(Originally posted on May 6, 2016)

 

Salary vs. Dividends, What is Best for You?

 

Before we can explore the benefits of receiving Salary or Dividends, it is important to first understand what exactly dividends are;

Generally speaking, Dividends are amounts paid to the Shareholders (owners) of a Corporation from the Retained Earnings of that Corporation.

Retained Earnings are simply the accumulated Profits a Corporation has earned over a period of time; therefore, a Corporation can only pay Dividends to the Shareholders if there are Retained Earnings (Profits less Income Taxes).

You may have heard that Dividends you receive are ‘tax-free’, but such is not the case. Dividends for the most part receive specialized treatment by CRA because the Corporation has already paid tax on the Profits it has earned and the Dividends are then being paid from After-Tax dollars. And, depending on your personal tax situation, tax bracket and other factors, a significant amount of dividends could be received before you notice an increase in your personal tax burden, making them seem to be ‘tax-free’.

When you receive Dividends, you also receive an amount called a ‘Dividend Tax Credit’ on your information slip (T3 or T5). This Credit is to recognize that the Corporation has already paid some tax on these amounts.

To make things a little more confusing though, there are 2 types of Dividends you could receive, “Eligible” and “In-Eligible”; simply put, Eligible Dividends receive a higher tax credit for recipients because the Corporation paying the Dividends has paid income tax on these amounts at the highest tax rate already. In-Eligible Dividends therefore, receive a lower tax credit.

Most small business owners will only ever receive the ‘in-eligible’ type of dividends.

So, if Dividends could be relatively tax-free, why would you want to receive a salary instead of dividends?

(Originally posted on April 4, 2016)

 

The Firm of the Future

 

Firstly, let us ask you a question “Are you a ‘typical’ small business owner?"

In our daily interactions with small business owners, we see a great deal of common themes, the most being on how small business owners approach the accounting and tax reporting requirements of running their business.

Does the following represent your current accounting systems?

  • You have a ‘bookkeeper’, sometimes your spouse or a friend of the family that helps you with the day-to-day transactions.
  • You have a payroll service provider such as ADP or Ceridian to assist you with paying your employees and ensuring CRA gets their payroll taxes.
  • At the end of the year, all of your records and your accounting system backup (if you are using software) go into a big box and it is all dropped off at your ‘Accountants’ office
  • Then, after waiting patiently, you get your financial statements and tax returns several months later. (and a big bill!)


So, let us ask you another question, “Do you take your car to 4 different mechanics to get your tires changed?”

(Originally posted on March 29, 2016)

 

Ledgers is Opening a New Location in Airdrie, AB

 

Ledgers Canada is pleased to announce the awarding of a new franchise in Airdrie. Our newest Network Member Sharie Rideout is the proud owner.

Sharie Rideout will be up and running by the end of March, please visit their website at http://airdrie.ledgers.com for full contact information.

(Originally posted on March 29, 2016)

 

Ledgers is Opening a New Location in Charlottetown, PEI

 

Ledgers Canada is pleased to announce the awarding of a new franchise in Charelottetown. Our newest Network Member Nesta Larter is the proud owner.

Nesta Larter will be up and running by the end of March, please visit their website at http://charlottetown.ledgers.com for full contact information.

(Originally posted on March 7, 2016)

 

Do You Have CRA Tax Problems? We have a Solution!

 

Far too many small business owners have been there – GST is due or payroll taxes are to be remitted, but the employees need to be paid and the rent is due.

What do you do?

Unfortunately, most business owners, when faced with this predicament do the obvious – pay the rent and employees, CRA can wait.

When this cycle manages to repeat a few times, now you are in a big pickle.

The interest and penalties that CRA charges can seem to be insurmountable, and if your business is already struggling, how are you going to find thousands of extra dollars to meet your obligations to CRA?

If you have found yourself in this situation, you know how aggressive and demanding CRA can be.

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