CCPC Dividends vs. Salary
Paying owners (shareholders) with a dividend at year end?
I'm looking for an explanation for shareholders draw being converted to a dividend at year end rather than being paid as employees of the company.
I know taxes are lower on dividends but am not sure of all of the ramifications this has on the owners/shareholders, such as CPP.
Any information would be greatly appreciated.
I'll give you a few links to information on this site regarding the salary versus dividend debate.
Just be aware, that as far as I know, there is no such thing as a shareholder's draw.
Sole proprietors take draws. Owner/Managers of corporations are employees so they are paid as employees. If they take a "draw", it is likely a withdrawal from the shareholder loan account ... an account that tracks contributions made by the shareholders.
Here is the information that I think will help you:Management Fees and Salaries for Incorporated Businesses
discusses owner manager remuneration.Shareholder Wages
discusses the advantages and disadvantages of the various ways to remunerate an owner/manager ... and when payroll taxes are required.Shareholder Loans
discusses the very specific rules under which money can be loaned to a shareholder or a family member.Shareholder Loans
discusses how the shareholder loan account works.
Each article has links you will need to follow to articles by accountants to get a more informed picture.
It is always advisable to speak with an accounting professional (CA, CGA) before doing anything to avoid negative consequences. There is very little they can do to help you after the fact if you misunderstood the rules.