As a corporation, paying yourself is not as simple as just taking money out of the company bank account. There are certain steps you need to take to ensure that you are paying yourself legally and in compliance with all regulations. In this article, we will discuss how to pay yourself as a corporation in Canada, specifically in Toronto and Ontario.

Step 1: Decide on a Salary or Dividend

The first step in paying yourself as a corporation is deciding on a salary or dividend. A salary is a set amount of money paid to you on a regular basis, while a dividend is a distribution of profits to the shareholders of the corporation. It is important to note that dividends are subject to a different tax rate than salaries, and there are certain rules and regulations you must follow when paying yourself a dividend.

Step 2: Register for a Payroll Account

If you have decided to pay yourself a salary, you must register for a payroll account with the Canada Revenue Agency (CRA). This account will allow you to remit payroll taxes and make deductions from your salary for things like Canada Pension Plan (CPP), Employment Insurance (EI), and income tax. You will need to provide information such as your business number, the number of employees, and the amount of remuneration.

Step 3: Determine Your Payroll Taxes

Once you have registered for a payroll account, you will need to determine your payroll taxes. This includes CPP, EI, and income tax. The employer and employee are both responsible for paying a portion of CPP and EI, while income tax is deducted from the employee’s salary. It is important to make these payments on time to avoid penalties and interest charges.

Step 4: Pay Yourself

Once you have determined your salary or dividend and registered for a payroll account, you can start paying yourself. If you have registered for a payroll account, you can set up direct deposit to ensure that your salary is deposited into your bank account on a regular basis. If you have decided to pay yourself a dividend, you must follow the rules and regulations set out by the CRA to ensure that you are paying yourself legally.

In conclusion, paying yourself as a corporation requires careful consideration and planning. It is important to decide on a salary or dividend, register for a payroll account, determine your payroll taxes, and pay yourself in compliance with all regulations. By following these steps, you can ensure that you are paying yourself legally and in compliance with all laws and regulations in Canada, specifically in Toronto and Ontario.