Shareholder Loans and the Tax Implications for Incorporated Businesses
Shareholder loans and their corresponding tax implications can be a complex topic for many incorporated business owners but understanding the facts is essential when considering shareholder loans. For example, it would be important to know that if you are a shareholder of a corporation or ‘connected” with a shareholder of a corporation and you withdraw funds from that corporation, you may be required to include the entire amount of this loan in your personal income under the “Shareholder Loans” provisions of the Act.
In this session we will discuss:
• What constitutes the shareholder loan account within your corporation.
• The basic rules imposed by the Canada Revenue Agency (CRA) when an owner-manager borrows funds from the corporation.
• Some exceptions available to allow shareholders to take loans for a longer period of time.
• Clearing the shareholder loans by either paying a salary or declaring a dividend and its advantages and disadvantages.
• Understanding the corporate and personal tax effects of paying dividends versus salaries.