Salary vs. dividend when a company is closing down?
Let's say I have a small business that has been in operation for 10 years and it no longer makes any money. I've told all my customers that we will no longer take on any new business. So for the rest of the fiscal year, there will be no revenue and there will be negligible expenses. There's about k in cash and 0k of accounts receivable that were accumulated from previous years (ie. tax has already been filed for these assets in previous years, and do not contribute to taxable income as of today and the future). The business operates in Ontario, Canada.
As the only shareholder and owner of this small business, how should I "cash out" of my business so that I have money to start a second one? Should I pay myself a 0k salary that would be subject to the personal taxes? Or am I allowed to pay myself a 0k dividend out of the retained earnings (which I'm guessing won't be taxed)? SOmeone told me it is illegal to pay myself a 0k dividend when the company isn't making money?
(1)1 Comments
Sorted by latest first Latest Oldest Best
When your company shuts down, you don’t pay salaries or dividends anymore, you sell up and return the money to the shareholders.
First you pay back everything you owe, including loans from shareholders (investment in the company that gave you shares is not a loan). Then you pay back the money that the shareholders invested, that is tax free because they just get their money back. Whatever is left is divided between the shareholders and must be taxed, but not as income.
Terms of Use Privacy policy Contact About Cancellation policy © freshhoot.com2025 All Rights reserved.