Save taxes with corporate dividends resolutions
Corporate Resolutions For Issuing Dividends
Companies in Alberta that have shareholders may offer corporate dividends when their company has done particularly well and made a profit. It is important to keep in mind that the date of the dividend issuance, along with the amount of the dividends issued will vary based on a number of different circumstances. When the directors of the corporation deem it in the company’s best interest, the corporation may issue corporate dividends to the shareholders. Dividends are often misunderstood. The lawyers at Kahane Law Office in Calgary or our Edmonton office answer your questions around issuing or releasing funds through a resolution. Call 403-225-8810 for the help you need.
The Importance Of Dividends
Corporate dividend payouts are great for shareholders and investors, as they are more than just a means of added income. They also show bolster the confidence that the shareholders have in the company, and they provide more certainty when it comes to the financial stability of the corporation. Companies that do not yet provide dividends often find that making the switch and offering these payments makes their shareholders look more favorably on them overall. It becomes easier to secure investors.
The Tax Advantage Of Corporate Dividends
One of the most attractive aspect of corporate dividends is how taxation of them occurs. When a (usually small) business has few shareholders who work in the business, there may be tax savings. Instead of drawing a salary or wage, the corporation issues a dividend or payment to the shareholder(s). In Canada the tax rate for receiving funds this way from your company is lower tax than income. In order to keep that preferred tax status, you must include a corporate dividend resolution. With a small business, there is more control over how money is taken out of the corporation. Tax returns have a specific line item for dividends. This is ideal for minimizing taxes.
Different Types Of Corporate Dividend Resolutions
Corporate dividends, and thus their corresponding resolutions, take different forms depending on the situation. This stems from the fact that a company issues the release of funds to shareholders in this was for different reasons. Work with your lawyer and accountant to ensure you use the correct structure for distributing funds. Specifically, these two types of dividends include:
Residual corporate dividends
Companies issue residual dividend payments after a the shareholders or directors pass a resolution to issued them. Normally, these dividends exists as a one off dividend. For example, payment of these dividends tend to occur after a specific happening. Often the corporate dividend resolution is only issued after the final completion of a project. Alternatively, it occurs when excess funds sit in a particular capital project of the company. This type of resolutions returns the “extra” money help by the company to the shareholders.
Stability corporate dividends
Stability corporate dividends usually have a fixed percentage of the quarterly or yearly earnings that the company then issues to its shareholders. The corporate dividend resolution specifically states this percentage. This type of dividend is attractive to investors. With a fixed amount in place, investors know what their return is based on their shareholdings. These type of dividends are often issued through what are known as preferred shares. Learn more about preferred shares with this link. As a corporate tool, they offer many advantages to shareholders.
Issuing Dividends By Resolution
Lastly, companies issue dividends to specific shareholder classes. By having different classes of shareholders, a corporation can issue different dividends to different classes. All shareholder in a class receive the same treatment. This is why people decide to create several classes of shares. The corporate dividend resolution specifically states the amount of money per share and to which class of shares that receive the issued dividend. It is not allowed to issue the distribution of these funds to specific shareholders and not others within a class of shares. Even if the resolution states as much, corporate law prohibits this type of dividend.
Get Legal Help For Your Company
Failing to issue corporate dividend resolutions or preparing them improperly often leads to negative tax implications. These tax issues usually occur for both you and the company. Be sure your company is on side the law in for its corporate dividend resolutions. Our corporate lawyers work with your accountant to help create the most beneficial tax situation as possible. The corporate resolution lawyers at Kahane Law Office in Calgary, Alberta can help with your corporate resolution legal needs. Call us anytime at 403-225-8810, toll-free at 1-877-225-8817 or email us directly here.