There is little or no tax advantage in receiving taxable ineligible dividends from your small business corporation due to CRA adjusting the dividend tax credit in recent years.

However, there is no CPP deducted on dividends, thus there could be a cash flow advantage in receiving a dividend instead of salary.

There are other personal financial planning factors to keep in mind when deciding between dividends and salary.   For example, dividend income does not qualify as earnings for the calculation of RRSP allowable deduction.

It is recommended that you complete a personal financial plan with your qualified planner plus prepare a business plan for the next 3-5 years as well.

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