A common mistake many business owners make is that they add shareholders (often family members) to their company for no money at all or very little money (e.g. $100). Now you wouldn’t add me to your corporation for nothing!
The CRA takes a similar view. Fair market value must be paid by all individuals that would like to be added as shareholders to a corporation. So if the corporation is worth $100,000, and you would like to add your spouse as a 50% shareholder, then she must pay $50,000.
If you add shareholders for free, then the CRA will attribute any dividends paid on those shares back to you. Or, they may include a taxable benefit in the personal income of the new shareholders, equal to the fair market value of the shares issued.
The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.