Becky asked:

I opened a new limited company last year. Its fiscal year end is May 31. After preparing F/S, I found the amount of account, due to shareholders in current asset, is very large at $80,000. It accounts for 80 per cnet of total assets.

I think the F/S doesn't look good. So I plan to convert parts of the account to a management fee? Does the management fee income belong to my personal income for 2008 or for 2007? How do I deduct tax and cpp on the management fee?

Gary Booth answered:

Shareholders of corporations should be made employees of the company and therefore payroll remittances should be made each month depending upon the amount of money withdrawn from company.

In this case, since it does not appear that payroll has been set up, the use of management fees is possible but this should not be used continuously.

One problem with management fees is that if the amount is greater than $30,000 there could be an issue with collecting GST. Normally the management fees would be for the year in which the money was withdrawn.

About the author

Gary Booth has over 20 years experience in the tax and accounting field. He operates his chartered accounting practice called Gary Booth CA Professional Corp. The six members of Gary’s team provide a wide variety of accounting and tax expertise to meet the needs of Gary’s clients.

Gary Booth CA Professional Corp is committed to providing excellent customer service and to exceed client’s business expectations. The services the firm provides includes:

• All types of personal tax returns from basic to complex
• Corporation tax returns
• Financial statement preparation
• Audits and review engagements
• Bookkeeping, GST and PST returns and payroll
• Certified quickbooks trainer and set up
• Business plans and business consulting

Gary can reached at 416 626 2727 x23 and www.garybooth.com.

 
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