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 are able to answer your questions around issuing corporate dividends with 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 they are taxed. 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 can issue a corporate dividend. This is taxed at a lower tax rate. 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 corporate dividend resolutions, can take different forms. This stems from the fact that corporate dividends in Alberta can be issued for different reasons. These include:
Residual corporate dividends
Residual dividend payments are issued after a resolution is issued for them. They are generally one off dividends. The corporate dividend resolution is only issued after a project is completed or there are excess funds in a particular capital project. This corporate dividend resolutions returns the “extra” money to the shareholders.
Stability corporate dividends
Stability corporate dividends usually have a fixed percentage of the quarterly or yearly earnings that is issued to shareholders. The corporate dividend resolution will state this percentage. This type of dividend is attractive to investors. With a fixed amount in place, investors will know what their return is based on their shareholdings. These type of dividends are often issued through what are known as preferred shares.
Issuing Dividends By Resolution
Dividends are issued to specific shareholder classes. By having different classes of shareholders, a corporation can issue different dividends to different classes. The corporate dividend resolution will specifically state not only the amount of dividend by to which class of shares it will be issued. It is not allowed to issue dividends to specific shareholders and not others within a class of shares. Even if the resolution states as much, it is not permitted under corporate law.
Get Legal Help For Your Company
Failing to issue corporate dividend resolutions or preparing them improperly can lead to negative tax implications for you and the company. Be sure your company is on side the law in for its corporate dividend resolutions. 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.