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Can a Canadian Corporation pay its owner less than the minimum wage? Is there a minimum amount when running the payroll?

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  • I'm pretty sure if anybody does work you have to pay them at least minimum wage. Of course owners don't always do work. What work is he/she doing? Oct 6, 2021 at 2:30
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    Owners not taking their salary when things are rough is common as dirt. Nobody forces you to pay yourself. If someone is claiming they can't pay you because they are required by law to pay themselves minimum wage, they're lying. Oct 6, 2021 at 9:59
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    Are you making this decision based on limited cash availability, or because you want to avoid salary and pay yourself dividends? Different economic realities could lead to different interpretations. Oct 6, 2021 at 13:26

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Stian Yettervick's answer is correct about the minimum a corporation needs to pay its owner (i.e. nothing).

If a corporation chooses to pay a salary the only restriction is the minimum wage laws of the province. Of course an owner is free to set their own hours, so if they work few enough official hours you could set it at a pretty low level.

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There is no minimum payroll amount. In practice, owners compensate themselves by whatever combination of salary, dividends, and retaining earnings in the corporation (for future withdrawal) that they wish. These have different tax implications (outside the scope of this question), as well as obligations (and eligibility) for the Canada Pension Plan.

Each province has its own rules for employment standards. For instance, Ontario has the Employment Standards Act. This technically applies to all employees, and includes an obligation to pay minimum wage per worked hour irrespective of whether paid as an hourly-salaried employee or otherwise. As far as I can tell, there is no inherent exception for employees who are also owners. But no-one is going to look at your pay stub, or care what number of hours is written there, or what your effective hourly wage is, unless you were to launch a complaint against your own business.

In practice, your accountant will reconcile any payments you take from your own business during its fiscal year. They will determine how much you were entitled to take out tax-free (as reimbursement of legitimate business expenses paid by you personally, for instance), and then work with you to determine how much of the rest you repay back immediately (as a short-term shareholder loan), how much can be a shareholder loan for longer, just needs to be paid back by end of next fiscal year (lest it be deemed a taxable benefit to you), how much the corporation will declare as dividends paid out, and the rest will be deemed salary (or equivalent taxable benefit) to you. Along the way, the company will have been remitting to the government instalment payments for corporate tax (RC) and for payroll tax related to personal tax withholdings and CPP payments from your salary, and there may be a correction (including potentially interest) if you are too far off.

From the point of view of your question, there is no obligation for you to even "have yourself on payroll" or keep any records of the number of hours you have worked. The salary you are deemed to have taken is what is implied by $ taken minus those legitimately classified as something else than salary, not as the sum of what is on some sheets of paper you call payroll stubs.

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    Strongly disagree with this wording, amongst other cavalier statements: "determine how much of the rest you pay back immediately as a short-term shareholder loan that won't even appear on the books anywhere". If your accountant is having you move funds around after the end of the year and pretending that no loan was ever owed at year-end, they are incompetent or worse. Aug 18, 2022 at 19:39
  • @Grade'Eh'Bacon. Yes, that was misleading wording through poor editing, fixed. Of course, an amount owing will appear on the end of fiscal year balance sheet, but will have no consequences if paid back in the short-term, i.e. without maintaining a loan to shareholder, e.g. taxtips.ca/smallbusiness/shareholder-loans.htm
    – Houska
    Aug 19, 2022 at 9:26
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It can pay it's owner nothing - as an owner. Owners are not entitled to anything at all, except for one single status: The owner is "owed" proportional votes at the yearly general assembly. It is custom for the largest owner to be, or select, the chairman and it is customary to have the largest owners represented on the board - but in actuality it is a just simple majority necessary, at the general assembly.

If the owner is also an employee, that is a different thing.

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  • I'm the owner and the only employee of my corporation. I want to have the payroll setup, but I don't want to pull too much money.
    – hossa
    Oct 6, 2021 at 11:08
  • This isn't a great answer - there is a fair bit of jurisprudence on this [the underlying nature of the question is: how small is the 'fair' salary I can pay myself, with remainder going as dividends, due to the complex interaction between the two and the potential there for abuse]. Oct 6, 2021 at 13:16
  • I agree, @Grade'Eh'Bacon that there might indeed be an optimum for tax purposes but that would be a very personal recommendation type question, since it would involve a lot of different and personal information. Spouse, no spouse, dependants, income level, income desired, finances of the corporation, type of corporation... As it stands the question has a definite and common answer. It can pay nothing. That is then the minimum.
    – Stian
    Oct 6, 2021 at 13:52
  • That's all I need to know: if I want to run the payroll, what is the minimum I have to pay myself as the owner of the corporation. I'd like to be able to pay myself, let's say, $5/hour. Please stay within the topic, my question is not about the tax optimisation or anything else. Though, my goal is the optimisation of the taxes, but that is perfectly legal as long as no law violation.
    – hossa
    Oct 6, 2021 at 14:24
  • @hossa Careful. A statement like "my question is not about the tax optimisation or anything else. Though, my goal is the optimisation of the taxes, but that is perfectly legal as long as no law violation. " is indication that the intent of your action is to reduce taxes. That's one of 3 tests to determine whether the General Anti-Avoidance Provision applies [1) Does it reduce taxes? 2) Was it done primarily to reduce taxes? 3) Is it an abuse of the intent of the Income Tax Act?] - though this is rarely applied. Oct 6, 2021 at 14:34

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