How to Save Money with Salaries and Dividends in 2014 Watch Video
Allan Madan, CPA, CA
Deciding on the right compensation strategy between salary and dividends can be quite tricky. Read More…
Disclaimer
The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.
ABOUT THE AUTHOR
ALLAN MADAN
CPA, CA
Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.
How would I pay myself a Dividend? What supporting documents do I need when I pay myself a Dividend
Hi Hashim,
Before you pay yourself a dividend, you should ensure that the shares that you own in your corporation have the right to receive dividends. You can determine this by reviewing the shares’ attributes in the articles of incorporation. In addition, the share register contained in your company’s minute book should have you listed as a shareholder. Furthermore, there should be a share certificate in the company’s minute book, on which you are listed as the owner of those shares.
Assuming that your minute book is up-to-date, as described above, then all you need to do is prepare a director’s resolution to authorize the company to pay you a dividend. A dividend can be paid to you by cheque or by e-transfer from the company’s bank account to your personal bank accountant.
Whenever a dividend is paid the company’s minute book should be updated and a T5 slip should be prepared to report the dividends paid to you in the year.
Thank You,
Allan Madan, CPA, CA
For my company Roy Banse Agency Inc., my Y/E is the end of this month and I wanted to ask how best to manage any dividends I pay myself out of the company. If I understand it correctly, dividends are not a pre-tax expense for the company, correct? Corporate taxes are calculated on earnings and dividends are then accounted for based on net after tax earnings, correct?
The reason I am asking is that I want to consider any methods of reducing taxable earnings before Y/E.
Any guidance in this matter before the holiday break would be very much appreciated,
Thanks,
Jeremy
?Hi Jeremy,
Sorry for not responding sooner. Dividends paid are non an expense of the company and they do not reduce the company’s taxable income. Instead, dividends are a distribution of the company’s pretax profits to its shareholders.
Please let me know if you have any questions and happy holidays.
Allan Madan, CPA, CA