If you’re a small business Canada shareholder, you probably already know that your business and personal finances are legally separate. But do you know what really happens when you take too much money out of your business?
As a Profit Strategist working with incorporated Canadian businesses, I see this all the time: a business owner takes out more than the business can afford, then struggles to cover taxes, payroll, or expenses at year-end.
Here’s what you need to know.
Shareholder Loans: What Happens When You Withdraw Too Much?
When you take money out of your business, it affects your shareholder loan account. If you’re tracking it as an equity account (as many Canadian business owners do), here’s how to read it:
A positive balance means your business owes you.
A negative balance means you owe your business.
CRA gives you until the end of the next fiscal year to clear that negative balance. If it’s not cleared? You’ll be taxed personally on that money—usually via a T5 slip.
It’s Not Just About Tax—It’s About Cash Flow
Too often, I see business owners treat their business like a personal ATM. But the money you take out today might leave your business dry tomorrow—especially when it’s time to pay taxes or cover overhead.
This is why having a real cash flow strategy matters. You need to know:
How much you can safely take out
What to set aside for taxes, profit, and expenses
How to ensure your business always has cash in the bank
The Solution? Profit First for Shareholders
I help clients implement the Profit First system so their business works for them—instead of them working for it. When you set your business up to pay you properly and protect its own cash flow, you stop the cycle of stress and surprises.
Want to see how much profit your business should actually be making?
Download the Profit Maximizer Calculator to find out:Profit Maximizer Calculator
