How to save corporate taxes in Canada - by Accountant Toronto.wmv

[allanmadan]

Thank you for your question.

If the corporation has separate classes of shares, and those shares have the right to receive dividends at the discretion of the board of directors, then the board can declare dividends in differing amounts for each class of shares. So, your corporation can split the dividends 80/20 one year, and 90/10 the next year.

Allan Madan, CA

[sheepherder4444]

Thank you sir. All your videos are very helpful. About that dividend sprinkling. Can you set up 2 different classes of shares and unevenly distribute the dividends? Some years 80/20 other years 90/10? Also do you write up articles of incorporation? Thanks

[allanmadan]

Thank you for your question.

If the corporation has separate classes of shares, and those shares have the right to receive dividends at the discretion of the board of directors, then the board can declare dividends in differing amounts for each class of shares. So, your corporation can split the dividends 80/20 one year, and 90/10 the next year.

Allan Madan, CA

[allanmadan]

@sheepherder4444 Thank you for your question.

If the corporation has separate classes of shares, and those shares have the right to receive dividends at the discretion of the board of directors, then the board can declare dividends in differing amounts for each class of shares. So, your corporation can split the dividends 80/20 one year, and 90/10 the next year.

Allan Madan, CA

[itsanameisntit]

I wish you were my accountant. Mine didn't tell me anything when I incorporated. I'm in Vancouver.

[chewtheredpill]

Thanks for the video Allan! - just incorporated - cheers

[umrslm]

Allan thanks for the video could you please forward me your email address.

[allanmadan]

My email address is amadan@madanca.com

Allan Madan, CA

Madan Chartered Accountant

[baller1069]

Are you sure the first 40k of dividends are tax free? What restrictions are there on this?

[allanmadan]

Yes, the first $40,000 of dividends are not subject to income tax, providing that you have no other source of income. You must ensure that the articles of incorporation permit dividends to be paid on the shares that you own.

Allan Madan, CA

Madan Chartered Accountant

[shawnblais81]

@allanmadan And what if I do? I have a full time job earning 60k, and a sole proprietership earning 120k-140k/year which I'm planning on incorporating.

I'd like to pay my wife $38k (so we show a decent amount of earned income), and then sprinkle dividends to both of us, and potentially our children to avoid taxes. Would that work?

[shawnblais81]

@allanmadan @allanmadan And what if I do? I have a full time job earning 60k, and a sole proprietership earning 120k-140k/year which I'm planning on incorporating.

I'd like to pay my wife $38k (so we show a decent amount of earned income), and then sprinkle dividends to both of us, and potentially our children to avoid taxes. Would that work?

[allanmadan]

It makes sense to incorporate if you can save money inside the corporation, i.e. you don't require all of your business profits to pay for personal expenses. Money kept inside the corporation is only taxable at 10% (federal rate), while your marginal tax rate is 29% (federal only).

Salary paid to a spouse must be reasonable in relation to the work she is performing.

Make sure that the corporation issues separate classes of shares for dividend sprinkling.

Allan

[shawnblais81]

@allanmadan Hey Allan, thanks for the response, I wish you were in the Edmonton area I would come pay you a visit in a heartbeat!

I'm under the impression that if I pay myself dividends from the company, I can pay a much lower tax rate than my own personal 29%, is that the case?

Also, what would be the end game of keeping money in the corporation? I understand that it would reduce the taxes paid that year, but at some point I need to get the money out of there and into my pocket...

[vipcanadajunk]

Hi Allan, It was a great video explained in a very simple way.

I am incorporate for a year now and these tips were very usefull for me.

regards

Vipin

[allanmadan]

Thank you for the compliment. Incorporating is an excellent way to save taxes.

Allan Madan, CA

Madan Chartered Accountant

[WildWhistler]

Sounds good Mr Madan. Are these tips from your provincial experience or would they be in effect within Alberta as well? What is your experience with incorporation within Alberta?

[allanmadan]

Thank you for your question.

The 10 best tax tips provided pertain to Canadian Controlled Private Corporations, regardless of the province of residence. Generally speaking, all provinces more or less follow the Federal Income Tax Act. While Alberta has its own income tax act and its own corporate tax return, these tips still apply to Alberta corporations.

Allan Madan, CA