Can I add my spouse to my corporation, as a shareholder, for income splitting purposes?

Yes, you can add your spouse to your corporation, either as a preferred shareholder or common shareholder. Both types of shares, if structured properly, will allow you and your spouse to split the profits of the corporation through payment of dividends to each of you.

A key difference between a common shareholder and preferred shareholder is that a common shareholder is entitled to participate in the growth of the business. Also, common shareholders usually have voting rights attached to their shares, giving them a degree of control over the corporation’s affairs.

On the other hand, the value of preferred shares is fixed at the time of issuance, and does not increase in value, even if the company grows. Additionally, preferred shareholders usually do not have the right to vote.

Tip: If you are adding your spouse as a shareholder, then he/she must pay the market price for the shares purchased. Special provisions exist in the Canadian Income Tax Act, that if properly implemented, can allow your spouse to become a shareholder for a nominal amount (e.g. $100).

ABOUT THE AUTHOR

ALLAN MADAN

CA.CPA.CGA

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.

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