Salary or dividends: Which one is right for you?

As both the owner and an employee of your company, you look for the best strategy to withdraw funds from your business. You should know that the answer depends on your current situation and cash flow needs.

You can decide to get only a salary or only dividends. Or maybe you could take advantage of both solutions. One year to the next, new events can influence your objectives and lead you to change the allocation between salary and dividends.

As a business owner, you have to base your decision on the company's perspective and that of the owner-employee. For example, opting for a salary rather than dividends has a different effect on the company than it does for the owner-employee.

During your working life, you could decide to get paid with dividends, depending on your financial expenses, taxable income or cash requirements. On the other hand, choosing to get a salary will depend on your marital status and business's group plans. With retirement in mind, you need to start making financial and fiscal choices that will ensure diversified sources of income later in life.

As you can see, many factors can influence your choices. That's why it's important to reevaluate your remuneration strategy yearly to reduce your tax burden.

Consult your Desjardins financial planner to find out what strategies would work best for you. The financial planner will be able to recommend strategies to diversify your sources of income at retirement, examine the possibility of income splitting between you and your partner, and assess the impact of your income on social programs.