How to Pay Yourself Your First Dividend From Your Corporation (Step by Step)

You've been invoicing through your corporation for a few months, there's real money in the corporate account, and you'd like some of it in your personal account. If you've decided dividends are the right route (or part of it — see our salary vs. dividends breakdown), here's how to actually do it properly. Because a dividend is not just a transfer: it's a formal corporate act, and the CRA expects the paper trail to match.

Step 0: Confirm You Can Pay a Dividend

Two quick checks before anything moves:

• Solvency test. Corporate law prohibits paying a dividend if it would leave the corporation unable to pay its debts as they come due. Look at your upcoming tax bill, HST owing, and payables before deciding the amount.
• Your share class allows it. Dividends are declared per share class. If you hold the common shares and the articles don't restrict them, you're fine. If there are multiple shareholders or classes, dividends must respect the rights attached to each class — this is exactly where a CPA review earns its fee.

Step 1: The Director's Resolution

The directors — probably just you — must formally declare the dividend in writing before or at the time it's paid. The resolution states the class of shares, the amount (total or per share), the payment date, and that the solvency test is satisfied. It's a one-page document, signed and placed in your minute book.

Step 2: Move the Money

Transfer the declared amount from the corporate account to your personal account, on or after the date in the resolution. Label the transfer clearly ("Dividend — [date]") so it reconciles cleanly in your books. Unlike salary, there is no withholding — no CPP, no income tax deducted at source. The full amount moves.

Step 3: Record It in Your Books

Your bookkeeper (or you) records the dividend as a reduction of retained earnings — it is not an expense and does not reduce the corporation's taxable income. This is the fundamental trade of dividends: the corporation pays tax on its profit first, then you receive the dividend and get a dividend tax credit personally to offset the double taxation.

Step 4: The T5 Slip (Deadline: Last Day of February)

For every calendar year in which the corporation pays you dividends, it must file a T5 slip and summary with the CRA by the last day of February of the following year, and give you a copy. The T5 reports the actual dividend plus the "gross-up" (38% for eligible dividends, 15% for non-eligible — most small business dividends are non-eligible). You then report the grossed-up amount on your personal return and claim the dividend tax credit.

Late T5s attract penalties per slip, and forgetting them entirely is one of the most common first-year mistakes we see.

Step 5: Plan for the Personal Tax

Because nothing was withheld, the personal tax on your dividends is entirely yours to fund at filing time — and if it's large enough, the CRA will put you on quarterly personal instalments the following year. A simple discipline: every time you pay yourself a dividend, move a percentage (your CPA can give you the right number for your bracket) into a separate savings account and don't touch it.

The Rhythm Most Founders Settle Into

Quarterly dividends with a resolution each time, one T5 in February, and a tax reserve account that grows alongside. It takes about twenty minutes per quarter once the template exists. Try our free Salary vs. Dividends calculator to see the after-tax math on your numbers — and the paid report generates your payment schedule with every CRA date attached.