Owner compensation planning is the deliberate design of how income is extracted from a corporation, balancing salary, dividends, and other strategies to minimize combined corporate and personal tax while meeting personal cash needs.
The salary versus dividend decision is the most visible component, but not the only one. Bonus timing, prescribed rate loans, RRSP contribution room, CPP optimization, corporate-owned insurance, and the use of a HoldCo to accumulate passive income all interact in ways that make owner compensation a system to be designed rather than a year-end decision.
The optimal mix changes as the business grows, as personal circumstances evolve, and as tax legislation changes. What was efficient three years ago may not be today. Business owners who consistently pay less tax than their peers are not doing anything aggressive. They review their compensation structure with qualified advisors annually and adjust proactively.
See also: Salary vs Dividends · Dividend Refund · Tax PlanningOwner compensation is where the largest tax savings opportunities for incorporated business owners consistently exist. See how Wefinx approaches tax planning.