Almost everything an accountant can do for you is decided before the year end. Afterwards the books record what happened and the return reports it; the choices have gone. Planning is the conversation that happens while they are still open.
It is worth something only when it fits the year you are actually having, which is why it starts with your figures rather than with a strategy.
What this includes
- Salary against dividends, and what each does to CPP, RRSP room and the corporate deduction
- Whether a holding company earns its keep in your situation, or does not
- Timing a purchase, a sale or a bonus so it lands in the right year
- Shareholder loans, and keeping them from becoming income
- Income splitting where the rules actually allow it
- What to do before your year end this year, written down
The year end is the deadline, not the filing date
By the time a return is being prepared, the year is closed and the planning window has shut. The useful time to have this conversation is two or three months before your year end, with the books current enough to show where you are.
What we will not do
We do not sell structures. A holding company, a family trust or a second corporation is worth having when it does something specific for you, and is an annual cost and an annual filing when it does not. If the answer is that your current setup is fine, that is the answer you will get.
Personal and corporate together
The two returns are one decision. See corporate tax returns and personal tax returns.
Questions we are asked about this
Salary or dividends — which is better?
It depends on the year you are having, not on a general rule. Salary creates RRSP room and CPP contributions and is deductible to the corporation; dividends are not deductible and carry no CPP. Most owners end up with a mix, and the right mix changes as income and plans change.
When should we have this conversation?
Two to three months before your year end, with the bookkeeping current enough to show where the year has actually landed. After the year end the useful decisions have already been made by default.
Is a holding company worth setting up?
Sometimes. It can help with creditor protection, holding surplus cash, or an eventual sale. It also adds a corporation to maintain, file and pay for every year. It is worth doing when it answers a specific question about your situation and not otherwise.
Worth reading
Where we work
We are based in Scarborough and act for clients across Toronto and the GTA in person — see accountant in Scarborough and small business accountant in Toronto — and everywhere else in Canada by email and video call.
Our other services
Corporate Tax Returns (T2) · Personal Tax Returns (T1) · Trust Returns (T3) · HST and GST Filing · Bookkeeping · Payroll · CRA Audits and Disputes · Financial Statements · Incorporation and Business Setup · Estate and Succession Planning · Cross-Border Tax
Our office
ClearWealth Accounting Advisors
1457 McCowan Rd, Suite 202
Toronto, Ontario M1S 5K7
Get directions
Open Monday to Friday, 9 a.m. to 6 p.m.
Phone: (437) 290-5117
Email: info@clearwealth.tax
