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How To Pay Yourself If You’re Incorporated (Salary Vs. Dividends)

One of the most common decisions that a business owner or incorporated professional needs to make is how to pay themselves. Many entrepreneurs decide to incorporate their business and then pay themselves a salary out of their corporation, but this often results in paying higher taxes on their personal income. 

One of the major advantages of being incorporated is you get the benefit and the flexibility of being able to decide how to pay yourself, paying yourself a salary isn’t your only option. If you pay yourself a salary, you must pay into CPP (Canada Pension Plan) and you can end up paying more taxes than if you pay yourself a dividend.

With a dividend structure, you don’t have to pay into CPP and you can leave that extra money in your corporation. We have no idea if the CPP is actually going to be there 10, 20, or 30 years from now. We also don’t know if we’re ever going to get any of it if something happens along the way. The money in the CPP is not your money; it’s a pool of money that is structured and organized by the CRA (Canada Revenue Agency).

If you have a corporation, we strongly encourage you to pay yourself a dividend to help reduce the income tax you pay as an individual, which is just one step towards taking more ownership and control over your financial future.

If you want to learn how to effectively structure your corporation and pay yourself in a way that maximizes tax efficiency, visit our Contact Page to book a call, we’d love to talk through your goals.

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