Working with your Corporation Part 4: Paying yourself

These are some of the main areas you must consider in ensuring the financial areas, of your business stay current in your corporation.  We will go further into some of the day to day operations and tracking of specific items in your corporate business in the next few blogs.  Let’s start with how you can pay yourself.

Paying yourself:

In paying yourself from your Corporation, you should first determine what your personal closed circle is on a monthly basis.  Your Closed Circle comes down to how much do you require on a monthly basis for your family/households’ Obligations, Necessities and Wants? Once you’ve determined this amount, you simply pay yourself that amount from the Corporation monthly.  As your company grows, there will be more income to deal with, and we will be there to work with you to structure other movements of cash flow and capital.  We will also discuss some of these options in our future blogs.  When paying yourself from your corporation, you will typically do it in 2 ways:

a.      Write yourself a cheque from the Corporation and deposit it in your personal account.

b.      Transfer funds from the Corporation to your personal account.

This is the way to pay yourself from a basic Corporate Structure (Just 1 corporation).  When you add holding companies and Trusts, the cash movement may be different.  For example, if you have a family trust, the Corporation would move funds to the Trust and then the Trust would move funds to your personal account. 

*Important Notes on paying yourself:

a.      Always put “draw” on the memo of the cheque or funds transfer.

b.      When transferring funds always print out the transaction for bookkeeping purposes.

c.      When both spouses are shareholders of the Corporation, have the Corporation write the cheques or transfers in both names and deposit it into your jointly held bank account. This is important for income splitting, which saves tax.