What’s Yours Is Mine: A Conversation Between Shareholders and Their Corporations
- etel750
- 5 days ago
- 2 min read
Ever find yourself saying, “Well, it’s all my money anyway” when dipping into your Corporation's business account?
Let’s pause right there.
If you’ve incorporated your business, then legally speaking, you and your corporation are not the same person. Yes, you own it. But that doesn’t mean you can treat the business bank account like your personal wallet. And the CRA knows it too.
Let’s break this down with a fictional conversation between You (the shareholder) and Your Corporation (your business entity):
You: “Hey, I’m going to take out some money for that new patio set. Business is going well—may as well enjoy it!”
Corporation: “Hold on. That’s not how this works. If you want money, we need to do it the right way—like paying yourself a salary, dividends, or recording it as a shareholder loan.”
So, what’s the issue?
When you take money out of your corporation without properly recording it, you run the risk of accidental income—and a potential tax headache.
The CRA sees corporate funds used for personal purposes as shareholder benefits or income, unless it’s clearly tracked and declared. If you’re not careful, your business could end up being taxed—and so could you.
What are your options to access funds from your corporation?
Here’s how to do it right:
1. Salary
You pay yourself a salary like an employee. It’s deductible to the business and taxable to you personally. You’ll also need to remit payroll taxes (CPP, EI if applicable, income tax).
2. Dividends
A dividend is a share of profit paid to you as a shareholder. It’s not a business deduction, but it can be tax-efficient depending on your personal income level.
3. Shareholder Loan
You can borrow from the corporation, but there are rules. If the loan isn’t repaid within a year of your fiscal year-end, it may be included in your personal income. The CRA watches this closely.
The Balance Sheet Knows
Even if you forget—or don’t realize—that you’ve been taking money from the business for personal use, your accountant doesn’t. At year-end, it all shows up. And if that shareholder loan account is in the red (meaning you owe the business), that’s a red flag.
If you’re audited, the CRA could reassess those amounts as income. And guess what? They’ll want back taxes, interest, and possibly penalties.
Keep It Clean
So what’s the best approach? Keep personal and business finances separate. Treat your corporation like the independent legal entity it is.
Need money? Issue yourself a dividend or pay a salary.
Borrowing temporarily? Document the loan and make a repayment plan.
Keep a record of every transaction.
Final Word
Incorporation has its perks—limited liability, tax planning opportunities, and a professional image. But it also comes with responsibility. Knowing what belongs to you versus what belongs to your business is essential to keeping your books clean and the CRA off your back.
Think of it like this:
“What’s yours is not automatically mine… unless we’ve made it official.”
Got questions about how to clean up your shareholder loans or set up proper payments from your corporation? I’m here to help- contact us.
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