Shareholder Loans
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Thread: Shareholder Loans

  1. #1
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    Shareholder Loans

    Just looking for some clarification.

    Do Shareholder loans have to be issued from corporate retained earnings, or can it be issued from corporate debt like an equity line of credit? My accountant wasn't sure if there were implications with CRA either way.


  2. #2
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    Do you mean repaying money the shareholder loaned to the corp, or the corp loaning money to the shareholder? I think you're talking about the former. In that case, I don't think there is any restriction on how the repayment is financed (corp can borrow to repay).

  3. #3
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    Quote Originally Posted by andrewf View Post
    Do you mean repaying money the shareholder loaned to the corp, or the corp loaning money to the shareholder? I think you're talking about the former. In that case, I don't think there is any restriction on how the repayment is financed (corp can borrow to repay).
    Just be careful that it doesn't start to look like a personal bank account. CRA tends to frown on that. Make sure you classify exactly what the loan to the corporation is for to make it easier in an audit.

  4. #4
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    Quote Originally Posted by tygrus View Post
    Do Shareholder loans have to be issued from corporate retained earnings, or can it be issued from corporate debt like an equity line of credit? My accountant wasn't sure if there were implications with CRA either way.
    It can be from debt. Just be careful to check with your financer if the corp has any debt as there can be restrictions on repaying shareholder loans both from retained earnings and credit facilities.

  5. #5
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    I want to take a shareholder loan from my corporations equity line of credit over to me personally to invest with and the repay back the corporation within the year. Is this ok?

  6. #6
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    Should be fine as long as the terms of the LOC do not prohibit it. Why not just borrow personally?

  7. #7
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    Quote Originally Posted by tygrus View Post
    I want to take a shareholder loan from my corporations equity line of credit over to me personally to invest with and the repay back the corporation within the year. Is this ok?
    Another option is to invest through the corporation...??? possibly take advantage of lower tax rates...

  8. #8
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    Quote Originally Posted by andrewf View Post
    Should be fine as long as the terms of the LOC do not prohibit it. Why not just borrow personally?
    Because if I do it this way, the corporation pays the interest on the equity loan with 10% taxed money, while I use the funds to invest personally and earn dividends and pay no tax under the dividend tax credit for individuals.

  9. #9
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    Usually corps can't borrow as cheaply as individuals. Be sure to factor that in as well.

  10. #10
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    Wouldn't this loan from the corporation to a shareholder be a taxable benefit for the shareholder? Unless you are planning to pay it back in the next fiscal year?


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