Should You Pay Yourself a Salary or Dividend? 7 Considerations For Small Business Owners

Posted by ronika under Taxes
From http://www.montrealfinancial.ca 5008 days ago
Made Hot by: Monsieur Eraser on March 7, 2011 11:45 pm

While incorporation has many benefits for small business owners, it does introduce additional complexities that are not faced by registered businesses. Unincorporated business owners are essentially taxed on their net business income, which allows for more time to devote to tax planning and how to spend all of your richly deserved profits. Incorporated business owners, on the other hand, cannot just withdraw cash from their businesses as the need or whim arises. There needs to be a formalized structure in place which usually takes the form of either salary or dividends. Either type of remuneration has tax and other implications that need to be considered before making a decision.

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Comments

Written by ShawnHessinger
5008 days ago

Ronika,

As always, you give us something to think about. How you structure a business is probably almost as important as the business model itself. It helps determine how your business will manage resources after the money has been made.

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Written by ronika
5008 days ago

Thank you, Shawn. So true - in my experience, it is something that small business owners (especially those without financial backgrounds) don't necessarily think about, but can be (especially as the business grows) vital to its success.

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Written by ronika
5008 days ago

Thanks, Yoni. Definitely not the most exciting thing I've written about.

I love the idea of cookies as incentives. I think it could have a major impact on productivity. Also, given that dogs probably make for model employees, there should probably be some tax incentives for "employing" them!

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Written by yoni67
5008 days ago

Ronika,

Great article! Looks like it could be used in a textbook!

Unfortunately my business just barely squeaks by. If I were to provide myself with such incentives, it would probably take the form of cookies. Our two dogs, my two employees would get Milk-Bones for their hard work. I just gave one to each and said it was from you!

Yoni

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Written by ronika
5008 days ago

Thank you, Rivkah!

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Written by saraib820
5008 days ago

Ronika,

I agree. The article is like a teaching tool. It demonstrates your wisdom and knowledge greatly. Your writings are a treat to read and very informative!

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