Turn on suggestions
Auto-suggest helps you quickly narrow down your search results by suggesting possible matches as you type.
Showing results for
Yes, a common small business "retirement" plan is to accumulate retained earnings (say 250,000 or $500,000) in the corporation. At the same time, max out RRSP contributions by taking a salary during the working years. Retire at 55, take $25,000 or $50,000per year out in dividends for 10 years, letting the RRSP compound tax-free. Then start withdrawing the RRSP at 65.
Dividends can only be declared if they have positive retained earnings. If they have an employee to pay salary/wages to (even if the employee is also a shareholder), I don't think you can say it is inactive. It may just not have any revenue that year. If there is no revenue, and no positive retained earnings, paying a salary might not be a wise choice.
Hi, good morning,
Thanks for your reply.
I posed the question since I was examining a special situation (maybe a tax tricky) one may face. Let's look at a simple example. A business man operated 10 years and accumulated 500000 retained earnings, and then planned to retire. If he/she dissolved his/her corporation right away, there would be a lot tax effect in the year. If he/she keeps his/her corporation without doing business but pays out salaries or dividends in 10 years, possibly, the taxes payable are much less compared with dissolving company.
Thank you!
Ryan
Yes, a common small business "retirement" plan is to accumulate retained earnings (say 250,000 or $500,000) in the corporation. At the same time, max out RRSP contributions by taking a salary during the working years. Retire at 55, take $25,000 or $50,000per year out in dividends for 10 years, letting the RRSP compound tax-free. Then start withdrawing the RRSP at 65.
You have clicked a link to a site outside of the QuickBooks or ProFile Communities. By clicking "Continue", you will leave the community and be taken to that site instead.