create a personal balance sheet and personal income statement. So that they or their accountant can figure out what their net worth is. And how much resources they have at their disposal.
This is going to help them figure out exactly how much money they need to make from their business every month to pay their bills. as well as when they need to start earning that salary as well.
When’s business owners have worked out their personal balance sheet and personal income statement Edmonton bookkeeping says it’s also very important that they are keeping extremely good track of their personal and business finances so that they can keep their business and personal life separate.
Words that end, Edmonton bookkeeping recommends that entrepreneurs have one bank account for their personal life. And One bank account for their business. This makes it extremely easy to know what business expenses are. And what personal expenses are.
If both business and personal we’re coming out of one account. It might make it very difficult even for an accountant to figure out what expenses are business expenses. And which are not business expenses at all. But it also puts the business owner at risk if Canada Revenue Agency ever decided to audit them.
When CRA audits a company. They will want to look at all of the bank statements, to verify all of the expenses. And if there are personal and business expenses mixed together. This can be very difficult figure out. But also, putting the shareholders at risk Canada Revenue Agency rejecting what Stave counted as business expenses. Because it is not obvious.
By keeping personal and business bank accounts separate. Edmonton bookkeeping says that it can become much easier to figure out exactly how much revenue the business is making. And when shareholders can start taking a draw from the corporation.
Edmonton Bookkeeping | When Should a Shareholder Start Earning an Income
One of the biggest benefits of becoming an entrepreneur accounting to Edmonton bookkeeping is to pay minimal amounts of taxes. The average Canadian will pay 43% of their wages in a variety of taxes. Including income tax, CPP and EI which are taken directly off of their paychecks.
Other taxes that end up having to get paid include GST, carbon tax and fuel taxes. With the average Canadian paying so much in taxes. Business owners of Corporations pay much less. The corporate tax rate is currently at 11%. And so this is a big reason why entrepreneurs like starting businesses.
Be safe on the taxes says Edmonton bookkeeping. And that’s how they pay themselves. saving money for their future. As well as using it in their business to grow their company even larger.
However, many entrepreneurs may not realize that they might not be able to start earning an income in their business initially. Therefore, when business owners talk to their accountant and their Edmonton bookkeeping company. About their business plans, it will help them figure out exactly how long they need to be in business for. In order to start generating an income.. As well as how much that income is going to be
The next question that entrepreneurs often have is should they be paying themselves in salary or in dividends. Edmonton bookkeeping says that this question is best answered buy the accountant. The reason why, is because the taxes that the once as a business owner. The mix of salary and dividends will be based not only on the business’s financial situation.
But also on the entrepreneurs own personal circumstances as well. All of the shareholders of the corporation must submit their personal balance sheet and personal income statement in order for the accountant to figure out what’s that best mix is for each shareholder.
However, the accountant is not likely going to be able to know this throughout the year. Figuring it out at the financial year-end says Edmonton bookkeeping. And therefore, the shareholders will have to start taking a draw out of the corporation. Before they know if it’s going to be salary or dividends.
How they will do that says Edmonton bookkeeping. Is simply write themselves a check, or give themselves an e-transfer. In the amount agreed upon by themselves and their accountant. Which will typically be around figure. And only taken out of the corporation once a month. The biggest thing they needs to remember about this says Edmonton bookkeeping.
Is that if they do write themselves a check. They need to ensure that they are not writing on the check salary. Or else the accountant will have absolutely no choice but to use that amounts specifically for salary. Which may not be a tax savings for the entrepreneur.
When business owners follow these directions, then they will be able to take money out of the corporation when it is most beneficial for them. So that they can earn a living while growing their business.