I own a small roofing business in Mississauga. I am curious to know which option is best for me.
As a small business owner, should I take Salary or Dividends?
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In deciding whether a dividend or a salary is better, you should assess the benefits of each compensation method:
Benefits of dividends:
* You do not have to contribute to CPP or EI. This saves you money immediately.
* You do not have to deal with the compliance associated with payroll taxes, which can be time consuming.
* Dividends can be paid to family members who are shareholders even if they do not work in the business.
Benefits of salary:
* By contributing to the CPP, you will be eligible to receive CPP benefits upon retirement.
* By contributing to the EI program, you will be eligible to receive EI benefits if you become unemployed.
* Certain deductions can be claimed only against salary, such as child care costs and vehicle expenses. If you have such expenses, a salary may be a better option for you.
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