A shareholder loan tracks money moving between an owner and their corporation; borrowing from the company must generally be repaid within a year or it becomes taxable income.
The shareholder loan account records amounts flowing between you and your corporation. If you lend to the company, you can draw that money back tax-free later. If the company lends to you, the one-year rule applies: the loan must be repaid by the end of the corporation's following tax year, or the full amount is added to your personal income.
Even a timely-repaid loan can create a small taxable benefit if no interest at the CRA's prescribed rate is charged. Most shareholder loan problems arise not from schemes but from bookkeeping drift, personal expenses paid from the business account accumulating into a debit balance.
You borrow $20,000 from your corporation. If you do not repay it by the end of the company's next fiscal year, the entire $20,000 is added to your personal income and taxed at your marginal rate.
Our certified accounting firm handles this for businesses and individuals across Canada, at fixed fees with no surprises.
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