You have been working hard and your small business is now making money….now what? You will probably want to be re-investing money into your business to help it grow – but remember – you also need to pay yourself!

Want to know how?  Through remuneration planning…

This is a strategy to withdraw profits from a business for the owner’s personal use. The goal is to establish a plan that is both beneficial to the business but also provides solutions for personal cash flow needs. Sounds easy enough, however any plan outlined to achieve these goals will have tax implications that need to be considered.

You have two options available for drawing money out of your corporation – salary or dividends. How do you decide what is best for you? Taking a salary will generate RRSP contribution room, provide availability to CPP benefits during retirement, produce a tax deduction for the business and ensure that personal tax is paid throughout the year via the business payroll remittances. Alternatively, dividends provide preferential personal tax treatment, have much more flexibility than taking a salary and have fewer compliance and reporting requirements. Maybe the best option is not to decide between the two but to take a combination of both salary and dividends.

As you can see there are a few factors to consider. How are you supposed to come up with a plan that will meet your business and personal cash flow needs while simultaneously minimizing your tax implications? The right answer is that there is no right answer. The best remuneration plan depends on your specific situation and can change as your situation and tax regulations change. Working with an experienced advisor is the best way to make sure your remuneration plan is right for you. The good news is that we are here to help. Contact RLB today to discuss your situation with one of our remuneration planning specialists. Let us help you get the most out of your business.