If you own an incorporated business in Canada, you have the option to pay yourself through dividends, a salary, or a combination of both. In this article, we will look at the difference between these methods of payment and the main advantages and disadvantages associated with each. We will also see some common scenarios for when a business owner may choose one method over the other.

Salary/Wages

Why Choose Salary

Paying yourself a wage can be a way for you to earn a steady and predictable personal income. Some additional advantages of using this method would include:

• RRSP Contribution Room; Paying yourself a wage will allow you to build an RRSP contribution room while dividend payments will not create this.

• CPP Contributions; this is a double-edged sword, while wages will allow you to contribute to the Canada Pension Plan, as the owner of the corporation you will also be responsible for the employer’s portion of this contribution. 

• Fewer Surprise Tax Bills; Income tax is withheld from each payment and remitted to the Receiver General. When you file your personal tax return you will have already paid income tax and will avoid a surprise personal tax bill. When paying dividends, income tax isn’t withheld and remitted which often creates personal taxes owing in April.

• When Applying for a Mortgage; When you are attempting to qualify for a mortgage, banks like to see steady, predictable income. Earning employment income like this will help show that steady income, whereas dividend income may not be looked at as favourably. 

Where it gets tricky with dividends is that they are issued and paid based on share ownership. As an example, of Terry’s Tulips :td. Want to issue $100,000 in dividends to the owners of its Class A common shares, it must do so based on the percentage of ownership of these shares. So, if Terry owns 40% of Terry’s Tulips class A shares and Teagen own the other 60%, then Terry would receive $40,000 and Teagen would receive $60,000. This can make it difficult to allocate different amounts of income to multiple shareholders of they all own the same class of shares.

Why Choose Dividends

Paying dividends can be a simple way for business owners to withdraw money from their corporation. Some key advantages include:

• Lower Cost; Paying dividends removes the need to contribute to CPP, which reduces corporate and personal costs. The downside is that it does not allow you to contribute to the Canada Pension Plan program.

• Simplicity; if you own 100% of your corporation, you can just declare a dividend and transfer cash from the company to your personal account without the need for payroll or remittance of source deductions.

• Less Chance for Payroll Penalties; Payroll remittances are relentless. Usually, they have to be paid each month and late payments come with high penalties. Paying dividends eliminates the chance of late or missed payroll remittances. That being said, filling of T5s still must be completed on time once per year when paying dividends. 

In 1991, I joined a coaching program called The Strategic Coach which was run by Dan Sullivan out of Toronto. The program has since gone international and has thousands of participants involved globally. Put very simply, it is intended for individuals who are interested in growing both personally and professionally. The goal is for participants to have a great personal life with lots of time off, as well as a great business that generates a lifestyle for them that allows them to live a preferred life.

Why Consider Business Coaching?

Most people think that in order to be successful in business, you have to give away all of your time or to have time off you have to give away money. This program helped me build a good business and have a great personal life. The program offers tools that I can use to enable me to have both personal and professional growth. If you are a business owner, at some point you will likely develop the feeling of complexity. What this means is you simply have run out of time and you can’t get any more results. In fact, running out of time means that you have already potentially cut into a lot of your own personal time as well. The program that I got involved with is not the same program that I’m in today but has many similar characteristics. 

In order to achieve personal and professional growth, you need to have a good team around you. You must identify what your unique abilities are and try to operate in that area. By doing this, you will generally work in areas of your business that give you energy and are usually associated with the highest economic bang for the buck. This means you have to delegate. In order to delegate, it’s critical that you empower people by ensuring they know what they are doing and have the necessary tools and resources. You will also be building empowerment so that bigger results can be made, and making an investment back into your business. Many times when business owners are adding employees they look at it as a cost. It is actually an investment and, if done properly, will yield results that are greater than what you invested.

This is just scratching the surface on coaching and what it’s done for me. If you ask me who needs coaching in business, I would say that everyone needs coaching. But it’s important also that you hit that scene of complexity, you still want to grow, and you’re willing to spend the time and money to do so. If each of those criteria is met, business coaching is something I strongly recommend you pursue.

Clifford A. Wiegers

CFP, TEP, CH.F.C., CLU, B.Comm.

Insurance Representative, Wiegers Financial and Insurance Planning Services Ltd.

Financial Planner, Manulife Securities Investment Services Inc.

It seems like just yesterday that we first started hearing about the COVID 19-virus, and now it’s been almost a year of uncertainty with only a blurry horizon in the future. What that horizon will look like, or when we will reach it, is still unknown but the hope is that we get there soon… and that we can hold our loved ones tight again!

As we all know, life can change in an instant, leaving our best-laid plans torn to pieces. However, it is critically important to pick up the pieces and find the new course we are to take so that despite the interruption, we can get to where we want to be. As a Certified Financial Planner with Wiegers Financial & Benefits for almost seven years, I have experienced with every client some kind of change in their lives and ultimately their financial goals. Given that life is not stagnant, it’s critically important that your plan and goals change with it to keep up.

What kind of life changes can impact your financial plan? Any number of things can change your goals but some of the most common changes are those concerning:

• Job and pension
• Income
• Marital status
• Dependents (children or elderly parents)
• Real assets (e.g. primary residence or rental properties)
• Other investments
• Insurance policies

As a Canadian farmer, you’ve lived through your fair share of unpredictability. Whether it was the farm crisis or one too many years of lackluster harvests, you took your farm through the worst combinations Mother Nature and the markets could throw at you, beating the odds to build something your family is truly proud of.

Looking back at the ups and downs of farming, you’d never take any of it back. And you want to leave the challenge behind for the next generation so that your family’s legacy can continue to flourish long after you’re gone. Successful farmers are constantly thinking about what’s next. If you’re over 50, planning the future of your farm should be your top task. The work you put in now could set your farm’s estate up for one of the most anticipated outcomes in your entire farming career. You know how rare that can be in the agriculture industry!

Speaking of your career, you’ve worn many hats over the years: accountant, labourer, veterinarian, weatherman, mechanic, scientist – the list goes on. Through the demands of your job, you’ve learned to ask for help when you need it. So if you’re willing to call your neighbour down the road at harvest, you should be willing to work with the expert up the street on financials.

A financial advisor provides leadership when you need it. They have your best interests in mind while navigating the blind spots of your farm’s estate, connecting a knowledgeable team of specialists to determine how to best plan your family farm’s future. The most common regrets farm estate financial advisors hear from farmers are that they wish they would have talked about it either ten years earlier before they lost their health, or before inflation led to a big misstep in their tax strategy.

You may be thinking about farm estate planning because you’ve been pressed by your child who’s made sacrifices for the farm or you’ve witnessed what happens when farmers leave a mess behind. Don’t wait until things fall apart. If you have a lot of unanswered questions about your farm’s estate, proper planning will bring clarity to problems that exist and provide answers that may solve them. Bring in your biggest concerns and prepare to give your financial advisor honest answers to the following questions.

These are the top six considerations when you're farm estate planning:

1. How do I want to spend the rest of my life?