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Multiple Shareholders, Multiple Accounts​

July 10, 2012​

Tax Question:

How many shareholder loan accounts should I have?


Canada Revenue Agency (‘CRA’) is paying much more attention to shareholder loan accounts.


If there are two shareholders and only one shareholder loan account, CRA may examine the combined account and assess a value to each shareholder. If one shareholder is found to be in a debit balance (the shareholder owes the corporation money), CRA may assess them with a taxable benefit even if the combined balance is a credit (the corporation owes the shareholder money).

On the flip side, if you have just one shareholder but keep numerous shareholder loan accounts for bookkeeping purposes, CRA is now viewing each account separately. If some of the accounts are debit and others are credit balances, they will take the view that you have withdrawn money from the company and assess it as income, separate from any money you have injected into the company. If you keep numerous shareholder loan accounts for one shareholder for bookkeeping purposes, amalgamate the accounts together in your accounting records, or sign a shareholder resolution stating that the accounts should be considered netted against each other for income tax purposes. Each shareholder should have a separate shareholder loan account and work to keep the balance at zero or in a credit position to avoid being assessed a taxable benefit.

If you would like more information on this topic, please contact a member of the Empire CPA team by filling out the contact form below.

Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. Empire, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.

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